Compliance with the second proviso to Section 80 HHC is necessary to claim deduction, and once complied, the assessee is entitled to the deduction.

ORDER :

1. Heard learned counsel for the parties.

2. Leave is granted.

3. The only reason for declining the relief to the assessee was the failure of compliance of the second proviso to Section 80 HHC of the Income - tax Act 1961. In respect of other requirements, there is no dispute that the assessee has complied with the same.

4. While the matter was being argued, we permitted learned counsel for the assessee to comply with the requirements of the said proviso and it is now represented that an amount equal to the amount of deduction claimed under the sub - section has been debited from the profit and loss account of the previous year relevant to the assessment year 1987-88 in respect of which the deduction was to be allowed and that the same was credited to a reserve account to be utilised for the purpose of the business of the assessee.

5. In view of the compliance of the said proviso, the order under challenge is set aside and the assessee is held entitled to deduction under Section 80 HHC in the accounting year 1986 - 87.

6. The civil appeal is, accordingly, allowed.

7. No costs.