M.M. Kumar, J. - (1.) THIS order shall dispose of I.T.A. Nos. 278 and 279 of 2007 as similar facts are involved. However, the facts are being referred from I.T.A. No. 278 of 2007.
(2.) THE assessee has approached this Court by filing the instant appeals under Section 260 -A of the Income Tax Act, 1961 (for brevity, 'the Act'), challenging a common order dated 31.10.2006 passed by the Income Tax Appellate Tribunal, Chandigarh Bench -A (for brevity, 'the Tribunal'), in ITA No. 565/Chandi/2001, in respect of the assessment year 1998 -99 and ITA No. 639/Chandi/2004, in respect of the assessment year 2000 -01. The assessee is a Limited Company incorporated under the Companies Act, 1956 and is engaged in the business of manufacture of knitted cloth from raw wool and trading of the goods produced. It had filed its return for the assessment year 1998 -99 at Rs. 36,27,866/ -. The case was selected for scrutiny and notices under the Act were issued. The Assessing Officer observed that besides the activity of manufacturing of yarn, the assessee was also engaged in the trading of raw wool and knitted cloth, which in addition were being manufactured by the assessee. The income which was subjected to the claim of deduction under section 80 -IA of the Act included profits derived from the trading of raw wool and knitted cloth also. The Assessing Officer issued notice to the assessee to explain as to why the claim for deduction under Section 80 -IA of the Act in relation to the income derived from trading activity be not declined. After affording opportunity of hearing the Assessing Officer, vide order dated 29.1.2001 (A -2), has held that the income may fall within the head 'business income' but in so far as its eligibility for deduction under Section 80 -IA of the Act is concerned, it is only the income derived by the assessee from the industrial undertaking which could be eligible for deduction under Section 80 -IA of the Act. It has further been held that the profits derived from the trading of goods was not eligible to qualify because it could not be considered as 'derived from the industrial undertaking' within the meaning of Section 80 -IA of the Act.
(3.) AGAINST the order of the Assessing Officer, dated 29.1.2001, the assessee preferred an appeal before the CIT(A), which was allowed, vide order dated 12.3.2001 (A -3), by observing as under: - The first ground of appeal is general in nature and calls for no comments. In the second ground of appeal, the appellant has contested the action of the AO in not allowing deduction u/s. 80(IA) of the I.T. Act, 1961. This issue also came up for hearing before me in the preceding assessment year 1997 -98 and the matter has been decided in favour of the appellant. The AO, while concluding his finding has stated that the facts and circumstances of case regarding claim of deduction u/s. 80(IA) are similar to the facts of assessment year 1997 -98 but as the appellate decision in the preceding year has not been accepted, deduction was not allowed. In view of detailed discussion in the appellate order for the preceding assessment year, the AO is directed to allow the said deduction u/s. 80(IA) and accordingly this ground of appeal is allowed. In ground No. 3, the appellant has contested the disallowance of Rs. 16,912/ - made under the head "telephone expenses". On consideration of the matter it is held that various Benches of ITAT have taken a view that in the case of companies disallowance out of telephone expenses on account of use of telephone by the directors cannot be made and disallowance if any in the shape of perquisite value can only be considered in the hands of directors of the company. One such decision is in the case of Bharat Motor Parcel Services Vs. ITO (1992) reported at : 44 -TTJ -404 (Hyd.). Hence disallowance made is deleted and this ground of appeal is allowed.;