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2000 (2) TMI 9 - SC - Income TaxAppellant had claimed relief under section 80HH in respect of its liquid section which had been newly set up in a backward area. It was the contention of the appellant that relief should be allowed on the gross income and not on the net income - Tribunal was right in holding that the assessee was not entitled to deduction under section 80HH of the Income-tax Act, 1961, on the gross profit but on the net income therefrom
Issues:
Interpretation of section 80HH of the Income-tax Act, 1961 for assessment years 1979-80 and 1980-81. Detailed Analysis: The case involved the interpretation of section 80HH of the Income-tax Act, 1961, concerning the deduction to be allowed in computing the total income of an assessee from profits and gains derived from an industrial undertaking or the business of a hotel. The appellant had claimed relief under section 80HH for its newly set up liquid section in a backward area. The main contention was whether the relief should be allowed on the gross income or the net income derived from the industrial undertaking. The High Court answered in favor of the Revenue, holding that the deduction should be on the net income rather than the gross income. The appellant relied on a previous decision in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, which interpreted section 80M of the Act and allowed deduction on the gross total income. However, this decision was overruled in Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120, where it was held that deduction should be allowed only on the net income and not on the gross income. Subsequently, sections 80AA and 80AB were introduced by the Finance (No. 2) Act, 1980, with section 80AB clarifying the deduction to be made from the net income. The court emphasized that the decision in Distributors (Baroda) P. Ltd.'s case [1985] 155 ITR 120 was irrespective of section 80AB. The appellant argued that section 80AB, introduced with effect from April 1, 1981, should not apply to the assessment years 1979-80 and 1980-81 in question. Reference was made to another case where it was observed that section 80AB was enacted to declare the law as it always stood regarding deductions under Chapter VI-A of the Act. Despite the appellant's submissions, the court affirmed the High Court's judgment, stating that there was no merit in the appeals and dismissed them.
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