COMMISSIONER OF INCOME TAX Vs. R PRAKASH

JUDGEMENT

(1.) The Revenue is in appeal from the order of the Income Tax Appellate Tribunal, which confirmed the order of the first appellate authority. The Revenue has raised a question of law as to whether the assessee is entitled to claim deduction under Sections 80HH and 80I of the Income Tax Act, 1961, with respect to the profit derived by the assessee from the processing of cashew in the factories owned by outsiders.

(2.) Admittedly, the assessee had been carrying on processing of cashew nuts in its own factory and also in the factories of sister concerns, which were in backward areas. There was also processing done by the assessee in factories which were not in the backward areas. Section 80I does not speak of industrial undertakings in backward areas. Section 80I speaks of 20% deduction in respect of profits and gains derived from industrial undertakings if it is a newly established one. The Assessing Officer found that the assessee is eligible for deduction only in respect of profits and gains derived from the assessee's own industrial undertaking. The same was affirmed by the first appellate authority and with respect to the claim for factories in places which are not categorised as backward area, the matter was remanded to verify whether they were new industrial undertakings as contemplated in the provision. Two factories of the assessee at Mylakkad and Nathavaram Districts were found to be not new industrial undertakings. Hence, the assessee's claim with respect to the profits and gains derived from the sister concerns was declined under Section 80I. The remand made was only with respect to the industrial undertakings of the assessee, both in the backward and other areas; the remand being confined to verification of they being new.

(3.) The Tribunal considered the issue under Section 80I along with Section 80HH, insofar as the processing of cashew being carried on in other concerns. Section 80I would not be applicable in the case of processing done in other factories not belonging to the assessee and the deduction granted by the Assessing Officer was only with respect to the assessee's own factories. The interference made by the first appellate authority was only to verify whether the assessee's own factories, with respect to which the deduction was disallowed are new industrial undertakings. The claim of the assessee for deduction, with respect to profits and gains derived from the industrial undertakings of its sister concerns, under Section 80I was declined by the Assessing Officer and affirmed by the first appellate authority. There was no appeal to the Tribunal by the assessee. We are of the opinion that no question of law arises under Section 80I.