- (1.) FOLLOWING questions of law have been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, 'the Tribunal') arising out of its order dt. 20th March, 1997 in ITA No. 349/Chandi/1991, for the asst. yr. 1989 -90: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing investment allowance on the cost of machinery installed/purchased for the manufacture of soap which as per Item No. 4 of Sch. XI r/w Section 32A of the IT Act is specifically prohibited for the same ?
(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was right in law in holding that deduction under Section 80HH be allowed before allowing deduction under Section 32A/32B (sic -32AB) of the IT Act ? 2. The assessee deals in manufacture and sale of Vanaspati ghee and soap. It claimed deduction under Section 32A/32AB of the IT Act, 1961 (for short, 'the Act') on the machinery purchased and installed for use in manufacture of soap but the same was disallowed by referring to Sch. XI which contains list of articles or things to the manufacture of which the said deduction was not allowable. Soap was one of the items mentioned at Entry 4 in the said Schedule. The view of the AO, was however, set aside by the CIT(A). It was held that the word "soap" in the entry referred to soap used by human beings for personal use and not soap meant for washing which items were covered by Entries 20 and 21. It was held by the CIT(A) that Items 20 and 21 being no longer in the negative list and the same were eligible for deduction. The above view was upheld by the Tribunal. The assessee also claimed that deduction under Section 80HH of the Act be allowed before allowing deduction under Section 32A/32AB of the Act. This was rejected by the AO but upheld by the CIT(A). The CIT(A) held that deduction under Section 80HH of the Act should be computed before deduction under Section 32A/32AB of the Act. The Tribunal upheld the said view relying upon judgment of the Orissa High Court in CIT v. : [1991]191ITR688(Orissa) and judgment of Karnataka High Court in CAT v. : [1993]199ITR235(KAR) which was also followed by the said High Court in CIT v. : [1993]201ITR968(KAR) . It was noticed that the contrary view had been taken by the Gujarat High Court in Paushak Ltd. v. : [1994]210ITR535(Guj) and Delhi High Court in Gedore Tools (Indl.) (P) Ltd. v. : [1993]199ITR83(Delhi) . The same view was taken by the Delhi High Court in Motilal Pesticides (India) (P) Ltd. v. : [1994]207ITR636(Delhi) . The Tribunal held that since one view was in favour of the assessee, interpretation more favourable to the assessee had to be followed. We have heard learned Counsel for the parties and perused the findings recorded. Re :Q. No. 1
(3.) LEARNED Counsel for the Revenue submitted that "soap" was (specifically mentioned in Entry 4 and after deletion of Entries 20 and 21, it could not be held that cleaning soap was not included in the word "soap".;