CIT Vs. PUNJAB WOOL COMBERS LTD.

JUDGEMENT

(1.) In this reference filed under section 256(1) of the Income-tax Act, 1961 (for short "the Act"), the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (in short "the Tribunal"), vide order dated May 30, 1996, passed in Reference Application No. 310 Chandi/95 arising out of I.T.A. No. 1408/Chandi/94 at the instance of the Revenue, in respect of the assessment year 1990-91, has referred the following questions of law, for the opinion of this court:

(2.) The assessee-company is engaged in manufacture and sale of wool tops in the head office, i.e., combing unit and hosiery and knitting yarn in the spinning unit. The assessee filed return in respect of the assessment year 1990-91 declaring income of Rs. 99,80,390 whereas in the revised return filed on 1-2-1991, the assessee declared income of Rs. 99,88,880. The assessee claimed deduction under section 80-I of the Act in respect of the spinning unit, initially at Rs. 48,49,050 and later on in the revised return at Rs. 43,49,673. Deduction under section 80-I were claimed at the rate of 25 per cent, of Rs. 1,73,98,693, which was arrived at after reducing Rs. 33,31,678 under section 32AB and Rs. 17,26,466 as trading profits from the profits in respect of the spinning unit. During the course of scrutiny, the assessing officer came to the conclusion that profits of the combing unit had been reduced to increase the profits of the spinning unit with a view to claim higher relief under section 80-I. It was noticed that for the assessment year 1989-90 the assessee had shown profit in the combing unit at 11.04 per cent, whereas the same had declined to 7.11 per cent, in the year relevant to the assessment year in question. Similarly, in respect of the spinning unit, the gross profit rate was 14.28 per cent, whereas in the assessment year under discussion had shown the said rate at 14.12 per cent. In the opinion of the assessing officer, the profits of the spinning unit had been inflated to the extent of Rs. 96,16,477. The assessing officer, thus, computed the deduction under section 80-I of the Act at Rs. 20,42,020. The assessee noticed that there were certain mistakes in the computation of deduction under section 80-I and, hence, moved an application under section 154 of the Act. The assessing officer calculated the relief under section 80-I at Rs. 30,14,523 as against the amount of Rs. 20,42,020 calculated earlier.

(3.) The assessee preferred an appeal before the Commissioner of Income-tax (Appeals) (in short "the CIT(A)") who set aside the order of the Assessing Officer and remitted the matter for applying the provisions of section 80I(8) and (9) of the Act. Not satisfied with the said order as well, the assessee filed further appeal before the Tribunal.