RAKESH KUMAR GARG, J. - (1.) THIS judgment will dispose of above noted two appeals since common issues are involved in both these appeals. These appeals have been filed by the Revenue under s. 260A of the IT Act, 1961 (hereinafter referred to as the 'Act') against the asst. yr. 1994 -95 and ITA No. 285/Chd/1999 for the asst. yr. 1994 -95.
(2.) ACCORDING to the Revenue, the order of the Tribunal gives rise to the following substantial question of law : "Whether the Tribunal was correct in law in setting aside order under s. 263 of the Act passed by the CIT directing the AO not to ignore loss on export of trading goods for the purpose of computing deduction under s. 80HHC of the Act disregarding the fact that the law has been settled by the Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. vs. Dy. CIT (2004) 187 CTR (SC) 513 : (2004) 266 ITR 521 (SC) -
(3.) THE respondent is a limited company and derives income from manufacturing of cotton yarn. For the accounting year respondent assessee claimed deduction amounting to Rs. 5,96,147 under s. 80HHC of the Act. However, the AO while computing deduction under s. 80HHC of the Act ignored loss on export of trading goods and computed the deduction at (3) of the Act. The CIT (Central), Ludhiana, initiated proceedings under s. 263(1) of the Act on the ground that the order of the AO that the excess deduction under s. 80HHC of the Act has been wrongly allowed to the assessee and necessary verification was not made with reference to admissibility of the claim in accordance with the relevant provisions of law, therefore, the assessment order passed by the authority, Ludhiana, was not only erroneous but also prejudicial to the recompute the deduction under s. 80HHC of the Act after taking into consideration net result of both activities i.e. manufacturing and trading and not that only profit of one activity i.e. manufacturing is to be considered and losses of the other activities i.e. trading are to be ignored.;