1992 (1) TMI 169 - AT - Income Tax

Summary

Issues involved: Interpretation of deduction under section 80HH u/s Income-tax Act, treatment of past losses in computing income for deduction.

Summary:
The Appellate Tribunal ITAT Indore considered the issue of allowing deduction under section 80HH before adjusting past losses. The assessee claimed a deduction under section 80HH without setting off earlier years' losses. The Income Tax Officer (ITO) argued that deduction under section 80HH is available only after setting off past losses. The CIT(A) directed the ITO to allow the deduction before adjusting past losses, citing a decision of the Madras High Court.

The department's counsel argued that deduction under section 80HH should be allowed after setting off past losses. The assessee's counsel relied on judgments from the Orissa High Court, Chandigarh Bench of the Tribunal, and Ahmedabad Bench of the Tribunal to support allowing the deduction on gross total income before setting off past losses.

The Tribunal analyzed the provisions of section 80HH and the treatment of past losses in computing income for the deduction. It noted that while brought forward business losses must be adjusted against profits and gains for the deduction under section 80HH, unabsorbed depreciation is treated differently. The Tribunal referred to judgments from the Calcutta High Court and the Supreme Court to support its decision.

The Tribunal concluded that unabsorbed depreciation should not be deducted from business income for computing the deduction under section 80HH. It directed the Assessing Officer to allow the deduction after adjusting brought forward business losses against current year's profits and gains. The Tribunal partially allowed the appeal, reversing the CIT(A)'s order on this ground.