B. M. Kothari, A.M. - (1.) THE only ground raised by the appellant company in this appeal is reproduced hereunder : "Deduction allowed under s. 32AB has been wrongly proportionately reduced from the contribution of foreign project while giving the benefits under ss. 80HHB and 80-O."
(2.) The appellant company is a Government of India's enterprise under the administrative control of Ministry of Telecommunication, Government of India. The company is a prime multi disciplinary consultancy organisation providing full range of consultancy, design, engineering services in all the fields of telecommunications in India as well as abroad. The company also undertakes computer software projects and have deputed a number of software experts to the countries abroad. The assessee claimed deductions under ss. 80HHB and 80-O of IT Act, 1961 in relation to income derived from various foreign projects undertaken by the company. It also claimed deduction under s. 32AB of the IT Act, 1961. The Dy. CIT (Asst.), Special Range-2, New Delhi, completed the assessment under s. 143(3) for asst. yr. 1989-90 on 27th March, 1992. The assessee claimed deduction under s. 32AB of the Act in respect of plant and machinery purchased during the year under consideration. The AO observed that since the profit/income from projects eligible for benefit of deduction under ss. 80-O and 80HHB is included in gross total income, the proportionate amount of deduction allowable under s. 32AB has to be reduced against income eligible for deduction under ss. 80-O and 80HHB in order to arrive at to profits/income from such foreign projects entitled for benefit of relief under ss. 80-O and 80HHB. The AO observed that the assessee purchased plant and machinery worth Rs. 2,62,14,911. The deduction under s. 32AB has, however, been claimed at Rs. 1,46,42,208 being 20 per cent of the profits of eligible business determined at Rs. 7,32,11,041 which includes the profit of projects entitled for deduction under ss. 80HHB and 80-O of the Act. The AO, therefore, held that the deduction of Rs. 1,46, 42,208 allowed under s. 32AB of the Act is required to be allocated to ss. 80-O and 80HHB projects in the ratio of profit of Indian projects and ss. 80H and 80HHB projects. The AO accordingly allocated the same as under : ---------------------------------------------------------------------- "Project Profit Allocation of deduction under s. 32AB ---------------------------------------------------------------------- (a) Indian project 2,01,01,909 29,39,943 (b) 80-O project 2,78,58,170 40,74,311 (c) 80HHB projects 5,21,56,260 (as per original working) 76,27,954 ------------- 1,46,42,208 ----------------------------------------------------------------------
(3.) THE assessee preferred an appeal before the CIT(A) challenging the quantum of deduction under ss. 80-O and 80HHB by wrongly deducting the proportionate amount of benefit allowed under s. 32AB against the income eligible for grant of deduction under ss. 80-O and 80HHB. THE CIT(A) confirmed the action of the AO. THE present appeal by the assessee is directed against the said findings of the AO.;