Additional reserve for enhanced section 80HHC deduction failed where the issue was treated as one of fact only.

The dispute concerned whether an assessee could create an additional reserve to claim a higher deduction under section 80HHC after the deduction was enhanced in assessment, and whether any substantial question of law arose from the revisional order under section 263. The Bombay HC found that the assessee had sufficient opportunity to create the reserve when the assessment resulted in a higher deduction and after notice under section 263, but failed to do so. It treated the inability-to-foresee argument as fact-specific and held that the development rebate precedent was inapplicable to section 80HHC. The matter was held to turn on pure findings of fact, so no substantial question of law arose and the assessee did not succeed.

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Issues: Whether, on the facts, the assessee was entitled to create an additional reserve for deduction under section 80HHC of the Income-tax Act, 1961 after the deduction was enhanced, and whether any substantial question of law arose against the revisional order under section 263 of the Income-tax Act, 1961.

Analysis: The deduction originally claimed was lower than the deduction ultimately allowed on assessment. The Tribunal found that the assessee had sufficient to create the additional reserve when the assessment proceedings resulted in a higher deduction and also after notice under section 263 was issued, but it did not do so. The objection based on the inability to foresee the increased profit was rejected on facts. The reliance on the decision concerning development rebate was held inapplicable because the present controversy arose under section 80HHC.

Conclusion: The Court held that the issue turned on a pure finding of fact and that no substantial question of law arose. The assessee was not entitled to succeed.

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