2009 (2) TMI 132 - HC - Income Tax

Deduction u/s 80-I and 80-IA Undisclosed income of the Block Period - provisions of Section 158BB of the Act have been amended by Finance Act 2002 with retrospective effect from 01.07.1995 - assessee a Limited Company claimed deduction under Sections 80-I or 80-IA of the Act in relation to the total undisclosed income of the block period. The said claim was rejected by the Assessing Officer and the matter carried before Tribunal. The Tribunal vide its impugned order dated 18.05.1988 allowed the relief Held that in view of the amended provisions which have been made retrospectively applicable no fault can be found with the impugned order of the Tribunal holding that the assessee is entitled to claim deduction under Section 80-I or 80-IA of the Act. Assessee entitled to relief.

Summary

Issues:
Interpretation of provisions of section 158BB and Part-II, Part-III of Form No.28 for Block Assessment; Eligibility of the assessee for deduction u/s. 80-I or 80-IA with reference to 'total undisclosed income' of the Block period.

Analysis:
The controversy in this case revolves around the block period from Assessment Year 1986-87 to 06.01.1996, where the respondent-assessee, a Limited Company, sought deduction under Sections 80-I or 80-IA of the Income-tax Act in connection to the 'total undisclosed income' of the block period. The Assessing Officer initially rejected this claim, leading to an appeal before the Tribunal. The Tribunal, in its order, allowed the relief based on the interpretation of relevant provisions. It emphasized that while the undisclosed income of the block period is computed without set off of certain losses, there is no specific exclusion for deduction under Chapter VI-A of the Act. The Tribunal highlighted the legislative intent and the distinction in the prescribed forms for filing returns of undisclosed income, indicating that deductions under Chapter VI-A should not be denied. It further clarified that undisclosed income, by its nature, cannot be certified by an auditor in the audit report, as doing so would transform it into disclosed income. The Tribunal's decision was based on a thorough analysis of the legal provisions and the specific circumstances of the case.

The applicant-revenue contended that the provisions of Section 158BB had been amended with retrospective effect, substituting references to Chapter IV with 'this Act' and inserting a proviso. Despite acknowledging the validity of the Tribunal's order in principle, the revenue argued that the Tribunal should reconsider the availability of relief under Section 80-I or 80-IA post the amendment, particularly concerning the undisclosed income's relation to industrial undertakings and the requirement of filing an audit report. However, the Court noted that these contentions were not raised before the Tribunal initially. It allowed the revenue to address these issues when the Tribunal adjusts its decision in line with the Court's judgment. The Court emphasized that the Tribunal had already addressed the audit report filing aspect, leaving room for procedural compliance under Section 80-I(7) of the Act.

Considering the retrospective applicability of the amended provisions, the Court found no fault with the Tribunal's order granting the assessee the entitlement to claim deduction under Section 80-I or 80-IA. Consequently, the Court answered the referred question affirmatively in favor of the assessee and against the revenue. The reference was disposed of without any costs, concluding the legal proceedings on this matter.