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Issues:
- Exemption under section 10(2A) on share income from a partnership firm. - Applicability of section 80HHC for tax exemption. Analysis: 1. Exemption under section 10(2A): - The appeals were against the CIT(A)'s orders for the assessment years 1996-97 and 1997-98 regarding exemption under section 10(2A) on share income from a partnership firm. - The assessee firm claimed exemption based on its share of profit from a partnership firm, but the Assessing Officer denied the claim stating that the assessee was not a partner in the partnership firm. - The ITAT found that the assessee firm did not meet the criteria of being a partner in a separately assessed firm, as required by section 10(2A). - The ITAT referred to legal precedents and concluded that the income received by the assessee firm was not exempt under section 10(2A) as it was not a partner in any firm. 2. Applicability of section 80HHC: - The assessee also relied on section 80HHC for tax exemption, arguing that the character of its income was similar to that of the partnership firm M/s. Rock International, which was exempt. - However, the ITAT noted that for deduction under section 80HHC, the assessee must be engaged in the sale of goods or merchandise, which the assessee firm was not. - The ITAT analyzed relevant legal provisions and previous court decisions to determine that the nature and source of income are crucial for section 80HHC eligibility, and the assessee firm did not meet the necessary conditions. - Consequently, the ITAT held that the CIT(A) was unjustified in granting complete tax exemption to the assessee firm and overturned the decision, restoring the Assessing Officer's order. In conclusion, the ITAT allowed the revenue's appeals, rejecting the exemption claims under both section 10(2A) and section 80HHC for the assessee firm. The judgment emphasized the legal requirements and precedents governing tax exemptions in such cases, ultimately upholding the Assessing Officer's decision overruling the CIT(A)'s orders.
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