2001 (2) TMI 285 - AT - Income Tax

Summary

Issues:
Deletion of prima facie adjustment made by AO in deduction claimed under s. 80-I and 80HHC.

Analysis:
1. The appeal involved the deletion of prima facie adjustment made by the Assessing Officer (AO) in the quantum of deduction claimed under sections 80-I and 80HHC.
2. The AO recalculated deductions under sections 80-I and 80HHC by disregarding the claim of the assessee that it was entitled to the deduction without set off of brought forward losses and depreciation.
3. The Revenue contended that set off of brought forward losses and depreciation was mandatory under section 80AB, citing various judicial decisions to support their stance.
4. The assessee argued that the deductions were correctly claimed as there were two industrial undertakings involved, and the provisions of section 80AB did not apply in this case.
5. The Tribunal analyzed the legal provisions and judicial precedents cited by both parties. It was observed that the issue involved whether losses of one unit should be set off against profits of another unit before calculating deduction under section 80-I.
6. The Tribunal held that section 80AB mandates set off of losses against profits before claiming deductions under sections 80-I and 80HHC, based on relevant judicial decisions.
7. However, considering the conflicting decisions and the genuine controversy surrounding the issue, the Tribunal concluded that the AO's prima facie adjustment was not justified under section 143(1)(a) for deduction under section 80-I.
8. Regarding the deduction under section 80HHC, the Tribunal followed the decision of the Bombay High Court, ruling that section 80AB does not control deductions under section 80HHC, and set off of losses against profits was not permissible.
9. The Tribunal further held that the recalculation of deduction under section 80HHC did not fall within the AO's powers under section 143(1)(a), and the issues involved were beyond the scope of the said provision.
10. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision regarding the deductions under sections 80-I and 80HHC.