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Issues involved: Appeal filed by department against the order of Commissioner of Income Tax [A]-III, Chennai for assessment year 2004-05 regarding deduction u/s 80HHC and 80IA.
Deduction u/s 80HHC and 80IA: The department appealed against the CIT(A)'s decision not to reduce Pondicherry profits u/s 80IB from total business profits while computing deduction u/s 80HHC. The department argued that as per section 80IA(9) and 80IB(13), deduction cannot be allowed under any other provisions if already claimed u/s 80IA. The CIT(A) allowed the deduction u/s 80IA based on previous decisions, but the department contended that those decisions did not consider section 80I(6) of the IT Act. The ITAT, Chennai Bench in another case emphasized the legal fiction in section 80IA(5) for computing eligible business profits. Restriction of relief u/s 80HHC: The main issue was the restriction of relief u/s 80HHC by reducing deduction u/s 80IB from business profits. The Assessing Officer followed a Mumbai Tribunal decision to reduce business income while computing deduction u/s 80HHC. The CIT(A) directed to compute deduction u/s 80HHC without reducing u/s 80IB, citing decisions of Madras and Bombay High Courts. The Revenue appealed, but the ITAT upheld the CIT(A)'s decision based on the Madras High Court ruling that deduction u/s 80HHC should not be reduced by u/s 80IA deduction, as it is binding on them. In conclusion, the ITAT Chennai dismissed the Revenue's appeal, confirming the CIT(A)'s order to compute deduction u/s 80HHC without reducing u/s 80IA deduction, as per the binding decision of the Madras High Court.
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