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TAXAP/373/1999 5/ 5 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 373 of 1999
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA
AND
HONOURABLE
MR.JUSTICE H.B.ANTANI
==========================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment?
NO
2
To
be referred to the Reporter or not?
NO
3
Whether
Their Lordships wish to see the fair copy of the judgment?
NO
4
Whether
this case involves a substantial question of law as to the
interpretation of the Constitution of India, 1950 or any Order
made thereunder?
NO
5
Whether
it is to be circulated to the Civil Judge?
NO
=========================================
MAHALAXMI
FABRIC MILLS LTD. - APPELLANT
VERSUS
ASSISTANT
COMMISSIONER OF INCOME TAX - RESPONDENT
==========================================Appearance
:
MR JP SHAH for the Appellant.
MR MANISH R BHATT for the Respondent.
==========================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MR.JUSTICE H.B.ANTANI
Date
: 17/06/2008
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE D.A.MEHTA)
1. This
appeal was admitted after formulating the following substantial
question of law:
?SWhether, on the facts and in
the circumstances of the case, the Tribunal ought to have allowed
80HHC relief in respect of the ?Sprofits derived by the assessee
from the export of goods?? without reducing the said profits by the
amount of carried forward depreciation and investment allowance???
2. The
Assessment Year in question is 1991-92, the relevant Previous Year
being Financial Year ended on 31st March, 1990. The
appellant-assessee claimed deduction under Section 80HHC of the
Income Tax Act, 1961 (?Sthe Act??) at a sum of Rs.
30,89,519/=. The Assessing Officer restricted the claim to
Rs.21,75,700/=. The difference relatable to sum of Rs. 17,75,218/=
comprised of unabsorbed depreciation carried forward and investment
allowance. According to the Assessing Officer, the profits derived
by the assessee from export of goods were required to be reduced by
deducting the amount of unabsorbed depreciation carried forward and
investment allowance.
3. Being
aggrieved, the assessee carried the matter in appeal before the
Commissioner (Appeals), who, for the reasons stated in his order,
confirmed the action of the Assessing Officer. In Second Appeal
also, the assessee could not succeed. The Tribunal followed the
decision of the Apex Court in the case of Commissioner of Income
Tax Vs. Kotagiri Industrial Co-operative Tea Factory Limited, [1997]
224 ITR 604 to hold that before allowing any deduction under
Chapter VI-A of the Act, Gross Total Income had to be computed in
accordance with the provisions of the Act.
4. The
learned Advocate for the appellant Shri Manish J. Shah very fairly
invited attention to the decisions of the Apex Court in the case of
Synco Industries Limited Vs. Assessing Officer (Income-Tax) And
Another, [2008] 299 ITR 444 and Commissioner of Income Tax Vs.
Shirke Construction Equipment Limited [2007] 291 ITR 380 to
submit that the controversy is no longer res
integra. According to the learned Advocate, in light of the
aforesaid two decisions of the Apex Court, the question is required
to be answered against the appellant-assessee.
5. In
the case of Synco Industries Limited Vs. Assessing Officer
(Income-Tax) and Another (supra),
the Apex Court has discussed the
scheme of the Act with reference to the provisions of Section 80B (5)
of the Act which defines ?Sgross total income??. The controversy
before the Court was in relation to working out the deductions under
Sections 80HH and 80I of the Act ? whether such deductions are
allowable before setting off the business losses of earlier years or
not. The Supreme Court has come to the conclusion that if the
resultant figure, after setting off the business losses of earlier
years, is nil, no deduction under Section 80HH and 80I can be
granted.
6. In the case of Commissioner
of Income Tax Vs. Shirke Construction Equipment Limited (supra),
the Supreme Court was called upon to determine whether Section 80AB
of the Act can be applied to Section 80HHC of the Act and whether the
profits under Section 80HHC of the Act are required to be computed
after setting off unabsorbed business losses of earlier years under
Section 72 of the Act. The Supreme Court, after referring to its
earlier decision in the case of IPCA Laboratory Limited Vs. Deputy
Commissioner of Income Tax, [2004] 266 ITR 521, has reiterated as
under:
?SSection 80AB is also in
Chapter VI-A. It starts with the words ‘where any deduction is
required to be made or allowed under any section of this Chapter’.
This would include Section 80HHC. Section 80AB further provides that
‘notwithstanding anything contained in that section’. Thus, Section
80AB has been given an overriding effect over all other sections in
Chapter VI-A. Section 80HHC does not provide that its provisions are
to prevail over Section 80AB or over any other provision of the Act.
Section 80HHC would thus be governed by Section 80AB. The decisions
of the Bombay High Court and the Kerala High Court to the contrary
cannot be said to be the correct law. Section 80AB makes it clear
that the computation of income has to be in accordance with the
provisions of the Act, then not only profits but also losses have to
be taken into consideration.??
7. In the aforesaid set of
circumstances, it is apparent that in light of the enunciation of law
by the Apex Court, no error can be found in the impugned order of the
Tribunal. The Tribunal was justified in reducing the profits by the
amount of carried forward depreciation and investment allowance
before allowing deduction under Section 80HHC of the Act.
Accordingly, the question is answered in the negative i.e. in favour
of the Revenue and against the assessee. The appeal is dismissed
accordingly with no order as to costs.
[D.
A. MEHTA, J.]
[H.
B. ANTANI, J.]
/shamnath
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