High Court grants deductions under Section 80 HH, rules in favor of assessee.

The High Court allowed both Tax Case Appeals, ruling in favor of the assessee. The Court directed the Assessing Officer to grant deductions under Section 80 HH for both the assessment years in question, emphasizing the nature of processing at the unit and previous judgments supporting deductions for manufacturing activities involving job work. The Court found the Tribunal's decisions erroneous and upheld the Commissioner of Income Tax (Appeals) directives for granting relief to the assessee.

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Issues:
1. Exclusion of sub contract receipts from eligible business income for relief under Section 80 HH for assessment year 1989-90.
2. Exclusion of sub contract receipts from eligible business income for relief under Section 80 HH for assessment year 1992-93.

Analysis:

Issue 1:
The assessee, engaged in manufacturing, claimed deduction under Section 80 HH for sub contract receipts at a unit in a backward area. The Assessing Officer initially rejected the claim, but the Commissioner of Income Tax (Appeals) directed reconsideration. However, the Tribunal, following a Supreme Court decision, ruled that sub contract receipts did not qualify as income derived from the industrial undertaking. The assessee argued for relief based on previous court decisions supporting deductions for similar activities. The High Court noted that the unit was profit-making, and previous judgments favored deductions for manufacturing activities involving job work. The Court upheld the assessee's claim, emphasizing the nature of processing at the unit and directing the Assessing Officer to grant the deduction.

Issue 2:
For the assessment year 1992-93, the Assessing Officer calculated the deduction under Section 80 HH after setting off losses from the previous year, leading to no positive income for certain units. The Commissioner of Income Tax (Appeals) directed the Officer to grant the relief in accordance with the law, but the Tribunal overturned this decision based on the interpretation of "derived from" in Section 80 HH. The High Court, considering the unit's location in a backward area and the nature of its activities, found the Tribunal's decision erroneous. Relying on past judgments supporting deductions for job work activities, the Court set aside the Tribunal's order and directed the Assessing Officer to implement the Commissioner's directive.

In conclusion, the High Court allowed both Tax Case Appeals, answering in favor of the assessee, and directed the Assessing Officer to grant the deductions under Section 80 HH as per the Commissioner's directions.

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