1978 (7) TMI 134 - AT - Income Tax

Summary

Issues:
1. Disallowance of claim under section 80-HH by the Income Tax Officer.
2. Appeal by the assessee to the Appellate Assistant Commissioner (AAC) challenging the ITO's decision.
3. AAC's decision in favor of the assessee based on a Tribunal order.
4. Department's appeal against AAC's decision.
5. Department's argument that relief under section 80-HH should be allowed to the owner of the project, not the contractor.
6. Assessee's reliance on Tribunal orders and argument for eligibility of the deduction.
7. Tribunal's consideration of both parties' contentions and upholding AAC's decision.

Detailed Analysis:
1. The appeal was filed by the Department against the order of the AAC disallowing the claim under section 80-HH made by the assessee, a partnership firm engaged in contract works. The ITO had disallowed the claim stating that the construction of an irrigation dam did not qualify as a newly established industrial undertaking, hence the claim was denied.

2. The assessee appealed to the AAC, who allowed the claim based on a Tribunal order in a similar case from the previous assessment year. The AAC's decision was in favor of the assessee, citing the Tribunal's precedent.

3. The Department, aggrieved by the AAC's decision, appealed to the Appellate Tribunal. The Department's representative argued that the relief under section 80-HH should be granted to the owner of the project, not the contractor. The Department also mentioned a pending reference application before the High Court regarding a Tribunal order.

4. The assessee's representative relied on the AAC's decision and previous Tribunal orders related to the group's cases. The representative argued that the assessee, engaged in contract work, was eligible for the deduction under section 80-HH as it was carrying on a business.

5. The Tribunal considered the arguments of both parties and upheld the AAC's decision. The Tribunal noted that the assessee was engaged in a business of executing contracts, making it eligible for the deduction under section 80-HH. The Tribunal clarified that the ownership of the business was not a determining factor for claiming the deduction, but rather the nature of the business activity.

6. Ultimately, the Tribunal dismissed the Department's appeal, affirming the AAC's decision in favor of the assessee. The Tribunal held that the assessee was entitled to claim the deduction under section 80-HH as it was engaged in a business activity, regardless of the ownership of the project.