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2018 (3) TMI 150 - HC - Income TaxEntitled to claim deduction u/s 80HH and 80I - profit derived by the assessee from the processing of cashew in the factories owned by outsiders - Held that:- Section 80I would not be applicable in the case of processing done in other factories not belonging to the assessee and the deduction granted by the Assessing Officer was only with respect to the assessee's own factories. The interference made by the first appellate authority was only to verify whether the assessee's own factories, with respect to which the deduction was disallowed are new industrial undertakings. The claim of the assessee for deduction, with respect to profits and gains derived from the industrial undertakings of its sister concerns, under Section 80I was declined by the AO and affirmed by the first appellate authority. There was no appeal to the Tribunal by the assessee. We are of the opinion that no question of law arises under Section 80I. The assessee is engaged in the processing of cashew nuts and such processing is done in its own factories and also in the factories of other assessee, who are sister concerns. The derivation of income of the assessee is from such processing and it cannot be said to be income which is derived other than from the activity of processing. We find from the order of AO that the rejection was made for the following reason: “For claiming deduction u/s 80HH, the material factor is the industrial undertaking and not the assessee”. We agree with the statement, but it would not result in the dis-allowance. On the contrary, the benefit being conferred on the industrial undertakings within backward areas; the assessee who entrusts the processing to third parties would be entitled to claim the deduction for the profits and gains arising from the processing, if the factory is in a backward area. The emphasis is on “the profits and gains derived from an industrial undertaking in backward areas” whether it be the assessee's own industrial undertaking or of another. As has been held by the first appellate authority, an assessee carrying on processing of another will not be able to claim such benefit. But an assessee who carries on processing in an industrial undertaking belonging to another, but situated in a backward area would be entitled to claim the benefit under Section 80HH. - Decided in favour of the assessee.
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