2013 (12) TMI 866 - HC - Income Tax

Computation of relief u/s 80I - Deduction of Relief u/s 80HH from gross total income - Recomputation of allowable deduction Precedential value of J.P. Tobacco Products (P) Ltd Vs. C.I.T. Held that - Following Commissioner of Income Tax Vs. Lucky Laboratories Ltd 2005 (8) TMI 80 - ALLAHABAD High Court and Madhya Pradesh High Court in J.P. Tobacco Products P. Ltd v. CIT 1996 (8) TMI 29 - MADHYA PRADESH High Court - both the sections are independent and therefore the deductions could be claimed both under sections 80-HH and 80-I on the gross total income. Validity of change in method of charging depreciation from straight line to WDV Computation of Liability u/s 115J of the Income tax act Held that - Following Apollo Tyres Vs. CIT 2002 (5) TMI 5 - SUPREME Court - while computing the income under Section 115J of the Income-tax Act the Assessing Officer has only power to examine whether the books of account were certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act - the Assessing Officer thereafter has limited powers of making increases and reductions as provided for in the Explanation to the said section - the Assessing Officer does not have the jurisdiction to go beyond the net profits shown in the profit and loss account except to the extent provided in the Explanation to Section 115J of the Income-tax Act - the accounts maintained by the assessee are certified by the auditors Thus the book adjustment made by the Assessing Officer being contrary and liable to be set aside - Under the Companies Act 1956 both straight line method and written down value method are recognized Decided against the revenue.

Issues:
1. Computation of relief under Section 80 I and 80 HH.
2. Allowable deductions under Sections 80 HH and 80 I.
3. Change in method of charging depreciation from straight line to WDV method.

Issue 1: Computation of relief under Section 80 I and 80 HH

The High Court addressed the question of whether the relief granted under Section 80 HH should be deducted from the gross total income for computing relief under Section 80 I. The Tribunal held that the relief granted under Section 80 HH cannot be deducted from the gross total income for the purpose of computing relief under Section 80 I. This decision was based on the interpretation of relevant provisions and previous judicial decisions. The Court referred to the decision of the Madhya Pradesh High Court in the case of J.P. Tobacco Products P Ltd Vs. C.I.T, which established that the benefit of Section 80 I should be granted on the gross total income without deducting the relief granted under Section 80 HH. The Court directed the Assessing Officer to recompute the allowable deduction accordingly.

Issue 2: Allowable deductions under Sections 80 HH and 80 I

The Court discussed the independence of Sections 80 HH and 80 I of the Income-tax Act, 1961, in terms of claiming deductions for a new industrial unit. The Court referred to various judicial decisions, including those by different High Courts and the Supreme Court, which supported the view that deductions under both sections can be claimed on the gross total income independently. The Court emphasized that the Department had accepted the interpretations provided by these judgments by not filing special leave petitions against them. Consequently, the Court dismissed the appeal, stating that the Department cannot take a contrary view on the same issue after accepting the interpretations from previous judgments.

Issue 3: Change in method of charging depreciation

Regarding the change in the method of charging depreciation from straight line to written down value method, the Court relied on the decision of the Supreme Court in Apollo Tyres Vs. CIT. The Court highlighted that the Assessing Officer's power while computing income under Section 115J is limited to examining whether the books of account are certified under the Companies Act. The Court emphasized that the Assessing Officer does not have the jurisdiction to go beyond the net profit shown in the profit and loss account, except as provided in the Explanation to Section 115J. The Court further referenced a judgment of the Bombay High Court in Kinetic Motors v. Deputy Commissioner of Income Tax, which supported the limited powers of the Assessing Officer in making adjustments to book profits. Consequently, the Court decided in favor of the respondent-assessee based on the principles established in the Apollo Tyres case and other relevant judicial precedents.

In conclusion, the High Court's judgment addressed various issues related to the computation of relief under Sections 80 I and 80 HH, allowable deductions for new industrial units, and the change in the method of charging depreciation. The decisions were based on interpretations of relevant legal provisions, judicial precedents, and the limited powers of the Assessing Officer in assessing income and making adjustments to book profits.

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