2008 (1) TMI 428 - AT - Income Tax

Summary

Issues:
1. Allowable deduction under section 80-I after setting off business loss for the assessment year 1995-96.
2. Jurisdiction of the Assessing Officer to issue notice under section 148.

Issue 1: Allowable Deduction under Section 80-I after Setting off Business Loss for the Assessment Year 1995-96:

The appeal before the Appellate Tribunal ITAT COCHIN involved the question of whether the Assessing Officer was justified in calculating the allowable deduction under section 80-I of the Act after setting off the business loss for the assessment year 1995-96. The assessee, engaged in the production of plastic containers, initially claimed deduction under section 80-I for the assessment year 1996-97 without considering the business loss for the previous year. However, the Assessing Officer, based on an audit objection, reduced the profit by setting off the business loss for the assessment year 1995-96, thereby restricting the deduction.

During the proceedings, the learned senior counsel for the assessee argued that the Assessing Officer's refusal to carry forward the business loss for the assessment year 1995-96, due to a belatedly filed return, was unjustified. The counsel contended that the provisions of section 80-I did not warrant such reduction in profit while computing the deduction under section 80-IA. On the other hand, the Departmental representative supported the Assessing Officer's decision, citing the non obstante clause in section 80-IA(7) as overriding other provisions of the Act.

After considering the submissions and examining the relevant provisions, the Tribunal held that the Assessing Officer and the Commissioner of Income-tax (Appeals) had misinterpreted the law. The Tribunal pointed out that section 80-IA(7) clearly stated that the deduction should be limited to the profits and gains from the eligible business, without allowing the reduction of profit by setting off business losses from previous years. The Tribunal emphasized that the Assessing Officer's denial to carry forward the business loss did not justify restricting the allowable deduction under section 80-I. Consequently, the Tribunal set aside the Commissioner's order and directed the Assessing Officer to calculate the allowable deduction without considering the business loss for the assessment year 1995-96.

Issue 2: Jurisdiction of the Assessing Officer to Issue Notice under Section 148:

The assessee also raised the issue of the jurisdiction of the Assessing Officer to issue a notice under section 148. However, since the Tribunal resolved the appeal based on the merits of the deduction issue, it did not delve into the jurisdiction matter raised by the assessee. Therefore, the Tribunal did not provide a detailed analysis or ruling on the jurisdictional aspect, as the decision on the deduction issue rendered further consideration unnecessary.

In conclusion, the Appellate Tribunal ITAT COCHIN allowed the assessee's appeal, primarily focusing on the correct interpretation of the provisions related to allowable deductions under section 80-I without setting off business losses from previous years. The Tribunal emphasized that the deduction should be based on the profits and gains of the eligible business, as specified in the relevant statutory provisions, and not reduced by setting off losses from prior assessments.