2012 (3) TMI 718 - AT - Income Tax

Court dismisses cross appeals on deductions under Income-tax Act

The Assistant Commissioner of Income Tax, Company Circle V (3), Chennai Versus. M/s Raj Kumar Impex P. Ltd, Chennai (Vice-Versa)

The cross appeals filed by Revenue and Assessee regarding the computation of eligible deductions under sections 80HHC and 80-IB of the Income-tax Act, ... - Issues involved: Cross appeals filed by Revenue and assessee regarding computation of eligible deductions u/s 80HHC and 80-IB of the Income-tax Act, 1962.For Revenue: Revenue aggrieved that CIT(A) directed A.O. to compute deduction u/s 80HHC without first deducting available deduction u/s 80-IB. Revenue argued that deduction u/s 80HHC should be calculated only on profits after allowing deduction u/s 80-IB, citing decision in General Optics (Asia) Ltd. v. DCIT (315 ITR 400). However, Hon'ble jurisdictional High Court in CIT v. MRF Ltd. held that deduction u/s 80-IB should not be reduced before calculating deduction u/s 80HHC, following the decision in SCM Creations v. ACIT (304 ITR 319). The court also referred to DCIT v. Chola Textiles P. Ltd. where a similar view was taken for the assessment year 2004-05. Therefore, the appeal of Revenue was dismissed.For Assessee: Assessee aggrieved that income from DEPB sales and interest on margin money deposit were held ineligible for deduction u/s 80-IB. The court referred to Liberty India v. CIT where it was held that DEPB and Duty Drawback receipts are not considered income from industrial undertaking. Thus, CIT(A)'s decision to exclude these incomes while calculating deduction u/s 80-IB was upheld. The court also cited CIT v. K. Ravindranathan Nair to support the decision. Consequently, the appeal of the assessee was also dismissed.In conclusion, both appeals filed by Revenue and assessee were dismissed as the court found no merit in either argument.