2012 (11) TMI 1142 - HC - Income Tax

Summary

Issues involved:
1. Exclusion of mobilization charges from gross revenues for income computation under Section 44BB of the Income Tax Act, 1961.
2. Allowance of set off of unabsorbed depreciation against current year income under Section 44BB.

Issue 1: Exclusion of mobilization charges from gross revenues:
The High Court referred to the case of Sedco Forex International Inc. vs. Commissioner of Income Tax and another, (2008) 299 ITR 238, to determine whether mobilization charges should be excluded from gross revenues for income computation under Section 44BB. The Court ruled in line with the aforementioned judgment, holding that mobilization charges are to be excluded from gross revenues for the purpose of income computation under Section 44BB.

Issue 2: Allowance of set off of unabsorbed depreciation:
The question raised was whether the ITAT was correct in allowing the claim of the assessee to set off unabsorbed depreciation of earlier years against the current year income computed under Section 44BB. Section 44BB does not explicitly address set off, focusing instead on the reduction of deemed profit. The Court noted that the accounts were maintained, audited, and submitted as required by Sub-Section (3) of Section 44BB. The presence of unabsorbed depreciation carried forward to the next year did not violate any accounting principle. Consequently, the Court ruled in favor of the assessee, as the accounts demonstrated that the actual profit earned was less than the deemed profit specified in Section 44BB of the Act.

The appeal was thus disposed of by the High Court, with decisions made in favor of the assessee on both issues presented.