ORDER
Rakesh Kumar Gupta, A.M.
Present appeal filed by the revenue is directed against the order of the Commissioner (Appeals)I, Hyderabad, dated 15-9-1995.
2. The issue involved in the present appeal is with regard to deletion of prima facie adjustment made by the assessing officer in the quantum of deduction claimed under section 80-I and 80HHC.
3. The facts leading to the present appeal are that assessee claimed deduction under section 80HHC and 80-I before set off of the brought forward losses and depreciation. A note was given in the return citing three decisions as is clear from the adjustment carried out by the assessing officer. The note appeared to have been given to the effect that deductions under sections 80-I and 80HHC have been claimed without set off of brought forward losses and depreciation. But assessing officer made prima facie adjustment by recalculating deductions under sections 80-I and 80HHC by relying upon the decision of the Hon’ble Supreme Court in Sir Rama Verma v. CIT (1994) 205 ITR 433 (SC) and the decision in the case of Motilal Pesticides (P) Ltd. v. CIT (1994) 207 ITR 636 (Del). Recalculation of the deduction under sections 80-I and 80HHC was done by the assessing officer by way of prima facie adjustments by disregarding the claim of the assessee that it was entitled to the deduction under section 80-I and section 80HHC without the set off of brought forward of losses and depreciation. The total adjustment thus made by the assessing officer amounted to Rs. 42,01,325, i.e. Rs. 21,31,210 under section 80-I and Rs. 20,70,115 under section 80HHC. Aggrieved against the said adjustment, appeal was preferred by the assessee before learned Commissioner (Appeals), who allowed the appeal of the assessee and it was held by learned Commissioner (Appeals) that the issue was not amenable to be disallowed under section 143(1)(a). Aggrieved against the order passed by learned Commissioner (Appeals), revenue has filed the present appeal before us.
4. On the date of hearing, learned Departmental Representative vehemently argued that the set off of brought forward losses and depreciation was a must in view of the mandate given in section 80AB. He relied upon the decisions of Hon’ble Andhra Pradesh High Court in CIT v. Venkateswara Transmission Ltd. (1995) 216 ITR 510 (AP), Hon’ble Supreme Court decision in Sir Rama Verma v. CIT (supra), Hon’ble Madras High Court decisions in CIT v. Macmillan Co. of India Ltd. (2000) 243 ITR 403 (Mad) and CIT v. Sundaravel Match Industries (P) Ltd. (2001) 19 DTC 291 (Mad-HC) : (2000) 245 ITR 605 (Mad), Hon’ble Bombay High Court decision in Grasim Industries Ltd. v. Asstt. CIT (2000) 18 DTC 513 (Bom-HC) : (2000) 245 ITR 677 (Bom). According to learned Departmental Representative there was no scope for any doubt or controversy with respect to the erroneous claim as 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 assessing officer 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 section 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 supra and other decisions also cited by learned Departmental Representative are not applicable to the facts of the case of the assessee, as in the case of the assessee, there were two industrial undertakings and the profits and gains of one industrial undertaking were eligible for deduction under sections 80-I and 80HHC whereas in the cases cited by learned Departmental Representative the brought forward losses and depreciation of the same business were to be set off. He further submitted that the deduction under section 80-I was available with reference to the profits and gains of industrial undertaking whereas language of section 80AB is materially different than the language of section 80-I inasmuch as section 80AB refers to the term ‘income’ whereas section 80-I refers to the profits and gains of the industrial undertaking. He further submitted that assessee was entitled to claim deduction under section 80-I in the manner calculated by it in the return on the basis of the decision of Hon’ble Supreme Court in the case of CIT v. Canara Workshop (P) Ltd. (1987) 161 ITR 320 (SC). In the matter of deduction under section 80HHC, he relied upon the decision referred to by learned Commissioner (Appeals) to the effect that recalculation of deduction under section 80HHC was not possible in the proceedings under section 143(1)(a). He further relied upon the decision of the Bombay High Court in the case of CIT v. Shirke Construction Equipments Ltd. (2000) 18 DTC 292 (Bom-HC) : (2000) 246 ITR 429 (Bom) to convass his argument that section 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 section 8011HC. In the last, he submitted that the entire issue raised by the assessing officer 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. (supra) cannot be applied as in that case the issue was with regard to the deduction under section 80E and at that relevant point of time section 80AB was not brought on the statute. Therefore, according to learned Departmental Representative, no help can be taken by the assessee from the decision of the Apex Court (supra). He further submitted that section 80AB contains non obstante clause meaning thereby that the deductions in Chapter VI-A have to be controlled by section 80AB.
