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Cit Lucknow v. M/S Akbar Brass Products - INCOME TAX REFERENCE No. 44 of 1996 [2005] RD-AH 1265 (6 May 2005)


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Court no.37


Commissioner of Income-tax, Lucknow.   Applicant


M/S Akbar Brass Products, Moradabad. Respondent.


Hon'ble R. K. Agrawal, J.

Hon'ble Rajes Kumar, J.

The Income Tax Appellate Tribunal has referred the following question of law under section 256 (1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") relating to the assessment year 1987-88 for opinion to this Court.

" Whether, on the facts and in the circumstances of the case and having regard to the provisions in respect of creation of reserve as per second proviso to Section 80-HHC (1) (as it then existed), the Tribunal was in law justified in upholding the CIT (A)'s action in directing the Assessing Officer to allow opportunity  to the assessee to create further reserve and to allow deduction u/s 80-HHC of the Income Tax Act with reference to the assessed income?"

The brief facts of the case are that admittedly, the assessee-respondent (hereinafter referred to as "the assessee") firm is engaged in export business. For the relevant assessment year it filed return of its income at Rs.10,38,940/- after claiming deduction of Rs.15.45,781/- under section 80-HHC of the Act from the profits of Rs.25,84,725/- as per profit and loss account. Against the returned income of Rs.10,38,940/- the income of the assessee was computed at Rs.11,71,730/- and the deduction under section 80HHC as claimed at Rs.15.45,781/- was allowed with reference to the requisite reserve created by the assessee. In appeal the CIT (Appeals) noted that while the reserve has to be created of an amount equal to the amount of deduction claimed, but the same has to be allowed on the basis of income computed in accordance with first proviso to Section 80HHC (i) read with clause (a) of sub-section 3 of Section 80HHC. The submission before the C.I.T. (Appeals) was that deduction u/s 80HHC is to be allowed with reference to the income computed though the statutory reserve could be created on the basis of deduction claimed. It was also submitted that if the deduction could not be claimed in excess of the reserve created, the assessee was entitled to an opportunity to create the reserve of the remaining amount. The C.I.T/ (Appeals) accepted the assessee's submission and directed that any shortfall in the creation of reserve should be made good by the assessee and the Assessing Officer was directed to allow necessary opportunity to the assessee to make good the shortfall in the reserve vis-à-vis the income computed. Against the order of the CIT (Appeals), the revenue filed appeal before the Tribunal, which found no infirmity in the reasoning recorded by the CIT (Appeals). Thus, the order of the CIT (Appeals) was upheld.

We have heard Sri Shambhu Chopra, learned Standing Counsel appearing on behalf of the revenue.

We do not find any infirmity in the order of the Commissioner of Income Tax (Appeals) which has been confirmed by the Tribunal which is inconformity to the decision of this Court in the case of Commissioner of Income Tax Versus Modi Spinning & Weaving Mills Co. Ltd reported in 89 ITR, 304 and the decision of the Apex Court in the case of Karimjee P. Ltd. Versus Deputy Commissioner of Income Tax and another reported in 271 ITR, 564 which have been followed in Income Tax Reference No. 12 of 1996, Commissioner of Income Tax Versus M/S Eastern Novelties Corporation, Moradabad decided on 15th April, 2005.

Respectfully, following the above decisions, we answer the question referred to us is answered in the affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.




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