Law:

Section:

Section 80HH of the Income-tax Act, 1961- Deduction - Profits and gains from industrial undertakings, etc., in backward areas - Whether Assessing Officer was justified in disallowing deduction under sections 80HH and 80-I on enhanced income by way of excessive subsidy showing bogus purchases and sales in its books of account as it was not earned out of industrial activities carried out by assessee - Held, yes FACTS The assessee was engaged in the business of manufacturing and selling of Single Super Phosphate (SSP) fertiliser. The Assessing Officer dis- allowed deduction under sections 80HH and 80-I on enhanced income by way of excessive subsidy showing bogus purchases and sales in its books of account as it was not earned out of the industrial activities carried out by the assessee. On appeal, the Commissioner (Appeals) affirmed the order of the Assessing Officer. On second appeal, however, the Tribunal held that if an assessee is found to have involved itself in earning unaccounted money, it cannot be held disentitled from claiming the other statutory benefits which are available to it at that time for its carrying on the business in the backward area. HELD For deduction under section 80HH, there should be profit and gains from newly established industrial undertaking and profit should be from the industrial activities carried out by the industry. Same requirement is for deduction under section 80-I. When there was no dispute that the part of the income, on which the deduction under sections 80HH and 80-I had been denied, related to the income other than the income from industrial activities of the assessee. The Tribunal had committed error in allowing deduction on the subsidy amount, which had been claimed on showing bogus enhanced purchases and sales by the assessee. The Assessing Officer as well as the Commissioner (Appeals) were justified in denying deduction under sections 80HH and 80-I on such income which had nothing to do with the industrial activities. Anuroop Singhi for the Applicant. N.R. Saran and G.S. Bapna for the Respondent. ORDER Y.R. Meena, J. - On an application under section 256(1) of the Income-tax Act, 1961, Tribunal has referred the…

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