Hon'ble Subhash Chandra Nigam,J.
This is an appeal under Section 260A of the Income Tax Act raising following two questions:
"1 Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in holding that the deduction under Section 801 of the Income Tax Act, 1961 should be allowed on the gross total income, without reducing from it the deduction allowed under Section 80HH?
2 Whether the Hon'ble ITAT was right in restoring the matter regarding charging of interest under Section 234B and 234C to the file of the Assessing Officer in view of the judgment of the Supreme Court in Insilco 198 CTR 114 with the directions to decide the same as per law, whereas the judgment of the Hon'ble Supreme Court is not dealing with the issue before the ITAT?"
We are of the view that question no. 1 is covered by the decision of this Court in the case of Commissioner of Income Tax v. Lucky Laboratories Ltd., reported in (2006) 284 ITR 435 in favour of the assessee and against the revenue. The Division Bench of this Court has held as follows:
"Both sections 80HH and 80-1 contemplate deductions from gross total income and fall under Chapter VI-A. Section 80-I of the Act contemplates the deduction from profits and gains to an amount equal to twenty per cent derived from an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft. The section does not say that the deduction is permissible after reducing the deduction allowed under Section 80HH of the Act. Under section 80HH of the Act, deduction to the extent of twenty per cent is contemplated on the profits and gains derived from an industrial undertaking or the business of a hotel established in a backward area. This section indicates that the deduction contemplated is based on profits derived from such industrial undertaking hence the deduction is profit based. Sub-section (9) of section 80HH of the Act only says that if the assessee is entitled for deduction under section 80-I as well as section 80HH, effect shall first be given to the provisions of the section. Section 80HH (9) only talks about priority. It does not refer to the quantum of deduction. Neither section 80HH nor section 80-1 of the Act says that while computing the deduction under section 80-I of the Act, the deduction already allowed under section 80HH of the Act be excluded. In our opinion, both the sections independently contemplate separate deductions. If the assessee fulfils the conditions of both the sections, it is entitled for deductions as contemplated therein. In the absence of any provision, while computing the deduction under section 80-I of the Act, the deduction already allowed under section 80HH cannot be excluded. The view of the Tribunal in this regard is accordingly upheld. However, it may be mentioned here that section 80A (1) of the Act says that in computing the total income of an assessee, there shall be allowed from gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80U. Sub-section (2) of section 80A further says that the aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. In this view of the matter, the total deduction under sections 80HH and 80-I should not exceed the gross total income of the assessee. In the circumstances, while quantifying the deduction, priority should be given to the deduction under section 80HH in view of sub-section (9) of section 80HH of the Act.
The view taken above is supported by the Division Bench decision of the Madhya Pradesh High Court in the case of J.P. Tobacco Products P. Ltd. v. CIT reported in [1998] 229 ITR 123 and the decision of the Bombay High Court in the case of CIT v. Nima Specific Family Trust reported in [2001] 248 ITR 29. In both the aforesaid cases, it has been held that the unit is entitled to special deduction under both the sections 80HH and 80-I. So far as the benefit of section 80-1 is concerned it is to be granted on the gross total income and not on the income reduced by the amount of income allowed under section 80HH."
So far as question no. 2 is concerned, the Tribunal has remanded back the matter to the Assessing Officer to decide the issue in the light of the judgment of the Apex Court in Insilco, reported in 198 CTR-114. Therefore, this question cannot be said to be a substantial question of law, which requires consideration by this Court.
In view of the above, the appeal stands dismissed.
Order Date :- 3.2.2010 OP