TMI Blog1989 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ed depreciation from 1965-66 and adjust business losses of the years 1965-66 to 1970-71 to arrive at "nil" taxable income and, in that view, declined to grant the relief claimed by the assessee under section 80-I of the Act. On appeal by the assessee before the Appellate Assistant Commissioner, it was contended that the relief under section 80-1 of the Act should have been considered without taking into account the unabsorbed depreciation and carried forward losses of the previous years. Relying upon the decision of the Kerala High Court in Indian Transformers Ltd. v. CIT [1972] 86 ITR 192, the Appellate Assistant Commissioner took the view that the deduction under section 80-I of the Act should have been considered and calculated before se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified. By its order dated February 25, 1978, the Tribunal rectified the order passed by it on August 27, 1977, by stating that in view of the decision of this court in CIT v. L. M. Van Moppes Diamond Tools (I) Ltd. [1977] 107 ITR 386, the assessee was entitled to the rebate under section 80E of the Act before adjusting the carried forward loss of the earlier years and as section 80E corresponded to section 80-1, the assessee was entitled to the rebate under section 80E before adjusting the carried forward loss of the earlier years. Under section 256(1) of the Act, at the instance of the Revenue, the following two questions of law have been referred to this court for its opinion: "(1) Whether, on the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Workshops P. Ltd. [1986] 161 ITR 320. Per contra, learned counsel for the assessee submitted that if this court should take the view that the second question referred is covered by the decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), then, it may not be necessary to go into the first question regarding the correctness or propriety of the rectification proceedings under section 254(2) of the Act. However, learned counsel faintly attempted to contend that the second question referred to us may not fall within the ratio of the decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC). We find that in the first order of the Tribunal dated August 27, 1977, it had applied the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the unabsorbed depreciation and the development rebate relating to the specified industry have to be first deducted in computing deduction of 8% under section 80E of the Act. This view has since been upheld by the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. The manner in which the claim for deduction under section 80E should be considered and given effect to has been clearly indicated therein According to the Supreme Court, the first step is the computation of the total income of the concerned assessee in accordance with the other provisions of the Act, i.e., in accordance with all provisions, excepting section 80E (corresponding to section 80-1) of the Act. The next step is to ascertain what par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and unabsorbed loss should be held to be not deductible before working out the 8% deduction cannot be accepted but such items will have to be deducted in arriving at the figure which would be exigible to deduction at 8%. On that reasoning, the Supreme Court has disapproved the view taken in Indian Transformers Ltd. v. CIT [1972] 86 ITR 192 (Ker) and CIT v. L. M. Van Moppes Diamond Tools (I) Ltd. [1977] 107 ITR 386 (Mad) and it follows that the Tribunal was right in the view it took first in its order dated August 27, 1977, to the effect that the carried forward loss should be first deducted from the income which the assessee has received from the priority industry, and then, deduction under section 80-1 should be worked out and allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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