2009 (11) TMI 537 - HC - Income Tax

Special deduction Industrial undertaking in backward area industrial undertaking situated in District Notified as backward area - assessee entitled to benefit under section 80HH of the Act

Summary

Issues Involved:
Interpretation of notification regarding backward areas for claiming deduction under section 80HH of the Income-tax Act, 1961.

Analysis:
The appeal by the Revenue challenged the order passed by the Income-tax Appellate Tribunal regarding the deduction claimed under section 80HH for the assessment year 1993-94. The respondent claimed the deduction based on the location of their manufacturing unit in Belgaum, a backward area as per a specific notification. The Assessing Officer initially rejected the claim, but the appellate authority allowed it for Belgaum District, distinguishing it from Belgaum taluk of Gulbarga District. The Revenue filed subsequent appeals leading to the current case.

The substantial question of law in this appeal was whether the Tribunal's confirmation of Belgaum being a backward area, as per the notification, was contrary to law and arbitrary. The court answered this question in the negative against the Revenue, providing detailed reasoning.

The court analyzed the notification dated December 19, 1986, which listed backward areas for claiming benefits under section 80HH. It was noted that while certain taluks from various districts were excluded, the notification did not exclude any taluk from Belgaum District. Specifically, for Gulbarga District, Chittapur taluk, Sedam taluk, and Belgaum taluk were excluded. This interpretation was crucial in determining the eligibility of the assessee for the deduction.

The court concluded that the concurrent findings of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal were justified. The notification clearly excluded specific taluks from Gulbarga District, not Belgaum District. Therefore, the assessee was entitled to claim the benefit under section 80HH for their manufacturing unit in Belgaum. The court dismissed the appeal by the Revenue, upholding the decision in favor of the respondent.