Commissioner of Income Tax vs Buildwell Assam (P.) Ltd.

D.N. Baruah, J.—In this reference u/s 256(1) of the Income Tax Act, 1961, the following question has been referred for the opinion of this court :

" Whether the Tribunal did not err in law as well as in facts in upholding the order of the Commissioner of Income Tax (Appeals) who directed the Assessing Officer to allow deduction u/s 80HH in respect of the whole business even though there was no profit from the concerned factory ?"

For the assessment year 1984-85, the Income Tax Officer made an assessment u/s 143(3) of the Income Tax Act, 1961, on May 7, 1986, and the income was assessed at Rs. 6,90,110. The assessee claimed rebate u/s 80HH of the Income Tax Act. The Assessing Officer observed that rebate u/s 80HH could not be allowed as there was no profit from the factory. The assessee took up the matter before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) by order dated July 18, 1986, allowed rebate to the assessee by following an earlier order. Thereafter, the Revenue took up the matter before the Income Tax Appellate Tribunal. The Tribunal, after hearing the parties, rejected the appeal following a decision of the Orissa High Court in Commissioner of Income Tax Vs. N.C. Budharaja and Company, . At the request of the Revenue, the question referred to above has been referred for opinion of this court.

We have heard Dr. A.K. Saraf, special counsel for the Revenue, and Mr. R. Goenka, counsel appearing on behalf of the respondent/assessee.

Dr. Saraf submits that u/s 80HH of the Income Tax Act, the assessee is entitled to get rebate only to the extent of any profit or gain derived from the industrial undertaking or the business of hotel, etc. In the instant case, the assessee has an industrial undertaking along with other contract works. Therefore, according to Dr. Saraf rebate can be given where the totaiincome of an assessee includes any profits and gains derived from the industrial undertaking. Mr. R. Goenka, however, does not dispute this legal position. Mr. Goenka further submits that the statement of facts does not indicate to what extent the assessee had earned profits and gains from the industrial undertaking.

On hearing counsel for the parties and on a perusal of Section 80HH of the Income Tax Act we are of the opinion that the assessee is entitled to get rebate to the extent of any profits or gains derived from the industrial undertaking only. If the assessee carries on some other business in that case no deduction is available on such profits and gains. Accordingly, we answer the question in the negative and in favour of the Revenue and against the assessee.

A copy of this judgment under the signature of the Registrar and the seal of the High Court shall he transmitted to the Income Tax Appellate Tribunal.