2003 (1) TMI 249 - AT - Income Tax

Summary

Issues:
Appeal against CIT(A) order for asst. yr. 1992-93 - Allowance of deductions under ss. 80HH and 80-I in relation to income after deduction under s. 80HHC.

Analysis:
The appeal pertains to the allowance of deductions under sections 80HH and 80-I concerning the income remaining after the deduction under section 80HHC for the assessment year 1992-93. The assessee claimed deductions under sections 80HHC, 80HH, and 80-I, with deductions under 80HH and 80-I claimed on the gross total income before the deduction under 80HHC. However, the Assessing Officer (AO) allowed deductions under 80HH and 80-I on income remaining after the deduction under 80HHC. The assessee sought rectification under section 154, which was denied by the AO. The CIT(A) upheld the AO's decision, stating that since most of the income was exempt under 80HHC, deductions under 80HH and 80-I should only apply to the remaining income post 80HHC deduction. The CIT(A) also noted that this issue was not covered under section 154. The assessee then appealed to the Appellate Tribunal.

Upon hearing both parties and examining the relevant provisions, the Tribunal observed that sections 80HH and 80-I provide incentives for industrial development in backward areas and after a specific date. These deductions are to be allowed at 20% each on profits derived from industrial undertakings included in the gross total income, as defined in section 80B(5). Section 80HHC, part of the same chapter, allows deductions for profits from the export of goods. The Tribunal highlighted that there is no statutory restriction on allowing deductions under 80HH and 80-I based on income remaining after the 80HHC deduction. Even if the entire income is exempt under 80HHC, deductions under 80HH and 80-I should be computed on the gross total income before the 80HHC deduction. The AO's error in allowing deductions on income post 80HHC deduction was deemed a legal mistake, justifying the rectification application under section 154. Consequently, the Tribunal set aside the CIT(A)'s decision and directed the AO to allow deductions under 80HH and 80-I on the gross total income before the 80HHC deduction. As a result, the appeal by the assessee was allowed.