1996 (9) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Whether the claim for deduction u/s 80HHC is restricted by the provisions of section 80AB of the Income-tax Act, 1961.
2. Whether the deduction u/s 80HHC is to be allowed only to the extent of the income from export business included in the total income.
3. Whether the assessee is entitled to claim anything in excess of Rs. 33,103 u/s 80HHC of the Income-tax Act.

Summary:

Issue 1: Restriction by Section 80AB
The court examined whether the claim for deduction u/s 80HHC is restricted by section 80AB. The statutory provisions of section 80AB were emphasized, which state that the amount of income computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income derived by the assessee and included in the gross total income. The court referred to the decision of the Constitution Bench in Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120, which clarified that deductions should be computed with reference to the net income included in the gross total income.

Issue 2: Deduction Extent
The court held that the deduction u/s 80HHC should be allowed only to the extent of the income from export business included in the total income. The Commissioner of Income-tax (Appeals) and the first appellate authority emphasized that the deduction is allowable only with reference to the amount of income included in the gross total income of the assessee. The Tribunal's view that section 80AB is not applicable was quashed, and the court underscored that the statutory provisions link the deduction inseparably with the export turnover.

Issue 3: Entitlement Beyond Rs. 33,103
The court concluded that the assessee is not entitled to claim anything in excess of Rs. 33,103 u/s 80HHC. The Commissioner of Income-tax, acting u/s 263, determined the balance income of Rs. 33,103 after deducting business loss and provision for purchase tax from the original income. The Tribunal's decision to allow a higher deduction was set aside, and the court endorsed the order of the Commissioner of Income-tax (Appeals).

Conclusion:
The court answered the first two parts of the question in the affirmative and the third part in the negative, meaning the assessee is not entitled to claim anything in excess of Rs. 33,103 u/s 80HHC of the Income-tax Act. The order of the Income-tax Appellate Tribunal was quashed, and the order of the Commissioner of Income-tax (Appeals) was endorsed.