2006 (3) TMI 287 - AT - Income Tax

Tax Tribunal Upholds Assessee's Claim Without Deductions, Stresses Consistent Application of Appeal Limits.

The ITAT dismissed the revenue's appeal, affirming the CIT(A)'s decision to allow the assessee's claim under section 80HHC without excluding deductions ... Income derived from exports - Whether section 80HHC deduction is to be allowed without excluding the deductions allowed under sections 80-I and 80G of the Act - HELD THAT:- The 'profits of the business' which is the starting point for computing deduction under sub-section (3) of section 80HHC is defined in Explanation (baa) below sub-section (4C). Nowhere in these provisions is there any mention that while computing the deduction u/s 80HHC, the profit is to be reduced by deductions under sections 80-I and 80G which are allowed to the assessee. Therefore, the contention of the learned DR that a substantial question of law or a question of law arises has no merits. Even on merits, the assessee's case has merits and was rightly allowed by the CIT(A) as aforesaid. Thus, the appeal is to be rejected. In the result, the appeal of the revenue is dismissed. Issues:1. Dispute over the addition of Rs. 1,44,190 under section 80HHC.2. Interpretation of Circular dated 24-10-2005 regarding the filing of appeals by the revenue.3. Whether deductions under sections 80-I and 80G should be excluded while computing deduction under section 80HHC.Analysis:1. The appeal pertains to a revenue dispute over the addition of Rs. 1,44,190 under section 80HHC for the assessment year 2001-02. The controversy arises from the direction to allow the claim of the assessee under section 80HHC without excluding deductions allowed under sections 80-I and 80G of the Act.2. The main contention revolves around the Circular dated 24-10-2005, which increased the limit for filing appeals by the revenue. The department argued that the new limit applies only to appeals filed after 30-10-2005, while the assessee relied on a Bombay High Court decision to support their position. The High Court's decision emphasized the need for consistency in applying monetary limits across old and new cases.3. The crux of the issue lies in the interpretation of the provisions of section 80HHC for computing deductions. The section outlines the methodology for determining profits derived from exports, without any explicit mention of reducing profits by deductions under sections 80-I and 80G. The Tribunal concluded that there is no legal basis for excluding these deductions while computing the deduction under section 80HHC.4. Ultimately, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to allow the assessee's claim under section 80HHC. The judgment highlights the importance of adhering to Circulars issued by the Board and interpreting tax provisions accurately to determine the eligibility of deductions for taxpayers involved in export-related activities.