2008 (7) TMI 372 - HC - Income Tax

Deduction u/s 80HHC was while computing deduction under section 80HHC, whether the loss incurred by the assessee for the previous years has to be given set off or not In view of the decision of hon ble Supreme Court in Synco Industries Ltd. v. Assessing Officer (Income-tax) 2008 -TMI - 3485 - Supreme court AO directed to follow the guidelines prescribed therein.

Summary

Issues:
1. Computation of deduction under section 80HHC - Whether the loss incurred by the assessee for previous years should be given set off.
2. Interpretation of provisions - Whether brought forward losses of earlier years should be deducted from the profit of the assessee for the purpose of computation of deduction under section 80HHC.
3. Consideration of relevant sections - Whether the assessee is entitled to relief under section 80HHC when considering the Explanation to section 80HHC and section 80AB of the Act.

Analysis:

Issue 1: Computation of deduction under section 80HHC
The appeal was filed by the Revenue challenging the order passed by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal regarding the assessment year 1996-97. The dispute centered around whether the loss sustained by the assessee in previous years should be set off while computing deductions under section 80HHC. The Assessing Officer initially held that the loss should be set off, but the assessee contended otherwise. The Commissioner of Income-tax (Appeals) allowed the appeal in part, stating that the loss incurred in earlier years should be considered for deductions under section 80HHC. The Income-tax Appellate Tribunal upheld this decision, directing the Assessing Officer to accept the computation made by the assessee under section 80HHC.

Issue 2: Interpretation of provisions
The substantial questions of law raised in the appeal questioned whether the appellate authorities were correct in holding that brought forward losses of earlier years should not be deducted from the profit of the assessee for computing deductions under section 80HHC. The Tribunal was criticized for allegedly failing to consider and record a finding regarding the assessee's entitlement to relief under section 80HHC while confirming the order of the Appellate Commissioner. The High Court referred to the decision in Synco Industries Ltd. v. Assessing Officer, emphasizing the importance of considering how the loss sustained by the assessee in earlier years should be factored into the computation under section 80HHC.

Issue 3: Consideration of relevant sections
In light of the Supreme Court's guidance on the treatment of losses sustained in earlier years, the High Court directed the Assessing Officer to follow the guidelines issued by the Supreme Court and compute deductions under section 80HHC accordingly. The Court concluded that the direction issued by the Income-tax Appellate Tribunal needed to be deleted, thereby disposing of the appeal in favor of the assessee.

This detailed analysis of the judgment highlights the key issues, interpretations of relevant provisions, and the court's decision based on legal principles and precedents.