TMI Blog2004 (7) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... income after setting off the brought forward loss no deduction under section 80HHC was claimed by the assessee. The assessee to the statement of total of income appended a Note to this effect. In the course of assessment proceedings the assessee however claimed that it was entitled to claim a deduction under section 80HHC of the Act on the profits derived from the business of export without setting off the brought forward loss. The assessee claimed that deduction under section 80HHC has to be allowed without taking recourse to Chapter VI of the Income-tax Act as the export profits are independent of any adjustment for such losses and depreciation. The assessee enclosed a computation of deduction under section 80HHC of the Act along with the note appended to the statement of income claimed relief/deduction of Rs. 16,32,220. The assessee placed reliance on the decision of the Honourable Andhra Pradesh High Court in the case of CIT v. Gogineni Tobacco Ltd [1999] 238 ITR 970. The Assessing Officer accepted the case pleaded by the assessee. There is no discussion in the order of assessment on this aspect but the fact remains that the Assessing Officer allowed the claim for deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention here that if deduction under section 80HHC were not be allowed for the reason that gross total income was nil after allowing set off unabsorbed business loss then the unabsorbed business loss to be carried forward to the next year would stand reduced to the extent of Rs. 16,41,541. There would be no change in the tax determined or payable by the assessee this year since the income and tax payable were determined under the provisions of section 115 JA of the Act. Nevertheless there is prejudice to the interest of the revenue inasmuch as the unabsorbed business loss to be carried forward to next year for being set off should be less than what was determined by the Assessing Officer. To this extent there is prejudice to the interest of the revenue and there is no dispute on this aspect before us. 4. The reply of the assessee to the show-cause notice was almost identical to the note that the assessee appended to the statement of income during the course of assessment proceedings. The assessee distinguished the decision of the Hon'ble Supreme Court in the case of Kotagiri Industrial Co-operative Tea Factory Ltd. relied upon by the learned Commissioner of Income-tax by taking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel's argument that the above decision is not relevant to the facts of this case is patently misconceived. So far as the decision of the Andhra Pradesh High Court relied upon by the Assessing Officer as well as by the assessee is concerned, the said decision does not refer to the restrictive provision of section 80A(2) of the Act, which applied with equal force to all the deductions specified under Chapter VI-A including the one under section 80HHC. The wordings of section 80A(2) leave no scope for any dispute in the matter. The same is the case with other decisions cited by the learned counsel. It may be mentioned here that there is one decision of Kerala High Court reported at 225 ITR 731 which supports the case of the department in the matter, although even in that case the scope of section 80A(2) or for that matter of section 80B(5) has not been referred to or dealt with." 6. The order of assessment was thus revised by CIT by withdrawing the relief allowed under section 80HHC. 7. Aggrieved by the order of the CIT, the assessee is in appeal before us. The grounds of appeal of the assessee reads as follows: "1. That on the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such decision. He then drew our attention to the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 and submitted that the Hon'ble Supreme Court has laid down in the said decision that where two views are possible on an issue and the Assessing Officer has adopted one view with which the Commissioner does not agree, it cannot be treated as an erroneous order, prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It was submitted by him that the Assessing Officer's view was in conformity with the decision of the A.P. High Court and therefore, cannot be said to be erroneous. 9. The learned D.R. placed reliance on the order of the CIT. It was submitted by her that the decision of the Hon'ble Supreme Court in the case of Kotagiri Industrial Co-operative Tea Factory Ltd. was binding on the Assessing Officer and the decision of the Hon'ble A.P. High Court ought not to have been taken cognizance by the Assessing Officer. It was further pointed out that in the case of IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521 (SC), the Supreme Court again reaffirmed its view in the Kotagiri Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before the Hon'ble A.P. High Court were as follows. The assessee derived income from tobacco trade. For the assessment year 1992-93 the assessee had filed return of income on30th December, 1992, admitting a loss of Rs. 8,55,137 after deducting the carry forward loss of Rs. 42,59,952 from the income of Rs. 34,27,372. While filing the return, the assessee has not quantified the deductions under section 80HHC of the Income-tax Act, because of the loss admitted by the company. Subsequently, it has filed a revised return claiming deduction of Rs. 34,14,814 under section 80HHC of the Income-tax Act from the current year's income and requested that the unabsorbed business loss of Rs. 20,45,751 and the unabsorbed depreciation of Rs. 21,16,890 be carried forward to the subsequent years. While processing the return of income, no deduction under section 80HHC was allowed as after the setting off of the unabsorbed business loss of Rs. 20,45,751 and the unabsorbed depreciation of Rs. 13,81,611 from the total income of Rs. 34,27,372, the gross total income was nil. As can be seen from the facts as narrated above, the Assessing Officer had made prima facie adjustment under section 143(1)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous. In the present case, however, two factors have to be taken note of. Firstly, the decision of the Hon'ble A.P. High Court was not the decision of the jurisdictional High Court. Secondly, the said judgment of the A.P. High Court was subject-matter of an appeal which was pending before the Hon'ble Supreme Court. It is no doubt true that the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. has held that if two views are possible in a given situation and the Assessing Officer adopts one view merely because the CIT does not accept that view the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law. In the case of G.M. Mittal Stainless Steel (P.) Ltd., the Hon'ble Supreme Court has approved the decision of the Hon'ble Madras High Court in the case of CIT v. Seshasayee Paper Boards Ltd. [1996] 217 ITR 358. In the said Madras High Court decision, the Assessing Officer followed the decision of the jurisdictional High Court which was subject-matter of an appeal before the Supreme Court. Even before the Supreme Court could pronounce its verdict on the appeal by the Revenue, the CIT in exercise of its powers under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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