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Issues: Whether deduction under Section 80-IB of the Income-tax Act, 1961 was required to be reduced from business profits before computing deduction under Section 80-HHC of the Income-tax Act, 1961, and whether the matter required remand for fresh computation in accordance with the Supreme Court's dictum.
Analysis: The assessment had computed the export deduction after first giving effect to the industrial undertaking deduction, but the Court found that the impugned demand was not based on proper computation of income. Relying on the governing principle laid down by the Supreme Court on the manner of computing deductions under Chapter VI-A, the Court held that the deductions had to be recomputed in accordance with that dictum. Since the existing computation was contrary to the approved method, the assessment order could not be sustained and the matter had to go back to the Assessing Officer for fresh determination.
Conclusion: Deduction under Section 80-IB was to be given effect in the reassessment, and the claim under Section 80-HHC was to be recomputed thereafter in accordance with law; the matter was remanded to the Assessing Officer.
Final Conclusion: The assessee succeeded in having the assessment set aside and the income recomputed afresh, but the taxable deduction issue was left for reconsideration on remand.
Ratio Decidendi: Where the existing computation of deductions under Chapter VI-A is contrary to the governing legal method, the assessment cannot stand and must be set aside for fresh computation in accordance with the applicable Supreme Court rule.
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