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TMI Blog2010 (10) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... l Sri. Joseph Markose appearing for the respondent-assessee. 3. The facts leading to the controversy are the following. The assessee company is engaged in manufacture and sale of rubberised coir products like mattresses, pillows, railway and bus seats. It had four industrial units, one each in the States of Kerala and Andhra Pradesh and two in the State of Tamil Nadu. The assessee made capital investment in research and development in one of the industrial units which entitles it for deduction under Section 35(1)(iv) of the Income Tax Act (hereinafter called "the Act") subject to the ceiling provided under Section 35(2). Similarly one of the industrial units set up by the assessee was a new one and was located in a backward area which enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment and then from the gross total income so arrived at, he granted eligible deduction under Section 80HH and 80-I in respect of the profit attributable to the industrial unit concerned. However, assessee's case is that assessee is entitled to get deduction under Section 80HH and 80-I before providing for deduction under Section 35(2), which was accepted by the Tribunal, against which Revenue has filed these appeals. 4. Before us Senior counsel appearing for the Revenue relied on the decision of the Supreme Court in Synco Industries Ltd. v. Assessing Officer Income Tax [2008] 299 ITR 444/168 Taxman 224 and contended that the Tribunal's order is not sustainable by virtue of this decision alone. Counsel for the assessee has referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss total income of the assessee has to be determined which is income computed under all heads including business income computed after granting deductions and allowances under Sections 30 to 43D of the Act which includes deduction of capital expenditure on research and development allowable under Section 35(2) of the Act. For easy reference Section 80HH and Section 80-I are extracted hereunder: "80HH. Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. -(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which section applies, there shall, in accordance with and subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s : (i) First business income has to be computed as stated in Section 29 by applying the provisions of Sections 30 to 43D of the Act. Since capital expenditure employed in research and development is allowable under Section 35(2) of the Act, the said deduction has to be allowed in the course of computation of business income of the assessee as a whole. The income so computed by applying the above provisions is the gross business income which so far as the respondent-assessee is concerned is the gross business income from all the industrial units. The next procedure is to club income computed under all the heads of income which will form the "gross total income" of the assessee. (ii) The next procedure is to determine "total in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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