2006 (12) TMI 130 - HC - Income Tax

Claim for deduction us/ 80-O disallowed by AO by giving intimation u/s 143(1)(a) - since the issue posed before the Assessing Officer whether the deduction u/s 80-O is on the net income or on the gross income was not debatable he rightly disallowed the claim of assessee u/s 80-O while issuing the intimation u/s 143 (1)(a) assessee s appeal dismissed

Summary

Issues:
Assessee's appeals questioning findings by Income-tax Appellate Tribunal in Appeal Nos. 163/Bang/1999 and 750/Bang/1997 regarding disallowance of claim under section 80-O of the Income-tax Act, 1961.

Analysis:
The assessee, a private limited company engaged in design engineering, filed income tax returns for the assessment years 1996-97 and 1997-98. The assessing authority disallowed the claim under section 80-O of the Act, stating that the allowance should be on net income, not gross income. The assessee challenged this decision before the first appellate authority and the Income-tax Appellate Tribunal. The questions of law raised by the assessee included the debatability of the claim, the applicability of decisions on other sections, and the correctness of the additional tax levied. The main issue was whether the assessing authority was justified in disallowing the claim under section 80-O while issuing the intimation under section 143(1)(a) of the Act.

The appellant argued that the claim under section 80-O was debatable, and therefore, the assessing authority should not have disallowed it at the prima facie stage. The appellant referenced circulars/instructions from the Department and a court case to support this argument. On the other hand, the Revenue's counsel justified the assessing authority's decision by citing relevant court observations. The court considered whether the assessing authority was justified in disallowing the claim under section 80-O and found that the issue was not highly debatable. The court noted that the Special Bench of the Tribunal had concluded that the deduction under section 80-O should be on net income, not gross income. Therefore, the court upheld the assessing authority's decision and ruled against the assessee.

In conclusion, the court answered the questions of law raised by the assessee in the negative, favoring the Revenue. The appeals were rejected based on the finding that the assessing authority was justified in disallowing the claim under section 80-O of the Income-tax Act.