1991 (2) TMI 204 - AT - Income Tax

Summary

Issues:
1. Whether certain incomes credited to the profit and loss account should be excluded in computing the profits of the concerned unit for the purpose of section 80HH.
2. Whether export incentives, duty drawbacks, and import license premiums should be considered for computing deduction under section 80HH.
3. Whether the Commissioner's order under section 263 should be upheld.

Analysis:
1. The appeal was against the order of the Commissioner of Income-tax, Madurai, under section 263 of the Income-tax Act, 1961, for the assessment year 1982-83. The Commissioner found the assessment order erroneous as certain incomes credited to the profit and loss account were not related to the industrial activity of the assessee firm. The Commissioner directed the Income Tax Officer (ITO) to withdraw the deduction under section 80HH already granted and modify the assessment. The assessee argued that the sale proceeds of waste materials and other incomes were part of its industrial activities and should be considered for deduction under section 80HH. The Tribunal considered relevant case laws and the CBDT's Circular and held that the Commissioner's order was not justified as the incomes in question were derived from the industrial activities of the assessee, following the decision of the Madras High Court in a similar case.

2. The assessee contended that export incentives, duty drawbacks, and import license premiums should be included in computing the deduction under section 80HH. The Commissioner relied on judgments from other High Courts to argue that these incomes were not directly derived from the industrial activities of the assessee and thus not eligible for deduction. The Tribunal, however, referred to the CBDT's Circular and the decision of the Madras High Court in a specific case involving similar issues. It held that these incomes were indeed derived from the industrial activities of the assessee and should be considered for the deduction under section 80HH, overturning the Commissioner's order.

3. The Tribunal considered the arguments presented by both parties, analyzed relevant case laws, and the CBDT's Circular. It emphasized the importance of the decision of the jurisdictional High Court and held that the Commissioner's order was not justified. By following the decision of the Madras High Court and applying the CBDT's Circular, the Tribunal set aside the Commissioner's order under section 263, thereby allowing the appeal filed by the assessee.