1990 (3) TMI 110 - AT - Income Tax

Issues Involved:
1. Allowability of deduction under Section 80-O of the Income-tax Act, 1961.
2. Applicability of Section 80-A(2) regarding the deduction when the assessee has incurred losses.
3. Allowability of investment allowance on dumpers under Section 32A.
4. Allowability of expenditure under Section 80-VV.
5. Applicability of Section 80-O for the assessment year 1983-84 in light of Section 80-HHB.

Detailed Analysis:

1. Allowability of Deduction under Section 80-O:
The primary issue revolved around whether the assessee was entitled to a 100% deduction under Section 80-O for technical services rendered abroad. The assessee had entered into an agreement with the Republic of Iran for constructing 270 dwelling units and claimed a deduction of Rs. 1,19,94,574 under Section 80-O. The Income-tax Officer (ITO) denied this deduction, arguing that the contract did not involve the export of technical know-how or services. The CIT(Appeals) allowed only 25% of the deduction, reasoning that the contract included non-technical aspects.

Upon appeal, it was argued that the Central Board of Direct Taxes (CBDT) had approved the agreement, and thus, the ITO could not override this decision. The Tribunal concluded that the Board's approval implied satisfaction of all conditions under Section 80-O, and the ITO had no jurisdiction to review this. Consequently, the Tribunal held that the assessee was entitled to a 100% deduction under Section 80-O.

2. Applicability of Section 80-A(2):
The Revenue contended that the deduction under Section 80-O was not permissible due to the assessee incurring losses in other units, invoking Section 80-A(2). The Tribunal referred to the Supreme Court's decision in Canara Workshops (P.) Ltd., which held that profits from one priority industry could not be offset against losses from another. However, the Tribunal distinguished this case, noting that the assessee's losses were from non-priority industries. The Tribunal concluded that the gross total income, if nil, would preclude any deduction under Section 80-O, making the issue academic since the assessee had overall losses.

3. Allowability of Investment Allowance on Dumpers under Section 32A:
The assessee claimed investment allowance on dumpers used in construction, which the ITO denied, considering them as transport vehicles. The CIT(Appeals) allowed the claim, relying on the decision of the Calcutta High Court, which included dumpers as part of earth-moving machinery.

The Tribunal upheld the CIT(Appeals)'s decision, referencing the Tribunal's previous rulings that dumpers used in construction qualify for investment allowance under Section 32A, distinguishing between industrial undertakings and industrial companies.

4. Allowability of Expenditure under Section 80-VV:
The Revenue challenged the CIT(Appeals)'s decision to exclude Rs. 24,500 from disallowance under Section 80-VV. The ITO had disallowed the expenditure without detailed reasoning, and the CIT(Appeals) had not elaborated on the specifics either.

The Tribunal remanded the matter back to the ITO for a detailed examination, emphasizing the need for reasonable opportunity for the assessee to present their case.

5. Applicability of Section 80-O for Assessment Year 1983-84:
For the assessment year 1983-84, the Revenue argued that the CIT(Appeals) erred in allowing relief under Section 80-O, ignoring the Supreme Court's decision in Gurjargravures (P.) Ltd. The Tribunal noted that the CBDT's approval for exemption under Section 80-O was valid only up to 31-3-1982, and Section 80-HHB came into effect from 1-4-1983. Therefore, the Tribunal set aside the CIT(Appeals)'s decision for this year and restored the ITO's order.

Conclusion:
The Tribunal allowed the assessee's appeal for the assessment year 1982-83, granting a 100% deduction under Section 80-O and upheld the CIT(Appeals)'s decision on investment allowance. However, it remanded the issue of expenditure under Section 80-VV back to the ITO and sided with the Revenue for the assessment year 1983-84, applying Section 80-HHB instead of Section 80-O.

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