V.K.SINGHAL J. - (1.) ALL the above numbered income -tax references are decided by one common order as an identical question is involved in all of them. For the purpose of disposal of all the above numbered income -tax reference, the facts of Reference No. 29 of 1987 are being taken into consideration.
(2.) THE Income -tax Appellate Tribunal has referred the following question of law arising out of its order dated November 19, 1986, in respect of the assessment year 1981 -82 under section 256(1) of the Income -tax Act, 1961 : 'Whether, on the facts and in the circumstances of the case, the Income -tax Appellate Tribunal was legally justified in coming to the conclusion that deduction under section 80HH be computed on commercial profits and in computing the commercial profits the assessee is entitled to require the addition of the provision for taxes, depreciation and investment allowance reserve to the net profit as per profit and loss account to arrive at commercial profits ?' The brief facts of the case are that the assessed is a manufacturer of cables and conductors and claimed deduction under section 80HH to the extent of Rs. 85,156. The Income -tax Officer passed an order under section 154 on January 23, 1985, and allowed the deduction to the extent of 20 per cent. on the net income of Rs. 1,25,236 and had given relief of Rs. 24,527. The assessee challenged this order of rectification before the Commissioner of Income -tax (Appeals) an contended that the net profit under the profit and loss account was Rs. 4,09,029, a sum of Rs. 16,682 in respect of inadmissible disallowance of investment allowance reserve, interest, donations and subscription is to be added and, therefore, the calculation should have been made at a figure of Rs. 4,25,711. It was found that the Income -tax Officer has reduced the brought forward business loss unabsorbed depreciation, investment allowance reserve and the brought forward deduction under section 80J of the Act. The Commissioner of Income -tax (Appeals) had taken into consideration the provisions of section 80AB which were introduce by the Finance (No. 2) Act No. 44 of 1980 with effect from April 1, 1981. On the basis of this provision, it was considered that this section was introduced to provide for the propose purpose of calculating deduction specified in section 80HH to 80TT, the net income has to be computed in accordance with the provisions of the Income -tax Act before making any deduction under Chapter VI -A which shall alone be regarded as income which is received by the assessee and which is included in his gross total income. For the purpose of computing the deduction under this section, the amount of income of that nature has to be computed in accordance with the provisions of the Act and is deemed to be the amount of income of the nature, which is derived or received by the assessee and which is included in his gross total income. The appeal was accordingly dismissed.
(3.) IN the second appeal before the Income -tax Appellate Tribunal, it was observed that the deduction is with reference to the profits and gains derived from the industrial undertaking and the various deductions which are given are only for the purpose of assessment. The provision of section 80AB does not prevent the assessee from getting the deduction which is more than the amount include in the total income and, as such, for computing the commercial profits, the assessee is entitled to require the additions in respect of provisions of tax, depreciation and investment allowance reserve to the net profit as per profit and loss amount to arrive at the commercial profits.;