9911796707
TMI Blog2007 (8) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... was revised declaring income under section 115J at Rs. 5,42,171. The original assessment under section 143(3) was made on 26-6-1991, wherein the total income was assessed at Rs. 70,080 while the income under section 115J was assessed at Rs. 5,42,171. The difference in the declared income and assessed income was on account of disallowance of expenditure under section 37(2A) of the Act. That means that deduction under section 80HHD as claimed by the assessee was accepted and allowed. 2.2 Subsequently, the assessee filed an application under section 154 of the Act on 30-5-1995, seeking rectification in the computation of deduction under section 80HHD. It was stated in the application that deduction under section 80HHD had to be worked out by determining the proportionate profits in the ratio of receipts from services provided to the foreign tourists to the total receipts of the business, whereas in the return of income the claim has been made in the ratio of profits derived from services provided to the foreign tourists to the total of credit side of the P L Account. The application filed by the assessee was rejected by the Assessing Officer vide order dated 18-10-1995, by hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn under section 139(5) only, if the assessee had discovered any omission or wrong statement in the original return of income. Apart from this, it was observed by him that profit and loss Account of the assessee will have to be recast to reflect the revised working of the deduction under section 80HHD. The assessee filed a revised computation which revealed that the total receipts of Rs. 4,44,76,329 from the tourists were not reflected in the credit side of the P L account filed along with the original return of income. Similarly, direct expenditure of Rs. 4,18,60,606 had not been debited to P L Account. Then the Assessing Officer referred to the decision of Gujarat High Court in the case of Panchmahal Steel Ltd. v. U.A. Joshi, ITO [1994] 210 ITR 723, which has also been upheld by the Supreme Court, wherein it was held that once a draft order was passed by the ITO under section 144B, the assessee could not, thereafter, file a revised return. Since the assessee had not filed the revised return under section 139(5), the additional claim could not be allowed. The claim of the assessee was also dismissed on the alternate ground that deduction under section 80HHD has to be restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2000, in assessee s own case, pertaining to assessment years 1989-90 to 1991-92. A perusal of the same shows that appeals were filed before the Tribunal which arose from the assessment proceedings under section 143(3) as well as section 154 of the Act. The appeals arising from assessment proceedings under section 143(3) were restored to the file of the Assessing Officer for adjudication of the claim under section 80HHD in accordance with the law. On the other hand, the appeals arising from the proceedings under section 154 were dismissed as academic. In the fresh assessment proceed- ings in pursuance of the directions of the Tribunal, the Assessing Officer was required to determine the correct amount of deduction under section 80HHD in accordance with the provisions of this section. The Assessing Officer himself has accepted in para 7 of the order that the assessee was entitled to higher deduction in accordance with the provisions of section 80HHD. In our opinion, the Assessing Officer could not reject the claim of the assessee merely on the ground that the claim was not made by filing the revised return. Once, the additional ground was admitted by the Tribunal and the matter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t condition is not satisfied, we fail to see how the deduction on account of development rebate can be claimed at all. We think that the Explanation is clear, and that there can be no doubt that it envisages the creation of a reserve fund notwithstanding that there is no profit or insufficient profit from which such reserve may be provided. To contemplate otherwise would be to negate the entire scheme incorporated in section 33 read with section 34 of the Act." The perusal of the above clearly shows that ( i ) reserve must be created in the previous year in which claim is to be allowed and ( ii ) such reserve must be created before the P L Account is finally drawn up. The above principles would also squarely apply where claim is to be adjudicated under section 80HHD since sub-section (1)( b ) specifically provides that reserve is to be created in the previous year in which deduction is to be allowed. Hence, the deduction would not be allowed unless the reserve is created in the year in which deduction is to be allowed. 7. In view of the above Supreme Court judgment, the claim of the assessee can be disallowed when reserve is not created by the assessee in the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting the benefit under section 80-O. The hon ble High Court held that it would be unfair to deny the benefit under section 80HHB on mere technicalities. Accordingly, the assessee was allowed an opportunity to fulfil the requirement of section 80HHB. 10. The decision of the Tribunal in B. Vijaykumar Co. ( supra ) relied upon by the assessee is contrary to the judgment of Supreme Court in the case of Shri Shubhlaxmi Mills ( supra ) and in the case of Karimjee (P.) Ltd. ( supra ), wherein it has been clearly held that reserve has to be created in the previous year in which the deduction is to be allowed. The judgment of the Court in the case of Shri Shubhlaxmi Mills ( supra ) was not referred before the Tribunal. Therefore, on the basis of the said decision of the Tribunal, it cannot be held that additional reserve can be created in the subsequent years. 11. In the present case, the contention of the assessee is that reserve has been created on 22-1-2002 but it is not clear either from the orders of the lower authorities or from the paper book filed before us to prove that the additional reserve was created in respect of the years under consideration. The relevant c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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