The computation of gross total income of the industrial undertaking for the purpose of deduction under Sections 80HH and 80-I operate independently.

G.S.Singhvi, J.

1. In this petition filed under Section 256(2) of the Income-tax Act, 1961, (for short, "the Act"), the Revenue has prayed for issuance of a direction to the Income-tax Appellate Tribunal, Delhi Bench "E", Delhi (for short, "the Tribunal"), to refer the following question of law for the opinion of this court:

"Whether, on the facts and in the circumstances of the case and in view of the provisions of Section 80HH(9), the Income-tax Appellate Tribunal is right in holding that the deduction under Sections 80HH and 80-I are independent deductions and are to be allowed with reference to the gross total income ?"

2. The assessee is a private limited company engaged in the manufacture of oil from mustard seeds. For the assessment year 1988-89, it filed the return on July 27, 1988, declaring an income of Rs. 2,33,450. By an order dated September 29, 1989, passed under Section 143(3) of the Act, the Assistant Commissioner of Income-tax, Investigation Circle, Hisar (hereinafter described as "the Assessing Officer"), made an addition of Rs. 1,46,752 on account of low yield declared by the assessee. He also rejected the assessees claim for deduction under Section 80-I of the Act on the gross total income and allowed deduction under that Section after excluding deduction granted under Section 80HH of the Act. On appeal, the Commissioner of Income-tax (Appeals), Rohtak, vide his order dated January 15, 1991, held that the deductions under Section 80-I and 80HH of the Act are independent of each other and are to be worked out with reference to the gross total income as defined under Section 80B of the Act. He further held that the Assessing Officer was not justified in allowing deductions under Section 80-I after reducing the gross total income by excluding the deduction granted under Section 80HH. Accordingly, he directed the Assessing Officer to recompute the deduction admissible to the assessee under Section 80-I of the Act. The appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals), Rohtak, was dismissed by the Tribunal vide its order dated October 25, 1996.

3. Shri Rajesh Bindal relied on the judgment of the Rajasthan High Court in CIT v. Vishnu Oil and Dal Mills [1996] 218 ITR 71 and argued that the Tribunal may be directed to refer the question framed by the Revenue for the opinion of this court. He, however, fairly stated that the question has been answered in favour of the assessee by the Bombay, Madhya Pradesh and the Rajasthan High Courts in CIT v. Nima Specific Family Trust [2001] 248 ITR 29 (Bom); J.P. Tobacco Products P. Ltd. v. CIT [1998] 229 ITR 123 (MP) and CIT v. Chokshi Contacts P. Ltd. [2001] 251 ITR 587 (Raj).

4. We have thoughtfully considered the entire matter. In CIT v. Vishnu Oil and Dal Mills [1996] 218 ITR 71, a Division Bench of the Rajasthan High Court referred to Sections 80AB and 80HH of the Act and held as under (headnote):

"For the determination of the relief under Section 80HH, the total income of the assessee has to be worked out after deducting unabsorbed losses and unabsorbed depreciation and the income eligible for deduction will be the net income as computed in accordance with the provisions of the Act and not the gross income."

5. In J.P. Tobacco Products P. Ltd. v. CIT [1998] 229 ITR 123, a Division Bench of the Madhya Pradesh High Court, after noticing the provisions of Sections 80HH, 80-I and 80J of the Act, held as under (headnote):

"Sub-section (9) of Section 80HH of the Income-tax Act, 1961, as it stood prior to insertion of Section 80-I by the Finance (No. 2) Act, 1980, with effect from April 1, 1981, originally included only Section 80J. Section 80J providing for deduction in respect of the profits and gains from newly established industrial undertakings or ships or hotel business in certain cases did not make any provision for reduction of the gross total income by the amount of deduction admissible to the assessee under Section 80HH.