The assessee claimed deduction under Section 80HH at 20% and 80-I at 25% of the income returned.

The Assessing Officer passed orders granting relief under Section 80-I  on the gross total income as reduced by deduction under Section 80HH on the view that as per Section 80HH(9)  first deduction under Section 80HH was to be given and the balance amount only qualified for deduction under Section 80-I.  

Honorable High Court of Madras held that

"Since the special leave petitions filed against the judgment of the Madhya Pradesh High Court have been dismissed and the Department has not filed the special leave petitions against the judgments of different High Courts following the view taken by the Madhya Pradesh High Court, we do not find any merit in this appeal. The Department having accepted the view taken in those judgments cannot be permitted to take a contrary view in the present case involving the same point."

Deduction under both the sections are allowed on the gross amount without deduction of exemption granted under section 80HH or 80I

 

(For text of judgment - visit 2008 -TMI - 30622 - MADRAS HIGH COURT)

Priority of deductions under section 80HH and 80I: both deductions apply to gross income without offsetting one against the other. The Assessing Officer applied section 80I to gross total income reduced by the section 80HH deduction; multiple High Court decisions and the Department's conduct supported following the prior line of authorities, leading to the position that deductions under both provisions are to be applied on the gross amount without subtracting one exemption before computing the other.