TMI Blog2005 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ENT The judgment of the court was delivered by Rajes Kumar J.- The Income-tax Appellate Tribunal has referred the following two questions under section 256(1) of the Income-tax Act (hereinafter referred to as "the Act") relating to the assessment year 1992-93 for opinion to this court: "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in deleting the addition of Rs. 48.98 lakhs made by the Assessing Officer on account of lowering of prices of the goods sold which the Income-tax Appellate Tribunal have allowed as a measure of business expediency? 2. Whether, on the facts and in circumstances of the case, the Income-tax Appellate Tribunal was legally justified in directing to compute the deduction under section 80-I on the total income without excluding any deduction under section 80HH overlooking the provisions of sub-section (9) of section 80HH?" The brief facts of the case are as follows: The assessee/opposite party (hereinafter referred to as "the assessee") is a public limited company engaged in the manufacture and sale of various items such as hair oil, toothpaste, shaving cream, perfumes, etc. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have been otherwise. It is relevant to note that for the assessment year 1991-92, the appellant had given discount on sales to the buyers while no discount was given for the assessment year 1992-93 under reference. If this was the situation, it is not understood why the appellant would supply at a lower rate despite increase in manufacturing cost due to various elements like increase in the cost of raw material and withdrawal of sales tax exemption. All the facts on the record indicate that the appellant was a captive manufacturing unit for M/s. Dabur India Ltd. This is more evident from the facts that the directors of the appellant-company are employees of Dabur India Ltd. and they were under the command of Dabur India Ltd. so much so that they could not even wait in the Income-tax Office in compliance with summons issued by the Assessing Officer beyond a particular time. The plea of the appellant company that they had to fall in line as other suppliers started supplying at a lower rate does not hold for want of details and prudency in conducting the business. The appellant-company had not brought out any fact indicating that a new competitor offering lower rates had entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for increasing the operation of the company, we could not get the desired support from our esteemed customer. The G.P. chart is enclosed. There is absolutely no material on record to hold that the facts stated by the assessee in the above letter are not correct. There is no reason to disbelieve and reject the above explanation. It is an undisputed position that the assessee was making specified goods as per orders received from Dabur India Limited. The Dabur being main customer, was in a position to dictate terms to the assessee. The Revenue has not produced any evidence to show that the goods produced by the assessee could be sold in the open market at unrevised rates if Dabur had refused to purchase them. The claim that on Dabur's refusal to purchase, the assessee had to stop its production in September, 1991, has not been refuted or challenged by the Revenue. Further there is evidence on record to show that the orders were placed for supply of specific goods on specific rates. The assessee, therefore, had a limited choice either to supply goods as per orders or close its business. Even the Excise Department approved the sale rates of the assessee. This was done as per order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned above. The other deduction under section 80-I be computed on total income without excluding any deduction under section 80HH. The Assessing Officer is directed to revise the assessee's income as per above observations." We have heard Sri Shambhu Chopra, learned standing counsel appearing on behalf of the Revenue. No one has appeared on behalf of the assessee. With regard to question No. 1, learned standing counsel only submitted that the assessee has lowered the price as a device to reduce income. No other argument has been raised. We have perused the order of the Tribunal and do not find any error in it. The Tribunal has given plausible reasons for accepting the claim of the assessee for lowering the price, which resulted in the fall in gross profit. Learned standing counsel is not able to assail these findings. In the circumstances, we do not propose to interfere with the finding of the Tribunal and the view taken in this regard. So far as question No. 2 is concerned, learned standing counsel submitted that in view of sub-section (9) of section 80HH of the Act, the deduction under section 80-I of the Act should be allowed only after reducing the deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of a hotel established in a backward area. This section indicates that the deduction contemplated is based on profits derived from such industrial undertaking hence the deduction is profit based. Sub-section (9) of section 80HH of the Act only says that if the assessee is entitled for deduction under section 80-I as well as section 80HH, effect shall first be given to the provisions of this section. Section 80HH(9) only talks about priority. It does not refer to the quantum of deduction. Neither section 80HH nor section 80-I of the Act says that while computing the deduction under section 80-I of the Act, the deduction already allowed under section 80HH of the Act be excluded. In our opinion, both the sections independently contemplate separate deductions. If the assessee fulfils the conditions of both the sections, it is entitled for deductions as contemplated therein. In the absence of any provision, while computing the deduction under section 80-I of the Act, the deduction already allowed under section 80HH cannot be excluded. The view of the Tribunal in this regard is accordingly upheld. However, it may be mentioned here that section 80A(1) of the Act say that in comput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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