TMI Blog1997 (9) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation and, thereafter, unabsorbed depreciation of assessment year 1986-87 onward were adjusted against the resulting amount. Thus, nil income was declared in the returns for both the years and certain amounts of unabsorbed depreciation were still claimed to be carried forward. The returns were originally accepted during the course of processing under section 143(1)(a). Later on, however, the Assessing Officer passed a rectificatory orders under section 154 in which he first of all set off the entire amount of unabsorbed depreciation of earlier years against the gross total income (as mentioned above) for assessment year 1994-95. Out of the resultant amount, the Assessing Officer allowed deduction under section 80HHC by resorting to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the provisions of section 154 would also not be applicable, to such debatable issues. In support of his contention, the learned counsel for the assessee has placed reliance on a number of decisions as below: Firstly, the decision of Karnataka High Court in the case of God Granites v. Under Secretary, Central Board of Direct Taxes [1996] 218 ITR 298/85 Taxman 536 has been referred to. In that case, it was held by the Karnataka High Court that the inadmissibility of the claim of the assessee in regard to the deduction under section 80HHC was not so clear and self-evident from the return and the annexed document and, hence, the Assessing Officer did not have the power to take recourse to adjustment by disallowance under section 143(1)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o look into the relevant provisions of the Act. In accordance with the first proviso to section 143(1)(a), adjustment shall have to be made in the income or loss declared in the return in respect of any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of information available in such return, accounts or documents, is prima facie inadmissible. In accordance with sub-section (1) of section 80HHC where an assessee, being an Indian company.... is engaged in the business of export out of India of any goods or merchandise to which this section applies 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the business of the assessee is required to be arrived at which means the total income to be computed in accordance with all the provisions of the Act before making any deduction under Chapter VI-A. It would, therefore, be necessary to adjust not only the current year's depreciation but also all the brought forward losses and unabsorbed depreciation inasmuch as without such adjustment, full effect would not be given to the definition of 'gross total income' as in section 80B(5). The Supreme Court has also held so in the case of CIT v. Kotagiri Industrial Co-operative Tea Factory Ltd. [1997] 224 ITR 604/91 Taxman 214 as below: "In view of the express provision defining the expression 'gross total income' in clause (5) of section 80B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 72 relating to absorption of earlier years' losses, but even necessary the adjustment of unabsorbed depreciation which is even a step essential for arriving at business income inasmuch as the said step is envisaged in part D of Chapter IV relating to computation of profits and gains of business or profession. The learned counsel for the assessee has also tried to argue that the assessee is not compelled to claim depreciation in any particular year and the same may be claimed to be carried forward to the next year. This argument would also not hold good inasmuch as not only the assessee has claimed current depreciation but even unabsorbed depreciation has also been claimed to be adjusted to some extent in the computation of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justment process as envisaged under section 143(1)(a). Therefore, we are of the opinion that the judgment of the Karnataka High Court in the case of God Granites and of the Bombay High Court in the case of M.G Kamath would not apply to the present case and the disallowances of portions of deduction is under section 80HHC as claimed by the assessee in the returns are perfectly in order. Furthermore, since, originally the entire claim of the assessee was allowed wrongly and against the clear provisions of law, the rectificatory proceedings under section 154 would clearly lie. The rectifications actually carried on by the Assessing Officer being strictly in accordance with the procedures as laid down in the relevant section, no debatable issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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