TMI Blog2006 (2) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... -9-1997 to give an appeal effect to the order of the ld. CIT(A) wherein income has been assessed at Rs. 42,77,57,577. Subsequently, order under section 154/250/143(3) was passed for assessment year 1993-94. Consequent to the order passed under section 154/250/143(3) on 9-2-1999 in assessment year 1993-94, the carried forward of losses of Rs. 3,88,68,268 have been determined, which is to be adjusted against the income assessed in relevant assessment year. Hence, the Assessing Officer passed order under section 154/250/143(3) on 18-2-1999 to set off brought forward losses for E assessment year 1993-94 amounting to Rs. 3,88,68,268 against the business income relating to assessment year under appeal. While passing the impugned order the Assessing Officer deducted amount of brought forward losses of Rs. 3,88,68,268 from profits and gains of business or profession for the purpose of computation of deduction under section 80HHC of the Act. The Assessing Officer computed the deduction under section 80HHC at Rs. 3,73,44,771 as against Rs. 3,91,60,636 allowed by F the Assessing Officer in his order under section 250/143(3) of the Act. The Assessing Officer deducted brought forward losses of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outsideIndia.' 'Profits and gains of business or profession' in terms of section 29 of the Act arc to be computed in accordance with the provisions contained in sections 30 to 43B. Unabsorbed depreciation of earlier" years is allowed under section 32(2) of the Act while unabsorbed business loss is adjusted in terms of section 72 of the Act. The decision in the case of Salgaocar Mining Industries Ltd. is only concerned with adjustment of unabsorbed business loss in terms of section 72 and is not applicable in regard to unabsorbed depreciation required to be adjusted under section 32(2). Similarly, the ITAT Bombay Bench decision in the case of A liana Frozen Pvt. Ltd., is in regard to the issue of unabsorbed investment allowance of earlier years. This case is also not applicable for adjudicating the issue of unabsorbed depreciation. In the case of Rollatainers Ltd., the issue is again set off of brought forward losses wherein the ITAT relying upon the Hon'ble Bombay High Court decision in the case of CIT v. Shirke Construction Equipment Ltd., did not accept the stand o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras Bench, in the case of Asvini Cold Storage (P.) Ltd. v. Asstt. CIT 105 Taxman 341 wherein it was held that for determining the 'profits of the business' unabsorbed depreciation cannot be ignored in view of specific provision of section 29. (iii) The claim of the appellant that the issue was debatable and controversial is misplaced in view of the authoritative pronouncement of the Hon'ble Supreme Court in the case of Cambay Electric Supply Co. 7. The recomputation made by the Assessing Officer which is in conformity with the principles endorsed by the Hon'ble Supreme Court in the case of Cambay Electric Supply Industrial Co. is confirmed. 8. Appeal is dismissed." 5. Being aggrieved by this order, the assessee is in appeal by taking the following grounds:- "1. That the ld. CIT(A) erred on facts and in law in upholding the order passed under section 154/250/143(3) of the Income-tax Act, 1961 ('the Act') the order under section 250/143(3) of the Act insofar as the claim of deduction under section 80HHC of the Act is concerned. 1.1 That the ld. CIT(A) erred on facts and in law in not appreciating that there was no mistake in order under section 250/143(3) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while appreciating the true importance of the decision of Cambay Electric Supply Industrial Co. Ltd.'s case vis-a-vis, the, impugned issue before us. Therefore, the proposition laid down in theApex Courtin Cambay Electric Supply Industrial Co. Ltd.'s case does not help the case of the Revenue in the controversy before us. Hence, the Tribunal upheld the order of the ld. CIT(A). 9. The ld. Departmental Representative, on the other hand, relied on the orders of the authorities below. 10. Having heard the rival submissions and perused the orders of both the parties and the material available on record, we find that the crux of the issue before us to be decided before us are- (i) Whether unabsorbed carry forward depreciation is to be deducted in computing the business profits for determining the deduction allowable under section 80HHC of the Act; (ii) Whether the Assessing Officer was justified in rectifying the order passed under section 250/143(3) of the Act by passing an order under section 154 of the Act. (iii) Whether brought forward unabsorbed depreciation can be deducted while computing the business profits for the purposes of computing the deduction under section 80HH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- "32(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains C chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." 13. On a plain reading of the said section, it is seen that it provides that the brought forward unabsorbed depreciation is to be treated as part of the following years depreciation. In other words, the said depreciation is to be treated as the current years depreciation, while computing the business income of the assessee. The business income of the assessee is to be computed by-applying provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the third, and in fact the main aspect of the mistake was concerned, the position of law on that was well-settled in favour of the Department, as had been opined by the Accountant Member. A study of the provisions of sections 80A, 80B(5) and 80HHC and the High Court judgments cited by him made it quite clear that in computing the total income of an assessee, deductions specified in sections 80C to SOU shall be allowed from the 'gross total income' and such deduction shall not exceed the gross total income. Gross total income, as defined in section 80B(5), would be as computed in accordance with the provisions of the Act, before making any deduction under Chapter VI of the Act. The mandate contained is sections 80A and 80B(5) clearly requires that the gross total income is to be computed after setting off of the brought forward deficiencies of business loss and unabsorbed depreciation, etc. This is the first step to be taken in order to compute the 'total income' for the purpose of allowing deductions specified in sections 80C to 80U of Chapter VI-A from the resultant positive income of the previous year, if any, which is left after set-oil of the aforesaid deficiencies of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
