2008 (3) TMI 697 - HC - Income Tax

Summary

Issues involved: Appeal u/s 260A of the Income-tax Act, 1961 against ITAT order for assessment year 2000-01. Proposed substantial questions of law: 1. Treatment of unabsorbed depreciation for deduction u/s 80HHC. 2. Exclusion of Sales Tax and Central Sales Tax from total turnover for deduction u/s 80HHC. 3. Exclusion of Service Charges of dyeing and knitting from total turnover for deduction u/s 80HHC.

Issue 1: Unabsorbed Depreciation for Deduction u/s 80HHC
The revenue's appeal raised the question of whether unabsorbed depreciation of earlier years should be reduced from business profits computed for deduction u/s 80HHC. The counsel for the revenue acknowledged that this issue had already been decided against the revenue by the Supreme Court in the case of CIT v. Shirke Construction Equipments Ltd. The court noted that in determining business profits for deduction u/s 80HHC, unabsorbed business losses of earlier years should be set off u/s 72. Consequently, as per the precedent, no substantial question of law remained for determination, leading to the dismissal of the appeal.

Issue 2: Exclusion of Sales Tax and Central Sales Tax from Total Turnover
The second question raised was whether Sales Tax and Central Sales Tax should be excluded from the total turnover of the assessee when computing deduction u/s 80HHC. The counsel for the revenue conceded that this question had been answered against the revenue and in favor of the assessee by a judgment of the court in the case of CIT v. Vardhman Polytex Ltd. Therefore, based on the previous ruling, this issue was also resolved in favor of the assessee.

Issue 3: Exclusion of Service Charges of Dyeing and Knitting from Total Turnover
The final question pertained to whether Service Charges of dyeing and knitting should be excluded from the total turnover of the assessee for deduction u/s 80HHC. The counsel for the revenue admitted that this question had been decided against the revenue and in favor of the assessee by the court in the case of Nahar Spinning Mills Ltd. v. CIT. Given the precedent set by the court's previous ruling, the issue was resolved in favor of the assessee. Consequently, with all substantial questions of law having been addressed and resolved by previous judgments, the appeal was dismissed.