Case Summary: CIT v. Bongaigaon Refinery & Petrochemical Ltd. (2012) 349 ITR 352/210 Taxman 229/79 DTR 8/254 CTR 98 (SC)

In the case of CIT v. Bongaigaon Refinery & Petrochemical Ltd., it was held that S. 80HH of the Income Tax Act: Newly established industrial undertakings

  • Maintenance of separate books of accounts unit wise is not mandatory
  • Neither section 80HH, nor section 80I statutorily obliged assessee to maintain accounts unit wise
  • Consolidated accounts held to be valid and revision held not valid


Assessee operated in the petrochemical, polyester staple fiber, and refinery industries. Assessee established three different and unique manufacturing units to meet customer demand. After looking through the assessee’s unit-by-unit profit and loss statement, the assessing officer decided to grant the deduction requested by the assessee under sections 80HH and 80I of the Income Tax Act of 1961.

To take advantage of the provisions of sections 80HH and 80I, the Commissioner of Internal Revenue issued a new order following section 263, in which he refused the deduction claim and held that the assessee was required to keep separate books for each of the three units. In response to an appeal, the Tribunal ruled that even though there was no statutory requirement to maintain unit-wise accounts, the assessee should still submit unit-wise audited accounts and claim deductions under sections 80HH and 80I. This decision was reached even though there was no statutory requirement to maintain unit-wise accounts.

After an appeal, the High Court overturned the decision that the Tribunal had issued in so far as it compelled the assessee to produce audited statements that were broken down by unit.


Should the assessee be required to keep separate books of account for each of its units to qualify for a deduction under sections 80HH and 80I of the tax code?


Look at the deductions that are available under sections 80HH and 80-I. 80-I may be claimed by an assessee as long as they are actively operating one of the qualified businesses stated in that provision. A deduction may be taken against the earnings and benefits accrued by operating a qualified company. It is possible for an assessee to have more than one eligible business endeavor or to have one eligible enterprise in addition to another operation that is not eligible. In these kinds of circumstances, disagreements can arise over whether or not the profits of each undertaking have been accurately determined by correctly allocating the expenses and whether or not an assessee is required to keep its accounts organized on a unit-by-unit basis to be eligible for claiming a deduction.


The Supreme Court concluded that neither Section 80HH nor Section 80I statutorily required the assessee to keep its records in a unit-wise format. The Supreme Court went on to rule that the assessee was free to keep its books in consolidated form since this was an option available to them.

The issue was sent back to the Assessing Officer by the Supreme Court so that they may determine whether or not the taxpayer had properly estimated the unit-wise net earnings to claim a deduction under sections 80HH and 80I. In addition, the Supreme Court observed that auditors can determine and certify the unit-wise net profit computation from the consolidated books of accounts, and they can present this information to the Assessing Officer if the profits were not calculated accurately.

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Judgement Reviewed by Jay Kumar Gupta

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