7. We have heard the rival submissions and have deliberated upon the case laws cited by both the parties. It has been recorded by learned Commissioner (Appeals) that deduction under section 80-I was calculated by the assessee with reference to the profits and gains derived by Rudram unit. It has further been recorded by learned Commissioner (Appeals) that the other unit at Balanagar runs into losses. Such being the facts, the issue before us is as to whether the losses of one unit have to be set off against the profits of another unit before working out deduction under section 80-I. Section 80AB was inserted on the statute to declare the law as it always existed and it has been so held by Hon’ble Supreme Court in the case (1994) 205 ITR 438 (SC) (supra). According to the decision of the Hon’ble Madras High Court, in the case of CIT v. Sundervel Match Industries (P) Ltd. (supra) the losses should be set off against the profits of the industrial undertaking before granting deduction under section 80HH of the Act in view of the specific provision found in section 80AB of the Act. In holding so, Hon’ble Madras High Court has relied upon its own decision in the case of CIT v. Macmillan Co. of India Ltd. (supra). 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 section 80-I. It is needless to say that deduction under sections 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 section 80HH shall apply mutatis mutandis to the issue where the deduction under section 80-I is involved, other decisions relied upon by learned Departmental Representative, such as (1995) 216 ITR 510 (AP), (2000) 245 ITR 677 (Bom), (1994) 205 ITR 433 (SC) (supra) are distinguishable with the case of the assessee. In these cases, the issue was the set off of brought forward losses and depreciation of the same business against its profits in the succeeding years and then computing the deduction under Chapter VI-A whereas the facts as stated above involved in the case of the assessee are that the brought forward losses and depreciation of one industrial undertaking are sought to be set off against. the profits and gains of another industrial undertaking which is eligible for deduction under section 80-L Though as stated above, the decisions of Hon’ble Madras High Court support the case of the revenue, but the very fact there are decisions like the decision of the Hon’ble Supreme Court in the case of Canara Workshop (P) Ltd. (supra), shows that the issue is not free from doubt or debate. It calls for long drawn process of reasoning and arguments as to whether the decision of Hon’ble Supreme Court in Canara Workshop be applied to the case of the assessee and whether such decision was arrived at after considering the import of section 80AB of the Act. The very fact that the issue involved in the decisions of Hon’ble Madras High Court has reached to the various stages of the courts and were intensely fought by both the parties 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 assessing officer fatal at least within the parameters of section 143(1)(a). Therefore, we hold that the action of the assessing officer in making prima facie adjustment in relation & deduction under section 80-I is not upheld to the extent indicated above.
8. Coming to the adjustment made in relation to deduction under section 80HHC, we are persuaded to follow the decision of the Hon’ble Bombay High Court (2000) 246 ITR 429 (Bom) (supra), to hold that section 80AB does not control the deduction under section 80HHC and, therefore, brought forward losses and depreciation of the same undertaking or another undertaking could not be set off against the profits and gains of the undertaking doing exports, to compute the deduction under section 80HHC. We are further persuaded by the decision of the Hon’ble Bombay High Court’s decision in the case of Tanna Exports & Anr. v. M.G. Kamat & Anr. (1993) 202 ITR 219 (Bom), to hold that recalculation of deduction under section 80HHC did not fall within the domain of the powers of the assessing officer under section 143(1)(a). The decisions cited by learned Departmental Representative and learned counsel for the assessee in favour of their respective cases leave us in no doubt that the issues involved require long drawn process of reasoning and, therefore, in any case and at any rate, these are beyond the scope of the provisions of section 143(1) (a). Therefore, we reverse the action of the assessing officer and uphold the action of the learned Commissioner (Appeals) in the matter of deduction under section 80HHC also.
9. In the result, revenue’s appeal is dismissed.
