2003 (5) TMI 189 - AT - Income Tax

Summary

Issues:
1. Appeal by Revenue and cross-objection by assessee against order of CIT(A) for asst. yr. 1995-96.
2. Interpretation of deduction under s. 80HHC of IT Act, 1961.
3. Adjustment of negative figure in working out deduction under s. 80HHC.
4. Disallowance of deduction under s. 80HHA of IT Act.

Analysis:
1. The appeal by Revenue and cross-objection by the assessee were directed against the order of CIT(A) for the assessment year 1995-96. The Revenue contended that the CIT(A) erred in directing the AO to allow the claim under s. 80HHC at a higher amount. The assessee argued that the relief under s. 80HHC should be worked out in two phases, and the negative figure should be ignored based on previous decisions favoring the assessee.

2. The AO had considered the negative figure of loss and deducted it from the working of the deduction under s. 80HHC. The assessee relied on various cases where it was held that the negative figure should be ignored for the purpose of computing the deduction. The Tribunal upheld the contention of the assessee based on consistent decisions in favor of the assessee, despite the Revenue's reliance on a decision of the Mumbai High Court.

3. The Tribunal carefully analyzed the orders of the authorities and various case laws cited by both sides. The issue was found to be covered in favor of the assessee by previous decisions of the Tribunal, including the decision of the Mumbai Bench in a similar case. The Tribunal distinguished the judgment of the Bombay High Court cited by the Revenue and upheld the view that the negative figure should be ignored for calculating the deduction under s. 80HHC.

4. The only ground of cross-objection in the assessee's appeal related to the refusal to grant deduction under s. 80HHA of the IT Act. The assessee contended that it qualified as a small-scale industrial undertaking based on the amendment to the explanation to s. 80HHA. The Tribunal found that the assessee fulfilled the conditions as per the amendment but remitted the issue to the AO for verification of other conditions prescribed under s. 80HHA.

5. The Tribunal appreciated the representation by the chartered accountant for the assessee and dismissed the appeal of the Revenue while allowing the cross-objection for statistical purposes. The judgment provided a detailed analysis of the issues involved in both the appeal and cross-objection, ensuring a fair consideration of the legal provisions and precedents cited by the parties.