TMI Blog2013 (5) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... es of earlier years and that Judgment having the binding effect on this court, it has to be necessarily ruled that the benefit under section 80HHC of the Act can be claimed only after the unabsorbed depreciation of the earlier years is adjusted against the profits of the current year and then only the benefit extended under section 80HHC of the Act can be given effect to. Tribunal was correct in taking the view that the Appellate Commissioner was not justified in reversing the view taken by the Assessing Officer and the order of the Tribunal is proper, does not suffer from any error of law and therefore we answer the questions posed in the affirmative to hold that the Tribunal was correct in taking the view that the assessee was not entitled to claim the benefit of deduction even before adjusting unabsorbed depreciation of the earlier years - Revenue's appeal is dismissed. - IT Appeal No. 1105 of 2006 - - - Dated:- 19-2-2013 - D.V. Shylendra Kumar AND B. SREENIVASA GOWDA, JJ. For the Appellant A. Shankar. For the Respondent E.R. Indrakumar and E.I. Sanmathi. JUDGMENT:- Dr. Shylendra Kumar, J. - This appeal by the assessee under section 260-A of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Annexure-B. 6. In the appeal of the assessee on this aspect of the matter, the Appellate Commissioner was of the view that the Assessing Officer had committed an error in following the decision of the Andhra Pradesh High Court in the case of CIT v. Gogineni Tobacco Ltd.[1999] 238 ITR 970,did not agree with the view taken by the Assessing Officer; held that the Assessing Officer had wrongly applied the provisions of section 80AB of the Act and purporting to follow the view taken by the Orissa High Court in the case of CIT v. Tarun Udyog[1991] 191 ITR 688, allowed the appeal and directed the Assessing Officer to re-compute the taxable income by first allowing the benefit under section 80HHC of the Act before adjusting for unabsorbed carried forward depreciation of earlier years. 7. As against this order, the revenue went up in appeal and met with success before the Tribunal and the revenue noticing that the decision of the Andhra Pradesh High Court was no more good law in the wake of the decision of the Supreme Court in the case of IPCA Laboratory Ltd. v. Dy. and this decision had been followed by the Madhya Pradesh High Court in the case of VIPPY Solvex Products Ltd. v. CIT o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence. 13. Submission is that when once the carried forward or brought forward unabsorbed depreciation is not deemed to be depreciation of the current year, then the profit for the purposes of section 80HHC of the Act should be first assigned without factoring the carried forward or unabsorbed depreciation of the earlier years, but it should be otherwise determined independently and benefit under section 80HHC of the Act should be given if otherwise profits were available for the assessee should be of that year in view of the language of section 80HHC[1] of the Act and therefore submits that the view taken by the Appellate Commissioner is fully justified on this statutory legal position and the view taken by the Tribunal is not correct. 14. Mr. Shankar, learned counsel for the appellant - assessee points out to the position in section 32[2] of the Act that for the assessment year relevant for the purpose of this appeal, there was a limit of eight years up to which unabsorbed depreciation can be taken forward to the subsequent years and it was called unabsorbed depreciation allowance of the earlier years whereas earlier by fiction, it was being made depreciation allowance for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 80HHC of the Act and the contrary view taken by the Bombay High Court and Kerala High Court has been disapproved and though this was the decision in the context of carrying forward unabsorbed business losses of the earlier years, the position is not any different in respect of unabsorbed depreciation of the earlier years for the simple reason that it has been categorically held in these two Judgments of the Supreme Court that benefit of section 80HHC of the Act can be claimed only as against positive profits earned by an exporter, in the sense, that there should be a positive offer of profit after computing the profits as otherwise is computed and if there is no positive profit there cannot be a benefit claimed under Chapter VI-A in view of the provisions of section 80AB of the Act. 20. It is also submitted by Sri Indra Kumar, learned senior counsel appearing for the revenue that these two Judgments of the Supreme Court has been followed by the Bench of the Madras High Court in the case of CIT v. Sharon Vaneers (P.) Ltd and in this case, the Madras High Court had an occasion to refer to the provisions of section 32 of the Act also in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in IPCA Laboratory Ltd.'s case (supra) and as we notice the fact which was not exactly as in the present case and that was a case relating to interse set off of losses between two sources of export business of the assessee, what is held there is that the profit of the export business for the purpose of section 80HHC of the Act has to be necessarily arrived at by setting off the losses under one source of export business against the profit earned from another source and it is only thereafter profit attributable to export can be arrived at. 27. In the present case, no doubt that there are no two sources of export, but there is only one export activity. More important aspect is that the Supreme Court observed in IPCA Laboratory Ltd.'s case (supra) and traced the history of section 80HHC of the Act and examined the scope of the profit for the purpose of section 80HHC of the Act. 28. However, the Supreme Court specifically rejected the contention on behalf of the assessee in the context of understanding section 80HHC[3] of the Act and the ratio was that even in arriving at the amount for the purpose of section 80HHC of the Act, both the profits and losses will have to be taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the capital investment is also being taxed over a period of time and it is a provision made to bail out an assessee as otherwise income tax will be levied on par with the capital also every year which gets diminished over a period of time. 31. It is here that the concept of positive profit has significance as the positive profit is only after providing for such allowance and the losses as is enabled under section 72 of the Act. Insofar as provisions of section 80HHC of the Act is concerned, it is no doubt true that it is a beneficial provision which provides for incentive benefit to an assessee who has export business and of the nature as is mentioned in the section. The only significance insofar as section 80HHC of the Act is concerned, as we notice, is that said profits for computing the amount which qualifies for benefit under section 80HHC of the Act. It is only for such exercise all the provisions of section 80HHC [1], [2] and [3] exist. On the basis of the Judgment of the Supreme Court referred to above, the provisions of section 32 has no direct bearing on the provisions of section 80HHC of the Act. The effect in claiming benefit is felt when the assessee's claim is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80HHC of the Act will be limited to amount as determined under this section and not as otherwise could have been determined. But, we having noticed the ratio of the Supreme Court in the Judgments referred to above, that deduction can be claimed only against positive profits and positive profit necessarily implies the adjustments and set off of the depreciation allowance of earlier years and carried forward losses of earlier years and that Judgment having the binding effect on this court, it has to be necessarily ruled that the benefit under section 80HHC of the Act can be claimed only after the unabsorbed depreciation of the earlier years is adjusted against the profits of the current year and then only the benefit extended under section 80HHC of the Act can be given effect to. 36. In this view of the matter, we opine that the Tribunal was correct in taking the view that the Appellate Commissioner was not justified in reversing the view taken by the Assessing Officer and the order of the Tribunal is proper, does not suffer from any error of law and therefore we answer the questions posed in the affirmative to hold that the Tribunal was correct in taking the view that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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