Commissioner's order challenged on deduction u/s 80HHC for 1984-85 assessment set aside.

The appeal challenged the Commissioner's order on the assessment for the year 1984-85, specifically regarding deduction u/s 80HHC. The Commissioner's order was set aside, and the deduction was directed to be restricted within the limits of sec. 80AB. The Tribunal held that sec. 80AB could not be applied to sec. 80HHC due to their incompatible nature, emphasizing the distinction in deductions. The Tribunal directed the IAC(A) to determine export profit accurately and allow deduction u/s 80HHC without exceeding the export profit, ultimately allowing the appeal and restoring the assessment made by the IAC(A).

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Issues involved: Appeal against Commissioner's order setting aside assessment related to deduction u/s 80HHC and directing restriction within limits of sec. 80AB.

Summary:
The assessee's appeal challenged the Commissioner's order regarding the assessment for the year 1984-85, specifically concerning the deduction u/s 80HHC. The Commissioner set aside the assessment and directed the restriction of the deduction within the limits prescribed by sec. 80AB. The dispute arose from the determination of the assessee's total income, including deductions for depreciation and entertainment expenditure. The Commissioner initiated action u/s 263, questioning the income from the export business and miscellaneous income credited to the profit and loss account. The assessee objected, stating that the credited amount was receipts from various sources and income determination required adjusting corresponding expenditure. The Commissioner held that sec. 80AB applied to the deduction under sec. 80HHC, limiting the permissible deduction. The appeal contended that sec. 80AB could not be applied to sec. 80HHC due to their incompatible nature.

The appeal argued that sec. 80AB, governing deductions in respect of certain incomes, could not be applied to sec. 80HHC, which allowed deductions based on export turnover, not export profits. The distinction between deductions under heading "C" and sec. 80HHC was emphasized, highlighting that sec. 80HHC allowed deductions from the total income of the assessee, not specifically from profits of a particular activity. The amendment to sec. 80HHC in 1986 changed the basis of deduction to net foreign exchange realized and profits earned. The Tribunal concluded that sec. 80AB could not be applied to sec. 80HHC due to their incompatible nature and different operating fields.

Regarding the calculation of income from exports, the Tribunal noted the need to determine if the credited amount represented net income after considering corresponding expenditure. The Tribunal set aside the Commissioner's order, directing the IAC(A) to determine export profit and allow deduction u/s 80HHC, ensuring it did not exceed the export profit. The appeal was allowed, the order under appeal was set aside, and the assessment made by the IAC(A) was restored.

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