Law:

Section:

Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1986-87 - Assessee-company carried on business in tea auctioning and export of goods - Assessing Officer rejected assessee's claim of relief under section 80HHC for not complying with requirements of proviso to section 80HHC(1) inasmuch as assessee failed to debit an amount equal to deduction to profit and loss account and failed to create reserve to be utilized for purpose of business before finalisation of profit and loss account - Such a reserve was created during pendency of first appeal by reopening profit and loss account - Commissioner (Appeals) and Tribunal allowed relief - Assessee had relied on clarification issued by Department of Company Affairs - Whether as none of authorities had looked into as to whether instant case fell under said clarification of DCA, case need be remanded back - Held, yes FACTS The assessee was a closely-held company carrying on business in tea auctioning and export of goods. The Assessing Officer rejected the assessee's claim of relief under section 80HHC, inter alia on the ground that it had not complied with the requirements of the proviso to section 80HHC(1). On appeal, the Commissioner (Appeals) granted the relief. On further appeal, the Tribunal confirmed it. On reference, it was contended for the revenue that the assessee had not debited an equal amount of deduction available under section 80HHC(1) to the profit and loss account of the previous year in respect of which the deduction was claimed and it had also failed to create a reserve to be utilized for the purpose of the business of the assessee before finalisation of the profit and loss account which was a mandatory requirement under the proviso to section 80HHC(1). It was further contended that, at any rate, the assessee should have complied with the said requirements at any time before the completion of the assessment, which was not done and that the assessee had made the debit in the profit and loss account and created a reserve only during the pendency of the appeal before the Commissioner (Appeals) by way of reopening of the profit and loss account already finalized and…

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