1989 (8) TMI 108 - AT - Income Tax

Deduction allowed for export turnover in Free Trade Zone despite tax holiday

The Tribunal held that the assessee was entitled to the deduction under sec. 80HHC for the export turnover from the Kandla Free Trade Zone, despite ... Assessment Year, Export Business, Tax Holiday Issues involved: Assessee's appeal regarding deduction u/s 80HHC for assessment year 1985-86.Summary:Issue 1:The dispute arose regarding the deduction under sec. 80HHC for the assessee's export turnover from the unit in Kandla Free Trade Zone.Details:The assessee originally claimed deduction of Rs. 7,37,286 u/s 80HHC, which was partially allowed by the ITO. Upon appeal, the CIT (Appeals) directed the ITO to verify and allow the claim in accordance with law. The assessing officer then allowed a revised deduction under sec. 80HHC. However, the deduction was not allowed for turnover from the unit in Kandla Free Trade Zone. The CIT (Appeals) upheld this decision, leading to the appeal to the Tribunal by the assessee.Issue 2:Interpretation of sec. 80HHC in relation to sec. 10A and sec. 80AB.Details:The Department argued that since the income from the industrial undertaking in Kandla Free Trade Zone was fully exempt u/s 10A, no deduction should be allowed u/s 80HHC. However, the assessee contended that sec. 80HHC should not be excluded based on the provisions of sec. 10A and sec. 80AB. The Tribunal analyzed the legislative intent behind these sections and concluded that the assessee was entitled to the deduction under sec. 80HHC, even for the turnover from the Kandla Free Trade Zone.Conclusion:The Tribunal held that the assessee was entitled to the deduction under sec. 80HHC for the export turnover from the Kandla Free Trade Zone, despite enjoying tax holiday under sec. 10A. The assessing officer was directed to allow the claim of the assessee accordingly. The appeal was allowed in favor of the assessee.