TMI Blog2022 (4) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is therefore upheld. In the case of Royal Cushion [ 2008 (10) TMI 707 - BOMBAY HIGH COURT] the rectification carried out by denying deduction u/s 80HHC of the Act for the purposes of computing Book Profits u/s 115JB of the Act, was held to relate to the debatable issue of computation of deduction u/s 80HHC of the Act. The decision in the case of Hirsh Bracelet [ 2019 (9) TMI 250 - ITAT BANGALORE] goes against the assessee and supports our findings since it holds that Unabsorbed depreciation is deemed to be current years depreciation to be set off against all incomes as per section 32(2) r.w.s 71 of the Act. In the case of SRA systems [ 2021 (3) TMI 1133 - MADRAS HIGH COURT] was seized with the issue of set off of unabsorbed depreciation prior to deduction u/s 10A of the Act, which it was held was not tenable in law since deduction u/s 10A of the Act was to be made while computing the gross total income under chapter IV of the Act and not at the stage of computation of total income under chapter VI of the Act, being exemption provisions. In the present case the issue relates to deduction u/s 80IA of the Act which is to be made at the stage of computation of to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) u/s.92CA(3) of the Act as per para 4 2,70,80,409/- 2) Depreciation disallowed,,,...para 5 2,66,83,892/- 3)6xpenditure disallowed U/S.14A as per para 6 14,00,410/- 4) Irrecoverable balance written off as per para 7 16,26,668/- 5) Bad as per para 8 7,61,883/- ₹ 5,75,53,262/- Revised business income: ₹ 1,94,97,014/- Short term capital gain ₹ 1,78,55,920/- Income from House Property ₹ 9,67,386/- Income from other sources ₹ 17,293/- Gross total income: ₹ 3,83,37,613/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot eligible for deduction u/s. 80IA of the Act. Accordingly balance income of ₹ 1,21,98,597/- was assessed as taxable income of the assessee. The relevant portion of the order of the A.O. at Para 1 to 4 was pointed out as under: 1. The unabsorbed depreciation of ₹ 26139016/- (A.Y. 2004-05) was not adjusted before allowing deduction u/s. 80IA as required u/s. 32(2). This has been corrected in order u/s. 154 dated 10.12.2009. 2. After adjusting the unabsorbed depreciation, the resultant income shall comprise of Capital Gain, Income from House Property and Income from other sources which are not Profit derived from the business of power and hence not to be considered for deduction Under Section 80 IA. 3 On setting off the unabsorbed depreciation, the income chargeable to tax be ₹ 12198597/- (₹ 38338616 ₹ 26139016) as against NIL income assessed. Incorrect computation of income has thus resulted in under assessment of income of ₹ 12198597/- 4. Consequent to setting off the unabsorbed depreciation of ₹ 26139016/- pertaining to Assessment Year 2004-05, there would be no amount to be carried forward to years. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hort term capital gain he held that only profits derived from business were eligible for deduction u/s. 80IA and income from sale of business assets being not of the said nature, the claim of the assessee was incorrect in law. It is against this order of the ld. CIT(A) that the assesse has come up in appeal before us raising the following grounds: 1. Ld. CIT (A) erred in law and on facts in confirming action of AO in invoking provisions of sec. 154 of the Act in respect of mistakes pointed out by AO not apparent from the record. Ld. CIT (A) ought to have quashed the rectification order passed by AO on highly debatable issues that required investigation of facts. It be so held now. 2. Ld. CIT (A) erred in law and on facts in confirming action of AO denying deduction u/s 80IA on short term capital gain arising on sale of depreciable business assets under deeming provisions of sec. 50 of the Act treating as profits not derived from business of the appellant. Ld. CIT (A) ought to have quashed the order of AO appreciating that the issue being debatable is not amenable to rectification u/s 154 of the Act. It be so held now. 3. Alternatively and without prejudice to ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid incomes and thereafter noting that the business income was reduced to NIL as a consequence no deduction u/s 80IA of the Act ,as originally granted, was given and balance of other sources of income assessed to tax as under: Total Inocme as per order u/s 143(3) dated 26/12/2008 Before allowing deduction under chapter VIA ₹ 38337613/- Less:unabsorbed depreciation ₹ 26139016/- Assessed Income ₹ 12198597/- 1. The unabsorbed depreciation of ₹ 26139016/- (A.Y. 2004-05) was not adjusted before allowing deduction u/s. 80IA as required u/s. 32(2). This has been corrected in order u/s. 154 dated 10.12.2009. 2. After adjusting the unabsorbed depreciation, the resultant income shall comprise of Capital Gain, Income from House Property and Income from other sources which are not Profit derived from the business of power and hence not to be considered for deduction Under Section 80 IA. 3 On setting off the unabsorbed depreciation, the income chargeable to tax be ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ground No. 2 3 no arguments were made. Ground No 2 3 are therefore dismissed. 9. Since the argument of the Ld.Counsel, as noted above, was confined to only one limb of the rectification made, i.e the adjustment of unabsorbed depreciation against the business profits prior to granting deduction u/s. 80IA of the Act , we shall be dealing with the said aspect only. The argument of the Ld.Counsel was that the said adjustment was a debatable issue and could not be dealt with in rectification proceedings u/s. 154 of the Act. Various case laws in support of the said contention was relied upon as under: (i) Royal Cushion Vinyal vs. CIT [2009] 180 Taxman.com208 (Bombay) (ii) Dinosaur Steels Ltd. vs. JCIT [2012] 25 taxmann.com 554 (SC) (iii) Volkart Borthers vs. T.S.Balaram, Income-tax Officer [1971] 82 ITR 50 (SC) (iv) Hirsh Bracelet India (P.) Ltd. vs. ACIT [2019] 109 taxmann.com 50 (Banalore Trib.) (v) CIT vs. SRA Systems Ltd. [2021] 129 taxmann.com 118 (Madras) 10. Ld.DR however relied on the order of the Ld.CIT(A). 11. We have heard both the parties, gone through the order of the authorities below and also the case laws relied upon before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4)(such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years.] . . . . (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that subsection for the assessment year immediately succeeding the initial assessment year3008 or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 14. The section herefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.] 15. As per law therefore, clearly profits eligible for deduction u/s 80IA of the Act have to be calculated after adjusting brought forward depreciation therefrom. Meaning thereby that law clearly provides for deduction u/s 80IA to be granted after set off of unabsorbed depreciation. There is no scope for any other interpretation, we find, nor has any been pointed out by the Ld.Counsel for the assessee before us. 16. We therefore hold that the non adjustment of brought forward depreciation from profits and gains of business and profession, for determining the quantum of deduction u/s 80IA of the Act is a patent mistake amenable to rectification u/s 154 of the Act. The rectification so effected in the present case by adjusting brought forward depreciation against profits of the business before granting deduction u/s 80IA of the Act is therefore upheld. 17. The case laws relied upon by the Ld.Counsel for the assessee, as we have pointed out above are all rendered in different set of facts and are distinguishable and therefore of n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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