2000 (12) TMI 87 - HC - Income Tax

Court allows 40% deduction for assessee despite section 80HH(9) priority rule

Commissioner Of Income-Tax Versus Nima Specific Family Trust

The court ruled in favor of the assessee, allowing the claim for a 40% deduction (20% u/s 80HH and 20% u/s 80-I) despite the provisions of section 80HH(9) ... New Industrial Undertaking, Appeal To Appellate Tribunal, Powers Of Tribunal, Power To Remand Issues Involved:1. Entitlement to Deduction u/s 80HH and 80-I: - Whether the assessee was entitled to claim 40% of the profit as deduction (20% u/s 80HH and 20% u/s 80-I) despite the provisions of section 80HH(9) which prioritize deductions under section 80HH.2. Remand by Tribunal: - Whether the Tribunal was right in remanding the matter back to the Assessing Officer for re-examination in light of accounting standards.Summary of Judgment:1. Entitlement to Deduction u/s 80HH and 80-I:The court examined the interplay between sections 80HH and 80-I of the Income-tax Act, 1961. The Department contended that section 80HH(9) mandates that deductions under section 80HH should be given priority before any deduction under section 80-I, thereby restricting the quantum of deduction under section 80-I. The Department argued that the legislative intent was to limit the total deductions when both sections apply, as highlighted by the introduction of the bracketed portion in section 80HH(9) by the Finance (No. 2) Act, 1980.Conversely, the assessee argued that section 80HH(9) only sets a priority for deductions and does not affect the quantum of deductions under section 80-I. The assessee emphasized that section 80-I was reintroduced with a different structure focusing on profit-based deductions, unlike the earlier capital-employed based deductions under section 80J. The court agreed with the assessee, noting that section 80HH(9) refers to priority and not to the quantum of deduction. The court upheld the Tribunal's decision, affirming that the assessee could claim deductions under both sections without reducing the quantum of deduction under section 80-I.The court referenced the case of *J. P. Tobacco Products Pvt. Ltd. v. CIT [1998] 229 ITR 123* to support its conclusion. The court ruled in favor of the assessee, allowing the claim for 40% deduction (20% u/s 80HH and 20% u/s 80-I).2. Remand by Tribunal:The court addressed the issue of the Tribunal remanding the matter back to the Assessing Officer. The Tribunal had remanded the case for re-examination due to the lack of particulars and directed the Assessing Officer to consider the issue in light of accounting standards, particularly alternative II. The court agreed with the Tribunal's decision, emphasizing the necessity of remanding the matter for a detailed examination. The court reframed the question as whether the Tribunal was right in remanding the matter back to the Assessing Officer and answered it in the affirmative, in favor of the assessee.Conclusion:The appeal was disposed of with no order as to costs, and the issuance of a certified copy was expedited.