TMI Blog2001 (2) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... was given in the return citing three decisions as is clear from the adjustment carried out by the AO. The note appeared to have been given to the effect that deductions under s. 80-I and 80HHC have been claimed without set off of brought forward losses and depreciation. But AO made prima facie adjustment by recalculating deductions under ss. 80-I and 80HHC by relying upon the decision of the Hon'ble Supreme Court in Sir Rama Verma vs. CIT (1994) 116 CTR (SC) 55 : (1994) 205 ITR 433 (SC) and the decision in the case of Motilal Pesticides (P) Ltd. vs. CIT (1994) 207 ITR 636 (Del). Recalculation of the deduction under s. 80-I and 80HHC was done by the AO by way of prima facie adjustments by disregarding the claim of the assessee that it was en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee on the profits and gains of the industrial undertaking without the set off of brought forward losses and depreciation. Therefore, he pleaded that the adjustment made by the AO was perfectly in order. 5. On the other hand, learned counsel for the assessee submitted that assessee was having two industrial undertakings, one at Rudram and another at Balanagar. He further submitted that the unit at Rudram was a new industrial undertaking, which was eligible for deduction under s. 80-I. No deduction had been claimed according to learned counsel in respect of Balanagar unit as it has incurred losses in earlier years. He submitted that the decision of Hon'ble Supreme Court cited by the learned Departmental Representative sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat s. 80HHC is a complete code in itself and is not governed by s. 80AB and, therefore, set off of brought forward loss or depreciation cannot be done for working out the "profits of the business" to be worked out for calculating deduction under s. 80HHC. In the last, he submitted that the entire issue raised by the AO by way of prima facie adjustment and now by the Revenue through its grounds of appeal is nothing but an attempt to get adjudication on a point which is full of debate and controversy. According to him, prima facie adjustments in any case were not possible in the instant case. 6. In reply, learned Departmental Representative submitted that the decision of the Hon'ble Supreme Court in the case of Canara Workshops (P) Ltd. ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. In holding so, Hon'ble Madras High Court has relied upon its own decision in the case of CIT vs. Macmillan Co. of India Ltd. Therefore, as per these decisions it has to be held on merit that brought forward losses and depreciation in respect of other industrial undertaking shall have to be set off against the profits and gains of another industrial undertaking before working out the amount which can be said to be eligible for deduction under s. 80-I. It is needless to say that deduction under ss. 80HH and 80-I in this respect are in pari materia identical. Therefore, the ratio of the decision delivered by Hon'ble Madras High Court, in the context of s. 80HH shall apply mutatis mutandis to the issue where the deduction under s. 80-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties concerned clearly shows that at least there is a grey area and there exists a genuine controversy. In the light of such controversy, the issue cannot be said to be simple, obvious and patent and all these attributes are enough to make the action of the AO fatal at least within the parameters of s. 143(1)(a). Therefore, we hold that the action of the AO in making prima facie adjustment in relation to the deduction under s. 80-I is not upheld to the extent indicated above. 8. Coming to the adjustment made in relation to deduction under s. 80HHC, we are persuaded to follow the decision of the Hon'ble Bombay High Court reported in (2000) 163 CTR (Bom) 580 : (2000) 246 ITR 429 (Bom), to hold that s. 80AB does not control the deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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