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Issues involved: Quantification of relief under section 80-I of the Income-tax Act, 1961 for a Burshane cylinder factory.
Judgment Summary: The High Court of Bombay addressed the issue of quantification of relief under section 80-I of the Income-tax Act, 1961 for a Burshane cylinder factory. The assessee contended that depreciation should be added back to the net profit of the unit for calculating relief under section 80-I. The Tribunal upheld this contention, although expressing some doubt. The main question referred was whether depreciation allowed should be deducted in computing profits for the purpose of granting relief under section 80-I. Section 80-I applies to companies with profits and gains from a priority industry, allowing a deduction of eight percent. The Court emphasized that total income, as per the Act, includes profits and gains of a priority undertaking, which must be computed after deducting depreciation. Referring to a similar case involving section 80E, the Court cited the Supreme Court's ruling that unabsorbed depreciation must be deducted for calculating relief. The Court highlighted that the definition of "total income" under the Act mandates computation in accordance with its provisions, necessitating deductions like depreciation. The Court differentiated a decision related to section 80HH, emphasizing that the issue at hand aligns with the principles established in the case concerning the deduction of depreciation for determining profits and gains attributable to an industry under section 80E. Ultimately, the Court answered the referred question in the negative and in favor of the Revenue, stating that depreciation should not be added back to the profits and gains attributable to the priority industry for calculating the eight percent deduction under section 80-I.
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