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TMI Blog2004 (11) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... he case and in view of the provisions of section 80HH(9), the Income-tax Appellate Tribunal is right in holding that the deduction under sections 80HH and 80-I are independent deductions and are to be allowed with reference to the gross total income?" The assessee is a private limited company engaged in the manufacture of oil from mustard seeds. For the assessment year 1988-89, it filed the return on July 27, 1988, declaring an income of Rs. 2,33,450. By an order dated September 29, 1989, passed under section 143(3) of the Act, the Assistant Commissioner of Income-tax, Investigation Circle, Hisar (hereinafter described as "the Assessing Officer"), made an addition of Rs. 1,46,752 on account of low yield declared by the assessee. He also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998] 229 ITR 123 (MP) and CIT v. Chokshi Contacts P. Ltd. [2001] 251 ITR 587 (Raj). We have thoughtfully considered the entire matter. In CIT v. Vishnu Oil and Dal Mills [1996] 218 ITR 71, a Division Bench of the Rajasthan High Court referred to sections 80AB and 80HH of the Act and held as under (headnote): "For the determination of the relief under section 80HH, the total income of the assessee has to be worked out after deducting unabsorbed losses and unabsorbed depreciation and the income eligible for deduction will be the net income as computed in accordance with the provisions of the Act and not the gross income." In J. P. Tobacco Products P. Ltd. v. CIT [1998] 229 ITR 123, a Division Bench of the Madhya Pradesh High Court, after n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such provision was made in so far as section 80-I was concerned. This clearly contra-indicates that sub-section (9) of section 80HH by itself meant that deduction allowed under section 80HH is to be reduced from the gross total income for granting the benefit of section 80J and, for that matter, of section 80-I. It was provided in section 80J itself by later amendment while no such provision was made in section 80-I even though inserted on a later date. The provision of law is, therefore, clear that in so far as the benefit of section 80-I is concerned, it has to be granted on the gross total income and not on the income reduced by the amount allowed under section 80HH." In CIT v. Nima Specific Family Trust [2001] 248 ITR 29, a Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80HH would be given before calculating the deduction under section 80J. After April 1, 1989, section 80J came to be omitted. At this stage, it is also important to bear in mind that section 80-I was a dead section during the period April 1, 1973, to April 1, 1981. Section 80-I was brought back into the Income-tax Act by the Finance (No. 2) Act, 1980, with effect from April 1, 1981. Under section 80-I, as inserted with effect from April 1, 1981, it was provided that where the gross total income of an assessee included profits derived from an industrial undertaking, after a certain date, to which the section applied, there shall be a deduction from such profits of an amount equal to twenty per cent. This section 80-I was in a way a succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80HH, then priority shall be given to section 80HH. The word 'or' is very important. Section 80HH(9) only talks about priority. It does not refer to the quantum of deduction as was the case under section 80J(1). Section 80HH does not talk of carry forward of shortfall as in the case of section 80J(3). In fact, after April 1, 1981, sections 80HH and 80-I are both dealing with deductions based on profits. The concept of deduction based on capital employed is completely given a go-by. Special deduction is first given under section 80HH and then special deduction will be given under section 80-I to the extent available." In CIT v. Chokshi Contacts P. Ltd. [2001] 251 ITR 587, a Division Bench of the Rajasthan High Court referred to the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80HH is to be made in the first instance which is with an object to promote industrial establishment in backward areas and only thereafter deduction computed under section 80-I or section 80J shall be given effect to. " The Bench then referred to an earlier judgment of the same court in CIT v. Shree Engineers (D.B.I.T. Reference No. 38 of 1995, decided on January 10, 1996) and observed as under: "Coming to the judgment relied on by learned counsel for the Revenue in Shree Engineers' case, we are of the opinion that the answer to question No. 3 which was referred by the Tribunal has been rendered solely with the reference to the earlier decision of the court in Vishnu Oil and Dal Mills' case [1996] 218 ITR 71 (Raj) only without n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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