Rajes Kumar, J. - (1.) At the instance of the assessee, the Income Tax Appellate Tribunal, New Delhi has referred the following question of law under Section 256(1) of the Income Tax Act, 1961, hereinafter referred to as "the Act for opinion to this Court for the assessment years 1982-83 and 1983-84. "Whether oh the facts and in the circumstances of the case and in law the Hon'ble Tribunal was right in ruling that in arriving at the amount eligible for deduction under Section 80HHA of the Income-tax Act, 1961 the loss incurred in the other business and also the unabsorbed loss, depreciation and investment allowance were first to be set off before arriving at the qualifying amount?"
(2.) The brief facts of the case are as follows: The assessee is a private limited company engaged in the business of manufacture and sale of basic drugs with its factory at Rampur, U.P. In respect of the manufacturing business the assessee claimed deduction under Section 80-HHA of the Act, For the Assessment year 1982-83 the Income Tax Officer computed the income of the factory at Rs. 14. 44,051/- and set off against it the loss at head office at Rs. 5,16,657/-. He also deducted from the balance so arrived at further amounts aggregating to Rs, 3,58, 566/- on account of duty draw backs and cash incentives on the net figure of Rs. 5,68,828/- so arrived at the permitted deduction under Section 80-HHA of the Act at 20% at Rs. 1,13, 767/-. So far as the figure relating to assessment year 1983-84 is concerned, the income of factory was Rs. 5,75,432/- and set off against it; the loss at head office was Rs. 5,75,716/-. Therefore, a net loss was Rs. 284/-. In view of this, the question of duty drawback and cash incentive was not considered.
(3.) When the matter came up before the Commissioner of Income Tax (Appeals), the Commissioner of Income Tax (Appeals) set aside the order of the Income Tax Officer, For the assessment year 1982-83 in the order passed under Section 154 of the Act. The Commissioner of Income Tax (Appeal) held as follows. The appellate order in this case was passed on 1.10.1983. The appellant vide its petition dated 31.10.1985 has submitted the ground No. 7 of the ground of appeal regarding the incorrect computation of deduction under Section 80-HHA had not been decided upon in the said appellate order and this constitutes a mistake which should be rejectified under Section 154. The appellant given an hearing on this petition. On a perusal of the file of the office is found to be correct. It is seen that the ground No. 7 in the ground of appeal was duly examined during the course of hearing on 25.9.1985 which is evident from the notings made on the file. The omission to give a decision on this ground, therefore, constitutes a mistake which needs to be rectified under Section 154. The order dated 1.10.1985 is accordingly rectified in as much as the following paragraph is directed to be incorrect in the said order. "The next ground relates to the incorrect computation of deduction under Section 80HHA. The appellant in the head office account was dealing in purchase an sale of natural mentha oil. In the pharmaceutical division it was manufactured certain basis drugs. Deduction under Section 80HHA had been claimed in respect of this manufacturing unit. While the Income tax Officer accepted that the appellant was entitled to deduction under Section 80HHA and that the necessary conditions was satisfied but in computing the less amount of deduction he adjusted the loss from the head office set amounting to Rs. 5,16,657/-. It is this adjustment that the appellant has objected. After hearing the learned authorised representative I agree that such adjustment was not correct. Section 80-HHA speaks of the profit derived from the industrial undertaking and it is clear therefore, that there is no scope for the inclusion in the said profits of loss of any other unit. Accordingly the adjustment of the head office loss amounting to Rs. 5,16,657/- was not correct. The Income-tax Officer will modify the computation accordingly.";