Tata Interplay Sequential Deduction conflict

The dispute concerned the sequencing of deductions under Sections 80IB and 80HHC of the Income-tax Act. The assessee contended that the Revenue authorities erred in first reducing the deduction allowed under Section 80IB from business profits and thereafter computing deduction under Section 80HHC only on the residual amount.

The Assessing Officer, CIT(A), and the Tribunal had all adopted the sequential deduction methodology relying upon earlier Special Bench decisions. Before the High Court, the assessee relied upon the subsequent Supreme Court ruling in Shital Fibers Ltd., which clarified the proper manner of computing deductions under Chapter VI-A. 

Accepting the impact of the later Supreme Court decision, the High Court held that the impugned computation could not be sustained and remanded the matter back to the Assessing Officer for fresh computation strictly in accordance with the Supreme Court dictum. The remand was confined only to the deduction computation issue and not the broader assessment.