Deduction computation under sections 80HHC and 80IA was remitted for reassessment after a later Supreme Court ruling changed the legal position.

Deduction computation under sections 80HHC and 80IA, including the treatment of loss from windmill business for section 80HHC purposes, had to be reconsidered in light of a later binding Supreme Court ruling. The existing assessment could not be sustained on the earlier basis because the subsequent legal position affected the taxable income computation. The Assessing Authority was therefore directed to recompute the deductions and taxable income by applying the updated Supreme Court guidance. The issues were not finally determined on merits, and the matter was remitted for fresh assessment in accordance with the later law.

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Issues: Whether the deduction under sections 80HHC and 80IA of the Income-tax Act, 1961, and the treatment of loss from windmill business, required reconsideration in the light of the later Supreme Court ruling.

Analysis: The assessment controversy concerned two connected components of the profit computation, namely the treatment of loss from the windmill activity for the purpose of section 80HHC and the inter se computation of deductions under sections 80HHC and 80IA. In view of the authoritative pronouncement of the Supreme Court referred to in the judgment, the existing assessment could not be finally sustained without reworking the taxable income on the basis of the later legal position. The matter therefore required reconsideration by the Assessing Authority, with liberty to take note of the latest development in law while recomputing the deductions.

Conclusion: The issues were not finally decided on merits and the matter was remitted for fresh assessment in accordance with the later Supreme Court ruling.

Final Conclusion: The tax case was disposed of by sending the matter back to the original Assessing Authority for recomputation of the taxable income and the deductions under sections 80HHC and 80IA.

Ratio Decidendi: Where a later binding Supreme Court decision governs the computation of statutory deductions, the assessment is to be reopened and recomputed in accordance with that legal position rather than finally affirmed on the earlier basis.

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