ITA grants deductions under sections 80IB & 80HHC, excludes 80IA profits.

The ITAT allowed the assessee's appeal, directing the AO to grant deductions under sections 80IB and 80HHC based on the High Court's decision in Associated Capsules P. Ltd. v/s DCIT. The deductions were to be calculated on the profits remaining after excluding those allowed under section 80IA. The assessment was completed at an income of Rs. 73,54,340/- in favor of the assessee.

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Issues Involved: Appeal against assessment order for AY 2001-02, computation of deductions u/s 80IB and u/s 80HHC.

Comprehensive Details:

Issue 1: Appeal against Assessment Order
The appeal for the assessment year 2001-02 was filed by the Assessee against the common order dated 21.1.2010 passed by the ld. CIT(A) for the Assessment Years 2000-01 and 2001-02. The assessee firm, engaged in the business as Exporter of Readymade Garments, had filed a return declaring total income at Rs.NIL. However, the assessment was completed determining total income at Rs. 1,12,64,570/-. On appeal, the ld. CIT(A) partly allowed the appeal. Subsequently, the AO computed the assessee's revised income at Rs. 1,11,06,660/- after giving effect to the order of the ld.CIT(A). Both the assessee and Revenue preferred a second appeal before the ITAT. The ITAT set aside the assessment to the file of the AO with certain directions, including allowing deduction u/s 80IB and u/s 80HHC. The AO computed the deductions as per the Tribunal's directions and completed the assessment at an income of Rs. 73,54,340/-.

Issue 2: Computation of Deductions u/s 80IB and u/s 80HHC
The main contention was regarding the calculation of deductions under section 80-IB and 80-HHC. The assessee argued that the deductions were to be calculated independently on the eligible profits, while the AO had calculated deduction u/s 80HHC on the residual profits after reducing the amount of deduction u/s 80IB. The ITAT found that the issue was covered by the judgment of the Hon'ble Jurisdictional High Court in the case of Associated Capsules P. Ltd. v/s DCIT. The High Court held that deductions under different provisions should be restricted to the profits of the business that remain after excluding the profits allowed as deduction under section 80-IA. As there were no distinguishing features brought by the Revenue and considering the binding decision of the High Court, the assessee was found eligible for deductions u/s 80IB and u/s 80HHC. The AO was directed to allow the deductions as per the High Court's decision.

In conclusion, the assessee's appeal was allowed based on the judgment of the Hon'ble Jurisdictional High Court, and the deductions u/s 80IB and u/s 80HHC were to be granted accordingly.

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