The Kerala High Court allowed the 50% Deduction on gross total income as a quantified deduction under Section 80HHB of the Income Tax Act.
The Assessing Officer and the Commissioner of Income Tax (Appeals) disallowed the claim of the assessee, M/s. Bhageeratha Engineering Ltd. of revaluation of government bonds and the loss in the sale of government bonds. The assessee filed an appeal before the Income Tax Appellate Tribunal.
The Appellate Tribunal through order allowed the appeal of the assessee to delete the addition of revaluation of government bonds and set aside the dis-allowance made by the Assessing Officer and CIT (Appeals). The circumstances are that vide order made under Section 143(3) of the Act, the Assessing Officer determined the total income of the assessee. The Assessing Officer for determining the income of assessee dis-allowed the claim of loss on revaluation of bonds, loss towards the sale of government Bonds, and declined deduction claimed under Section 80HHB. While making a few more additions to the income of the assessee, the net income of the assessee from the business for the Assessment Year 1996-97 was determined.
In the appeal filed by the assessee, the CIT (Appeals) set aside the addition made under Section 80HHB, remanded the case to Assessing Officer to re-examine the issue of entitlement of assessee under Section 80HHB, judge the quantum as well as its admissibility under the Act. The Assessing Officer determined the claim of assessee under Section 80HHB and through order accepted the total claim of assessee under Section 80HHB amounting to Rs.10,06,26,590/-.
Mr. Christopher Abrahan, the counsel for the revenue prefaces his submissions by arguing that the Revenue is not questioning the eligibility of assessee for deduction under Section 80HHB of the Act. The Department questions the arbitrary quantification of deduction by the CIT (Appeals) in order dated 01.09.2005. The illegality, according to him, in the order of CIT (Appeals) is that the Commissioner accepted deduction under Section 80HHB arrived at by the Assessing Officer in the revised Assessment Order dated 15.02.2002.
According to him, the error in quantification is not an error relatable to the finding fact or re-verification of details by this Court. The CIT (Appeals) exceeded the jurisdiction in incorporating unavailable details, there is loss of Revenue and the unsustainable and illegal quantification constitutes a substantial question of law for the decision of the Court.
The division bench of Justice S.V.Bhatti and Justice Bechu Kurian Thomas noted that the Assessing Officer accepted the eligibility of the assessee for deduction under Section 80HHB vide order granted 50% on gross total income as quantified deduction under Section 80HHB. There is no mistake if the gross total income remains undisturbed in further adjudication. But, in the case on hand, by virtue of the decision of the Tribunal, the claim of the assessee on the loss of revaluation and sale of government bonds has been accepted.
“In account parlance, these items are to be deleted from the gross total income of the assessee, then the quantification under Section 80HHB should have been done correspondingly. We notice from the order of Commissioner dated 01.09.2005 (Annexure-I) that different reasoning is adopted in analyzing the controversy and the conclusion reached therefrom could not be supported from the record. The CIT (Appeals) erred in appreciating the effect order and consequential deduction and quantification under Section 80HHB. The Revenue has made out a case and we answer the questions of law in favour of the Revenue and against the assessee. This Court records that the deduction under Section 80HHB quantifying order dated 28.07.2003 is correct and ought not to have been reversed by the CIT (Appeals). The questions of law are answered in favour of the revenue and against the assessee,” the court said.
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