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2015 (7) TMI 3 - ITAT LUCKNOWEligibility of Deduction u/s 80HHC - Held that:- In the present case, the assessee is having three units. In unit No. 1, the assessee is manufacturing finished leather which is sold in domestic market or is utilized in manufacturing of leather footwear or goods by other units. In unit No. 2, the assessee is manufacturing complete shoes and leather uppers and other leather goods. In this unit, there is mainly export sales, although there is small amount of domestic sale. In unit No. 3, the assessee is manufacturing leather uppers and bags as well as other leather goods. In this unit also, there is small amount of domestic sale of ₹ 25.10 lacs as well as export sales of ₹ 4,217 lacs. The assessee has claimed deduction u/s 80HHC in respect of unit No. 2 & 3 where domestic sale is very small to the extent of ₹ 98.88 lacs and ₹ 25.80 lacs respectively as against export sale of ₹ 581.48 lacs and ₹ 421 lacs respectively and has not claimed any deduction u/s 80HHC in respect of unit No. 1 where domestic sale is to the extent of ₹ 2,051.83 lacs. The items manufactured in unit No. 1 is finished leather whereas in Unit No. 2 and 3, the finished leather is raw material and end products are leather uppers, complete shoes, leather bags and other leather goods. Under these facts, we find that this unit is having domestic sales and the items of production is different in unit no. 1 as compared to unit No. 2 & 3. Regarding the correctness of the profit reported in these units, we find that deduction was claimed by the assessee u/s 80IB also in respect of Unit No. 2 on the basis of profit as per profit & loss account of Unit No. 2 at ₹ 21,49,626/-. The Assessing Officer has allowed deduction to the assessee u/s 80IB for this unit on the basis of same profit although after making some adjustments in respect of interest income and export benefits. This goes to show that veracity of books of account of Unit No. 2 have been accepted by the Assessing Officer also because he has allowed deduction to the assessee u/s 80IB on the basis of separate profit & loss account of Unit No. 2. Hence, this is not the allegation of the Revenue that unit no. 2 books of account and profit & loss account are not correct and reliable. We also find that it is noted by the Assessing Officer on page No. 5 of the assessment order that from the computation of income filed along with in return of income, it is noticed that the deduction u/s 80HHC has been claimed by the assessee of ₹ 91,28,329/- in Unit No. 2 and ₹ 4,04,200/- in Unit No. 3 totaling to ₹ 1,31,07,417/-. When as per the Assessing Officer, it can be seen in Annexure-A to the assessment order, profit of the business as whole has been worked out at ₹ 1,81,06,614/- before reducing deduction allowed by him u/s 80IB and profit was computed at ₹ 1,32,82,262/- after reducing such deduction allowable u/s 80IB of the Act. Hence, it is seen that the deduction claimed by the assessee is not more than total profit worked out by the Assessing Officer suggesting loss in Unit No. 1. In our considered opinion, under these facts, the judgment of Hon'ble Delhi High Court in the case of Padmini Technologies (2011 (9) TMI 210 - DELHI HIGH COURT ) squarely applicable and respectfully following the same, we hold that in the facts of the present case, deduction is allowable to the assessee in respect of Unit No. 2 & 3 as has been claimed by the assessee. But for the limited purpose of verifying the calculation of the assessee for claiming such deduction u/s 80HHC, we remand the matter back to the file of the Assessing Officer for the limited purpose of verifying the veracity of this computation and to determine the actual deduction allowable to the assessee by taking the profit, export turnover and total turnover of these units No. 2 & 3 only by excluding the figures of Unit No. 1. Computing deduction allowable to the assessee u/s 80HHC - deduction allowable u/s 80IB would not be reduced as per CIT(A) - Held that: - As for the purpose of computing deduction allowable u/s 80HHC of the Act, deduction allowable u/s 80IA is not required to be reduced but for the purpose of allowing deduction u/s 80HHC of the Act, the same can be allowed only to the extent after reducing the deduction allowable u/s 80IA of the Act. It means the total deduction allowable including all sections should not exceed 100% of the taxable profit and gross total of income. Hence, we decline to interfere in the order of CIT(A) on this issue.
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