Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the relief under s. 80HH of the IT Act, 1961, computed by the CIT in his order under s. 263 of the Act was wrong and cancelling the same and thereby restoring the deduction allowed in the order dt. 17th Feb., 1987 ?

Counsel Appeared

C.V. Rajan, for the Revenue : P.P.S. Janarthana Raja, for the Assessee

JUDGMENT

MRS. A. SUBBULAKSHMY, J. :

At the instance of the Revenue, the following question of law has been referred to us : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the relief under s. 80HH of the IT Act, 1961, computed by the CIT in his order under s. 263 of the Act was wrong and cancelling the same and thereby restoring the deduction allowed in the order dt. 17th Feb., 1987 ?”

The assessee-company has three plant units one at Madras and two at Hosur. The plant owned at Madras and one at Hosur incurred losses and the other plant at Hosur incurred profit. The AO treated Plant II at Hosur separately as an industrial undertaking and determined s. 80HH deduction. The CIT on revision took the entire business income of the assessee into account and allowed some relief and directed the AO to modify the assessment and recompute the total income by allowing deduction under s. 80HH only with reference to the profit of Rs. 25,230 from Hosur Plant No. II. The Tribunal held that the quantification of deduction under s. 80HH was required to be made with reference to the profits of Plant II at Hosur, it being an industrial undertaking by itself and so the relief under s. 80HH computed by the CIT under s. 263 was wrong.

This Court in its order in Tax Case No. 1047 of 1987, dt. 28th April, 1998, CIT vs. Sundaravel Match Industries (P) Ltd. (2000) 163 CTR (Mad) 625 : (2000) 245 ITR 605 (Mad) considered an identical question and held that deduction under s. 80HH is allowable only after setting off the losses and answered the question in favour of the Revenue.

Following the above decision and for the reasons stated therein, we answer the question of law referred to us in favour of the Revenue and against the assessee.

[Citation : 247 ITR 488]