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TMI Blog2001 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act was only an amount of Rs.10,89,472. The Assessing Officer allowed that deduction in view of the fact that the assessee had created a reserve in his profit and loss account for the previous year, of a sum of Rs.11,20,750. The Assessing Officer made an addition to the business income under section 41(1) of the Income-tax Act of a sum of Rs.5,60,851. The assessee appealed. Before the Commissioner of Income-tax (Appeals) the assessee contended that the addition of the amount of Rs.5,60,851 as business income was not justified. Alternatively, the assessee contended that even if it was taken as business profit, the same also should be reckoned for deduction under section 80HHC of the Act. The Commissioner of Income-tax (Appeals) did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made by the Assessing Officer, was eligible for computation as deduction under section 80HHC of the Act, even though the said amount had not been provided for as a reserve in the profit and loss account for the previous year. The Income-tax Appellate Tribunal accepted this contention of the assessee and setting aside the order of the Assessing Officer and that of the Commissioner of Income-tax (Appeals), remitted the question to the Assessing Officer directing him to consider the amount of Rs.5,60,851 also for the purpose of deduction under section 80HHC of the Act. The Revenue having felt aggrieved by the view adopted by the Income-tax Appellate Tribunal on the scope of deduction under section 80HHC of the Act, sought a reference of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther that an amount equal to the amount of the deduction claimed under this sub-section is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilised for the purposes of the business of the assessee. (2) (a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are receivable by the assessee in convertible foreign exchange. (b) This section does not apply to the following goods or merchandise, namely: (i) mineral oil; and (ii) minerals and ores. (3) For the purposes of sub-section (1), profits derived from the export of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of the assessee. On a plain reading of section 80HHC(1) of the Act, it appears to us that the eligibility for deduction under section 80HHC(1) of the Act depends upon the conditions in the provisos being satisfied. We are concerned here with the further proviso which insists that the deduction can be granted, for an amount being equal to the amount debited to the profit and loss account of the previous year and credited to a reserve account to be utilised for the purposes of the business of the assessee. According to learned counsel for the assessee, what the further proviso refers to is the deduction claimed by the assessee and if while claiming the deduction under section 80HHC of the Act, the assessee had created a reserve f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n should be read harmoniously. It is no doubt true, as observed by the Supreme Court in CIT v. Gwalior Rayon Silk Mfg. Co. Ltd. [1992] 196 ITR 149, that a provision for deduction should be construed reasonably and in favour of the assessee if two views are possible. When we read section 80HHC of the Act along with the relevant provisos, it is clear that the deduction under section 80HHC is available only to the extent of the reserve created in terms of the further proviso to section 80HHC(1) of the Act. In fact the further proviso limits the deduction that can be granted under section 80HHC of the Act to the extent of the amount created as a reserve in terms of the further proviso. It appears to us that it may be open to an assessee, in spi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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