2008 (12) TMI 191 - HC - Income Tax

Relief under two sections simultaneously effect of amendment - ITAT hold that relief under section 80-IA should be deducted from the profits and gains of the business before computing the relief under section 80HHC held that - amendment has been brought by the Act of 1998 and made effective from April 1 1999 - the Tribunal erred in applying it to the assessment year 1998-99 when the amendment had not yet come into effect - substantial question of law is answered in favour of the assessee but restricting it only to the assessment year 1998-99

Summary

The High Court of Madras, in the case of Mrs. Prabha Sridevan and K. K. Sasidharan JJ., considered an appeal involving the deductions claimed under sections 80HHC and 80-IA of the Income-tax Act, 1961. The appellant maintained separate books of account for the optic and opto electrical divisions, claiming 100% deduction under section 80-IA and deductions under section 80HHC for exports from the optic division. The Assessing Officer limited the deduction under section 80HHC, citing section 80-IA(9A). The Income-tax Appellate Tribunal, relying on a Special Bench decision, allowed the appeals, holding that the relief under section 80-IA should be deducted before computing the relief under section 80HHC. The appellant challenged this decision, arguing that the restriction on relief under section 80HHC was introduced by the Finance (No. 2) Act, 1998, and should only apply to the assessment year 1999-2000. The Tribunal's reliance on the Special Bench decision was deemed erroneous as the amendment had not yet taken effect for the assessment year 1998-99. The court ruled in favor of the appellant, clarifying that the restriction should only apply to the assessment year 1998-99, and disposed of the appeal accordingly. The case was closed with no costs awarded.