The main legal point established in the judgment is that the provisions under the heading 'C-Deductions in respect of certain incomes' are independent of each other, allowing a new industrial unit to claim deductions under both Section 80-HHC and Section 80-I on the gross total income independently.

1. These appeals are preferred by the revenue challenging the order passed by the tribunal, which has upheld the deductions claimed by the assesses under Section 801B as well as under Section 80 HHC. The Tribunal in few cases did not grant the aforesaid relief and the assessee are in appeal. The question of law involved in all these appeals are one and the same, and therefore they are taken up for consideration together and disposed off by this common order.

2. The question of law that arises for consideration is as under:-

“When the deduction of profits and gains of an undertaking is allowed under Section 80 1A, whether such profits and gains has to be deducted before computation of the profits and gains under Section 80HHC or after arriving at the profits and gains of business?”

3. In order to answer the aforesaid questions, we set out hereunder the facts of one case for the proper appreciation of the legal issues involved.

4. The assessee is engaged in the manufacture and export of garments. For the assessment year 2001-2002, he filed a return of income. The assessing Officer proceeded to pass an assessment order under Section 143 (3) on 19.03.2004. The Commissioner exercising its jurisdiction under Section 263 of the Act found that the order of the assessment is erroneous and prejudicial to the interest of the revenue. It was held that the Assessing Officer in the original assessment order has not reduced the deductions allowable under Section 801B before computing the deductions admissible under Section 80HHC as required under Section 801B (13) read with Section 801A (9) of the Act. The Assessing Officer was directed to re-do the assessment in accordance with the direction as per the order dated 30.12.2004. In terms of the directions issued, the Assessing Officer has passed on order on 14.03.2005. A perusal of the said order shows the total income declared was Rs.3,53,49,850/-. The assessee was entitled to a deduction under Section 80 1B in a sum of Rs.88,37,463/-. While calculating the benefit under Section 80 HHC, the Assessing Officer deducted the amount of Rs.88,37,463/- out of the profits of the business declared after giving other benefits under the said provision. The benefit to which the assessee is entitled under Section 80HHC was restricted to Rs.2,03,83,961/-as against Rs.2,50,52,596/- claimed by the assessee and allowed by the Assessing Officer in the earlier order at the first instance.

5. In this appeal what is in challenged is the order passed by the tribunal, which set aside the order passed in revision and restoring the original order granting the benefit of deductions of Rs.2,50,52,596/-.

6. The order dated 19-3-2004 discloses the total profits of the business declared by the assessee was Rs.3,53,49,850/-. The admissible deduction under Section 801B as claimed was Rs.88,37,463/-. The assesses claimed a deduction of Rs.2,50,52,596/-under Section 80HHC. Both of which out together is less than the gross total income. Therefore he claimed complete deduction of the aforesaid amounts from profits of the business’ which was granted by the assessing authority. The Assessing Officer allowed the aforesaid deductions and arrived at the taxable income at Rs.14,59,791/-. In certain cases revenue has granted deduction under Section 80HHC and reduced the same for the purpose of quantifying profits under Section 801A.

7. The learned counsel appearing for the revenue did not dispute that the assessee is not entitled to the benefit both under Section 80-1A as well as Section 80-HHC to the extent mentioned in sub-section (9) of Section 80-1A. However, it was urged that once a deduction is granted under Section 80-1A, to the extent of such profits and gains the deduction given under Section 80-1A should be deducted before the computation of the profits and gains under Section 80-HHC and not after arriving at the profits and gains under that provision.

8. Chapter VI-A of the Act deals with deductions to be made