2022 (9) TMI 1454 - HC - Income Tax

Computation of income - as per Tribunal Deduction computed at the rate of 7.5% of the total income ought to be computed after setting off of brought forward losses - HELD THAT - It is now well settled that the deduction towards bad and doubtful debts at 7.5% shall be made after setting off the brought forward loss, to arrive at the total income. Therefore, the finding recorded by this Court on substantial question of law No.2 is an error apparent on the face of the record and therefore, deserves to be reviewed. Hence, the substantial question of law No.2 is answered as follows - The Tribunal was justified in holding that the deduction at the rate of 7.5% of the total income should be computed after setting off the brought forward loss.

Summary

Issues involved:
1. Review of judgment relating to the computation of deduction at the rate of 7.5% of total income after setting off brought forward losses.

Detailed analysis:
The judgment in question involved a review petition filed by the Revenue challenging a previous judgment regarding the computation of deduction at the rate of 7.5% of the total income after setting off brought forward losses. The substantial question of law in focus was whether the Tribunal was correct in holding that the deduction should be computed after setting off brought forward losses. The Court initially held in favor of the assessee, stating that the deduction should be computed before setting off the loss brought forward. It was noted that the reasoning of the Assessing Officer and the Commissioner of Income Tax (Appeals) was not in line with the provisions of the Income Tax Act, 1961. Consequently, the Court allowed the appeal in part and answered the substantial question of law against the revenue and in favor of the assessee.

Furthermore, the Court emphasized that the deduction towards bad and doubtful debts at 7.5% should be made after setting off the brought forward loss to determine the total income. The Court acknowledged that its earlier finding on the substantial question of law was an apparent error on the face of the record and thus warranted a review. Consequently, the Court modified the judgment, answering the substantial question of law in favor of the Revenue and against the assessee, leading to the dismissal of I.T.A.No.783/2018.

In conclusion, the judgment highlighted the importance of correctly computing deductions in accordance with the provisions of the Income Tax Act, ensuring that deductions are made after setting off brought forward losses to arrive at the total income. The review petition resulted in a modification of the initial judgment, ultimately favoring the Revenue and dismissing the appeal filed by the assessee.