COMMISSIONER OF INCOME TAX Vs. LUCKY LABORATORIES LTD

JUDGEMENT

(1.) The Income Tax Appellate Tribunal has referred the following two questions under Section 256(1) of the Income-tax Act (hereinafter referred to as "Act") relating to the assessment years 1992-93 for opinion to this Court:

(2.) The brief facts of the case are as follows: The assessee/opposite party (hereinafter referred to as "assessee") is a public limited company engaged in the manufacture and sale of various items such as hair oil, toothpaste, shaving cream, perfumes etc. The main buyer of the product was Dabur India Limited who have sold them under their own brand name. The Assessing Authority found that there was a steep fall in the sale from Rs.27,87 crores in the previous preceding year to Rs. 16.76 crores and gross profit from Rs.4,49,26,484/- to Rs, 1,23,40,225/- and gross profit rate from 20.9 percent to 9.52 percent. The assessee was asked to explain about the fall in the. gross profit. The reason for fall in the G.P. has been given as follows: i) Fall due to lowering of prices. Rs.48.98 lacs. ii) Increase in manufacturing and operational expenses. Rs.31.37lacs. iii) Increase in materials cost (out of this a sum of Rs.62.25 lacs. Rs.29.22 lakhs is on account of increase in the rates of GN oil, mineral oil and til oil). Total Rs. 142.60

(3.) The Assessing Authority accepted the reasons given at serial nos. 2 and 3. but did not give benefit for lowering of the prices of the goods for sale to Dabui India Limited. The Assessing Authority, accordingly, made addition o; Rs.48.98,000/- towards extra profit. The Assessing Authority has also allowed the claim under Section 80I of the Act at gross total income as reduced by the deduction under Section 80HH of the Act. The assessee filed appeal before the Commissioner of Income tax (Appeals). The Commissioner of Income tax (Appeals) has confirmed the addition of Rs.48,98,000/-. The Commissioner o Income tax (Appeals), however, accepted the plea with regard to the claim o deduction under Section 80I of the Act and held that the calculation for th purposes of allowing deduction under Section 80I of the Act has to be done on th whole amount of gross total income and not on the remainder after givin allowance under Section 80HH of the Act. The Commissioner of Income Ta (Appeals) has made following observation for confirming the addition c Rs.48,98,000/-.