Court rules replantation subsidy not deductible under Income Tax Act. Appeal allowed for revenue.

The court ruled in favor of the revenue, holding that the replantation subsidy received should not be considered for deduction under Section 32AB of the Income Tax Act, 1961. The court emphasized that the subsidy was not income chargeable to tax and rejected the argument for double deductions, citing a Supreme Court decision. The court found the previous judgment cited by the assessee irrelevant and dismissed the argument based on tax effect under Section 268A. Ultimately, the appeal was allowed in favor of the revenue, highlighting the lack of merit in the assessee's arguments.

---

---

Issues involved:
Challenge to judgment by Income Tax Appellate Tribunal regarding replantation subsidy for computing profits under Section 32AB of Income Tax Act, 1961.

Analysis:
The appeal challenged a judgment by the Income Tax Appellate Tribunal concerning the treatment of replantation subsidy for computing profits under Section 32AB of the Income Tax Act, 1961 for the assessment year 1990-91. The primary contention was whether the replantation subsidy received by the assessee should be considered for the deduction under Section 32AB despite specific provisions in the Act. The revenue argued that Section 32AB applies only to income chargeable to tax, emphasizing the need for clear statutory indication to allow double deductions. The revenue relied on a Supreme Court decision to support their argument, highlighting the legislative intent against double deductions.

On the other hand, the assessee relied on a previous judgment by the Calcutta High Court to support their position. They argued that the term "eligible business" in Section 32AB(1) should be the determining factor, emphasizing the distinction made by the legislature in defining eligible business. The assessee also pointed out the irrelevance of tax effect under Section 268A, as the appeal was admitted solely on the grounds related to the replantation subsidy issue.

The court considered both arguments and concluded in favor of the revenue. They held that the judgment cited by the assessee was not applicable as it concerned income chargeable to tax, unlike the current case involving income not chargeable to tax. Additionally, the court rejected the argument for double deduction, citing the principle against it established by the Supreme Court. The court also dismissed the relevance of tax effect under Section 268A, as the appeal was specifically admitted for the issue related to the replantation subsidy.

In conclusion, the court allowed the appeal in favor of the revenue, emphasizing the inapplicability of the cited judgment and the lack of merit in the arguments presented by the assessee.

---