2007 (10) TMI 248 - HC - Income Tax

Amount of deduction allowed under Section 80HH is not to be reduced from the total income while calculating the admissible deductions under Section 80I - both the sections are independent and therefore the deductions could be claimed both under sections 80HH and 80-I on the gross total income

Summary

Issues:
1. Interpretation of Sections 80HH and 80-I of the Income Tax Act.
2. Whether deduction under Section 80HH should be reduced from the total income while calculating deductions under Section 80-I.
3. Whether deduction under Section 80I can be allowed without reducing the deduction under Section 80HH.

Analysis:

Issue 1: Interpretation of Sections 80HH and 80-I of the Income Tax Act
The High Court heard arguments from both the Revenue and the assessee regarding the interpretation of Sections 80HH and 80-I of the Income Tax Act in the context of a closely held company's taxable income for the assessment year 1991-1992. The Assessing Officer had granted relief under Section 80-I after reducing the deduction under Section 80HH from the gross total income. However, the Commissioner of Income Tax reversed this decision, directing the quantification of relief under Section 80-I without adjusting the deduction allowed under Section 80HH. The Income Tax Appellate Tribunal upheld the Commissioner's decision, leading to the Revenue appealing against it.

Issue 2: Deduction under Section 80HH in relation to Section 80-I
The substantial questions of law admitted for the appeal included whether the deduction allowed under Section 80HH should be reduced from the total income while calculating deductions under Section 80-I. The learned counsel cited precedents from the Madhya Pradesh High Court and the Bombay High Court, which supported the independent claim of deductions under both sections on the gross total income. The Supreme Court's decision in a related case further reinforced this interpretation, emphasizing that the Department's acceptance of this view in various judgments precluded them from taking a contrary stance in the present case.

Issue 3: Allowance of deduction under Section 80I without adjusting Section 80HH
The second substantial question of law raised was whether the Tribunal was correct in allowing the deduction under Section 80I without reducing the deduction under Section 80HH. The High Court's dismissal of the civil appeal was based on the Supreme Court's decision and the consistent interpretation across different High Courts, which established that deductions under Sections 80HH and 80-I could be claimed independently on the gross total income. The Department's failure to challenge this interpretation in previous cases led to the dismissal of the appeal in the present matter.

In conclusion, the High Court upheld the decisions of the lower authorities and dismissed the Revenue's appeal, emphasizing the consistent interpretation across various High Courts and the Supreme Court regarding the independent claim of deductions under Sections 80HH and 80-I on the gross total income.