2007 (11) TMI 122 - HC - Income Tax

Assessee had claimed a deduction under Section 80HHC before allowing unabsorbed business losses and unabsorbed depreciation in assessee view this business loss and depreciation ought to have been allowed to be carried forward - Tribunal was not correct in law in holding that the Assessee is entitled to a deduction u/s 80HHC of the Income Tax Act 1961 before adjusting unabsorbed business and unabsorbed depreciation revenue s appeal allowed

Summary

Issues:
Interpretation of Section 80HHC of the Income Tax Act, 1961 regarding deduction entitlement before adjusting unabsorbed business and unabsorbed depreciation.

Analysis:
The judgment dealt with the interpretation of Section 80HHC of the Income Tax Act, 1961, focusing on whether the Assessee is entitled to a deduction under this section before adjusting unabsorbed business and unabsorbed depreciation. The court analyzed Section 80A, which specifies deductions to be made in computing total income, and Section 80B(5), which defines gross total income as the income computed before any deductions under Chapter VI-A of the Act. The court emphasized that deductions under Chapter VI-A should be granted after computing the gross total income. The court highlighted that Section 80HHC deals with deductions related to profits from export business and stated that the gross total income must be computed before granting any deduction under this section.

In a similar context, the court referred to a previous case where the Supreme Court held that for deductions under a specific section of Chapter VI-A, the gross total income must be determined by setting off business losses of earlier years. The court noted that the Assessee in the present case claimed a deduction under Section 80HHC before allowing unabsorbed business losses and unabsorbed depreciation. The Assessee relied on a decision of the Andhra Pradesh High Court, which was found to be in conflict with the Supreme Court's view. The court emphasized that all are bound by the Supreme Court's decision and, therefore, ruled in favor of the Revenue and against the Assessee, allowing the appeal.

In conclusion, the judgment clarified that deductions under Section 80HHC of the Income Tax Act should be granted after computing the gross total income, and any conflicting interpretations from lower courts should be resolved in line with the Supreme Court's decisions. The court's decision emphasized adherence to legal precedents and the hierarchy of judicial decisions in resolving tax-related matters.