2005 (10) TMI 211 - AT - Income Tax

Summary

Issues Involved:
1. Deduction under Section 80-I of the Income Tax Act, 1961, in respect of profits and gains computed after adjusting brought forward losses of earlier assessment years.
2. Deduction under Section 80P(2) of the Income Tax Act, 1961, in respect of interest received from a co-operative bank/co-operative society.

Issue-wise Detailed Analysis:

1. Deduction under Section 80-I of the Income Tax Act, 1961:

The primary issue in the appeal for the assessment year 1994-95 was whether the assessee was entitled to a deduction under Section 80-I of the Income Tax Act, 1961, without adjusting brought forward losses from earlier years. The assessee claimed the deduction on the entire income of Rs. 6,81,22,461 without adjusting brought forward losses amounting to Rs. 2,27,34,802. The Assessing Officer (AO) computed the deduction after adjusting these losses, leading to a restricted claim. The assessee moved an application under Section 154 for rectification, which the AO rejected, stating that the gross total income should be computed after allowing the set-off of brought forward business losses.

The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the assessee's contention, relying on the judgment of the Andhra Pradesh High Court in CIT vs. Visakha Industries Ltd., and directed the AO to allow the deduction without adjusting the brought forward losses. The Revenue appealed against this decision.

The Tribunal examined the provisions of Sections 80-I, 80AB, and 80B(5) of the Act, along with various judicial pronouncements, including the Supreme Court judgments in CIT vs. Kotagiri Industrial Co-operative Tea Factory Ltd. and Motilal Pesticides (I) (P) Ltd. vs. CIT. It concluded that the deduction under Section 80-I is admissible only after setting off brought forward business losses. The Tribunal emphasized that the gross total income must be computed in accordance with the Act's provisions, which includes adjusting brought forward losses before allowing any deductions under Chapter VI-A. Consequently, the Tribunal set aside the CIT(A)'s order and restored the AO's decision, allowing the Revenue's appeal.

2. Deduction under Section 80P(2) of the Income Tax Act, 1961:

The second issue in the appeal for the assessment year 2000-01 concerned the deduction under Section 80P(2)(d) of the Act in respect of interest received from a co-operative bank/co-operative society. The CIT(A) allowed this deduction, relying on the Tribunal's decision in the assessee's own case for the assessment year 1994-95. The Revenue appealed against this decision.

Both the Departmental Representative and the assessee's counsel conceded that this issue was covered in favor of the assessee by the Tribunal's earlier decisions in the assessee's own case for the assessment years 1994-95 and 1995-96. The Tribunal, after examining the facts and the earlier decisions, confirmed that the issue was indeed covered in favor of the assessee. Therefore, the Tribunal upheld the CIT(A)'s order allowing the deduction under Section 80P(2)(d) and dismissed the Revenue's appeal.

Conclusion:

In summary, the Tribunal allowed the Revenue's appeal for the assessment year 1994-95, holding that the deduction under Section 80-I must be computed after adjusting brought forward business losses. For the assessment year 2000-01, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction under Section 80P(2)(d) for interest received from a co-operative bank/co-operative society.