Section 80HHF deduction required fresh factual examination, while estimated personal-use expense disallowance was upheld.

Deduction under section 80HHF was not finally denied because the assessee's claim required factual verification on the nature of the software activity and the objection regarding Board of Film Certification approval; the matter was remitted for fresh adjudication with opportunity to the assessee. The estimated disallowance of postage, telephone, electricity, power running and maintenance expenses for personal use was sustained, as the assessee accepted that some personal element existed and the lower authorities' estimate did not warrant interference. The appeal thus succeeded only in part, with one issue sent back for reconsideration and the other disallowance maintained.

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Issues: (i) whether the assessee's claim for deduction under section 80HHF was liable to be denied for want of Board of Film Certification approval and whether the matter required fresh examination; (ii) whether the disallowance out of postage, telephone, electricity, power running and maintenance expenses on account of personal use was justified.

Issue (i): Whether the assessee's claim for deduction under section 80HHF was liable to be denied for want of Board of Film Certification approval and whether the matter required fresh examination.

Analysis: The deduction claim depended upon the nature of the software activity and satisfaction of the statutory conditions under section 80HHF. Since the assessee contended that it dealt in television software and had not been effectively examined on the specific objection regarding certification, the dispute required factual verification. In the interests of justice, the matter was sent back for reconsideration with opportunity to the assessee.

Conclusion: The issue was remitted to the Assessing Officer for fresh adjudication and was decided in favour of the assessee for that limited purpose.

Issue (ii): Whether the disallowance out of postage, telephone, electricity, power running and maintenance expenses on account of personal use was justified.

Analysis: The disallowance was made on an estimate because personal use could not be ruled out, and the assessee had itself ed that some personal element existed. On these facts, the estimation made by the lower authorities did not call for interference.

Conclusion: The disallowance was sustained and this issue was decided against the assessee.

Final Conclusion: The appeal succeeded only in part, with one issue sent back for reconsideration and the other disallowance maintained.

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