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Issues:
1. Whether the Tribunal was justified in allowing a deduction under section 80HH of the Income-tax Act when the Income-tax Officer found a contravention of conditions by the assessee? 2. Whether the decision of the Supreme Court in a related case impacts the entitlement of the assessee to claim deduction under section 80HH? Analysis: Issue 1: The case involved an application by the Revenue under section 256(2) of the Income-tax Act, 1961, questioning the Tribunal's decision to allow a deduction under section 80HH for the assessee, a contractor engaged in construction activities. The Income-tax Officer had initially rejected the claim, citing non-fulfillment of conditions under section 80HH. However, the appellate authority allowed a 20% deduction from the profit. The Tribunal upheld this decision based on a previous Bench ruling related to the same assessee. The Revenue challenged this decision, leading to the current judgment. Issue 2: The crux of the matter revolved around the interpretation of section 80HH and whether the assessee's construction activity qualified as "manufacture or production of an article or articles" as required by the provision. The Supreme Court's decision in a similar case involving the same assessee clarified that the construction of a dam did not meet the criteria for deduction under section 80HH. The Supreme Court highlighted that the term "article" should not be dissociated from its context and should not include immovable property like a dam. This interpretation set a precedent that construction activities, including the building of a dam, did not qualify for the deduction under section 80HH. In conclusion, the High Court held that based on the Supreme Court's ruling regarding the construction activities of the same assessee, the deduction under section 80HH was not justified. The Court ruled in favor of the Revenue, stating that the assessee was not entitled to claim any deduction under section 80HH of the Income-tax Act.
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