1996 (7) TMI 188 - AT - Income Tax

Assessment Year, New Industrial Undertaking, Profits And Gains, Unabsorbed Depreciation, Unabsorbed Development Rebate

Summary

Issues:
1. Proper set off of carried forward losses of past years.
2. Priority of deductions under different sections of the Income Tax Act.

Detailed Analysis:

Issue 1: Proper set off of carried forward losses of past years
The assessee contended that the Assessing Officer erred in not allowing the proper set off of carried forward losses of the assessment years 1967-68 to 1971-72. The assessee argued that losses with a shorter period for set off should be given priority over those with longer or unlimited set off periods. Specifically, the assessee claimed that the set off of deduction under section 80J should have priority over all other losses. However, both the Assessing Officer and the CIT(A) did not agree with the assessee's position. The CIT(A) upheld the Assessing Officer's decision, stating that deductions under Chapter VI-A are only allowable if there is positive income available for the current assessment year after setting off brought forward losses as per section 72. Therefore, the CIT(A) declined to interfere with the Assessing Officer's order, leading to the assessee appealing to the tribunal.

Issue 2: Priority of deductions under different sections of the Income Tax Act
The tribunal considered the arguments presented by both parties. The assessee's representative highlighted the provisions of section 80J, which allow for the set off and carry forward of unabsorbed deductions for a specified period. The representative argued that deductions under section 80J should be given priority over other losses due to the shorter set off period. Additionally, the representative cited a decision by the Indore Bench of the Tribunal supporting this position. On the other hand, the Revenue's representative supported the view taken by the Revenue authorities, emphasizing the provisions of sections 80A, 80AB, and relevant case law.

Ultimately, the tribunal analyzed the legal provisions and case law cited by both parties. Referring to decisions such as Patiala Flour Mills Co. and North Arcot District Co-operative Spg. Mills Ltd., the tribunal concluded that deductions under section 80J and carried forward deficiencies can only be allowed after adjusting unabsorbed losses, depreciation, or development rebate of earlier years against the profits derived from the relevant industrial undertaking. The tribunal also referenced decisions by other high courts and the Supreme Court to support its conclusion. As a result, the tribunal held that there was no flaw in the CIT(A)'s order and dismissed the appeals.