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TMI Blog2015 (12) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... recting the learned AO in allowing the deduction under section 80I after reducing the amount of deduction allowable to the appellant under section 32AB of the Income Tax Act, 1961 whereas the issue was on the quantification/computation of the claim under section 80I to be allowed as deduction under section 80B(5) and the said computation/ascertainment of the amount should have been on the profits and gains of the undertaking without deduction of claim under section 32AB out of such profits? ii) Whether under the facts and circumstances of the case, the Hon'ble Tribunal is justified by not referring the matter to a special bench on the issue in dispute?" In ITA No.187 of 2002 for the assessment year 1990-91, in addition to the above two questions, the third question claimed by the assessee reads thus:- "iii) Whether under the facts and circumstances of the case, the Tribunal was justified in rejecting the claim of the appellant that in respect of 5% to 10% of the sale price in each year of supplies no income accrues or arises for which the amount was released against the bank guarantees as the performance of the contract was not completed by giving a finding that the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax (Appeals) [CIT(A)]. Vide order dated 3.3.1992, the CIT(A) decided the issue in favour of the assessee. Aggrieved by the order, the revenue filed appeals before the Tribunal. The Tribunal vide order dated 17.5.2000 decided the issue against the assessee reversing the decision of the CIT(A) holding that deduction under section 80I of the Act was to be allowed after reducing the deduction allowable to the appellant under section 32AB of the Act. Hence the instant appeals by the assessee. 5. We have heard learned counsel for the parties. 6. A perusal of the findings recorded by the authorities below shows that the Assessing Officer did not allow the claim of the assessee under Sections 80I and 32AB of the Act on the ground that the assessee did not qualify for the said deduction being in the manufacture of items specified in Schedule 11 of the Act. On appeal by the assessee, the CIT(A) decided the issue in favour of the assessee but while giving effect to the orders of the CIT(A), the Assessing Officer allowed deduction under Sections 80I and 32AB of the Act for the assessment years 1987-88 and 1988-89 and while computing the quantum of deduction under section 80I of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. It was also observed that where the gross total income computed as stated in Section 80B (5) in all figure or a loss, the question of deduction under any or all of the sections in Chapter IA will not arise even though 20% of the profits and gains in respect of the specified industrial undertaking may be a positive figure, however, large it may be. 9. We may also refer to the decision of the Hon'ble Rajasthan High Court in the case of CIT vs. Rajendra Textiles, 225 ITR 516 wherein it has been held that the special deduction under Section 80HH is to be calculated on net income after deduction of depreciation, investment allowance etc. The Hon'ble High Court followed its decision reported in 218 ITR 71. The said decision was also followed in the case reported in 225 ITR 374. We may further refer to the decision of the Hon'be Supreme Court in the case of Moti Lal Pesticides (India) Pvt. Limited vs. CIT, 243 ITR 26 wherein the provisions of sections 80AA, 80AB and 80HH have been considered and it has been held that as a result of insertion of section 80AA and 80AB, special deduction under section 80HH is to be allowed only on net income and not on gross income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not admissible and the amount of full value of sale as depicted in the profit and loss account had been correctly disclosed and hence taxable. The Tribunal held that the assessee shall be entitled for deduction of the amount to meet the obligation which may arise under the warranty clause in the year in which the claim was actually lodged by the client i.e DOT or MTNL and the income had actually accrued and arisen and it could not be said that the probable obligation which may or may not arise under the warranty clause did not give rise to the income. 8. Learned counsel for the assessee relied upon judgments in CIT vs. Jay Bee Industries, (2008) 171 Taxman 386 (P&H), ITA No.167 of 2002 (Haryana Roadways Engg. Corporation Limited, Gurgaon vs. Commissioner of Income Tax, Rohtak) decided on 8.11.2010 (P&H) and CIT vs. Sony India (P) Limited, (2007) 160 Taxman 397 (Delhi) to contend that the warranty security for repair/replacement was an existing liability at the time of sale and was thus an allowable deduction. On the other hand, learned counsel for the revenue supported the order passed by the Assessing Officer, CIT(A) and the Tribunal. 9. We find merit in the submission of lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stricted the claim of the assessee under Section 32AB of the Act to the extent of plant and machinery purchased in each profit making unit and not on plant and machinery purchased by the assessee in other units as well where there was loss. The appeal of the assessee on this issue was rejected by the CIT(A). However, the Tribunal on further appeal of the assessee, following the decision of Delhi Bench of the Tribunal in the case of Phoneix Overseas Limited vs. CIT reported in 56 ITD 274 directed the Assessing Officer to recompute the claim of the assessee under Section 32AB of the Act in respect of each unit taking the utilization of the plant and machinery purchased by the assessee as a whole and not relate it with each profit making unit of the assessee only, with the following observations:- "11.1 The assessee claimed deduction under section 32AB as per his computation given at page 43 to 45A of the paper book i.e. on the basis of 20% of the profit of eligible business limiting it to the extent the amount has been deposited with IDBI or utilized for the purchase of plant and machinery by the assessee. The AO computed the claim of the assessee by restricting it to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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