2000 (11) TMI 302 - AT - Income Tax

Issues Involved:
1. Priority of set-off of brought forward business loss and unabsorbed depreciation over unabsorbed investment allowance and deficiencies under Section 80J.
2. Availability of unabsorbed investment allowance for assessment year 1982-83 in assessment year 1991-92.
3. Set-off of deficiency of deduction under Section 80J.
4. Disallowance of Rs. 1,86,183 in respect of textile cess under Section 43B.
5. Computation of deduction under Section 80HH.

Issue-wise Detailed Analysis:

1. Priority of Set-off of Brought Forward Business Loss and Unabsorbed Depreciation Over Unabsorbed Investment Allowance and Deficiencies Under Section 80J:
The assessee adjusted the unabsorbed investment allowance before unabsorbed depreciation against the income of the current year, which was rejected by the AO based on provisions of Section 32(2) and relevant judicial decisions. The CIT(A) upheld this order. The assessee argued that unabsorbed allowances should be set off in the following order: deficiency under Section 80J, unabsorbed investment allowance, unabsorbed business loss, and unabsorbed depreciation. The Tribunal noted that the legal position on the priority of set-off is well-settled by various judicial pronouncements, including the decision of the Hon'ble Gujarat High Court in Monogram Mills Co. Ltd. vs. CIT, which states that unabsorbed depreciation has precedence over unabsorbed investment allowance. The Tribunal found no reason to deviate from this settled position and upheld the CIT(A)'s order.

2. Availability of Unabsorbed Investment Allowance for Assessment Year 1982-83 in Assessment Year 1991-92:
The Tribunal noted that this issue is covered by the decision of the Hon'ble Supreme Court in Premier Cable Co. Ltd. vs. CIT, which held that unabsorbed development rebate can be carried forward only for eight assessment years following the assessment year in which the relief was first earned. Accordingly, the Tribunal upheld the CIT(A)'s order, which denied the availability of unabsorbed investment allowance for assessment year 1982-83 in assessment year 1991-92.

3. Set-off of Deficiency of Deduction Under Section 80J:
The AO disallowed the set-off of deficiency under Section 80J as it was beyond the seventh assessment year from the initial assessment year. The CIT(A) upheld this order. The assessee conceded that this issue is covered against them by the decision of the Hon'ble Supreme Court in Premier Cable Co. Ltd. vs. CIT. The Tribunal, therefore, held that the assessee is not entitled to set off the deficiency under Section 80J against the income of the current year.

4. Disallowance of Rs. 1,86,183 in Respect of Textile Cess Under Section 43B:
The AO treated the textile cess collected by the assessee as a trading receipt and disallowed the unpaid amount under Section 43B. The CIT(A) upheld this disallowance. The assessee argued that the textile cess is not akin to sales tax and should not be treated as a trading receipt. The Tribunal, however, noted that the textile cess forms part of the sale consideration and is, therefore, a trading receipt as per the decision of the Hon'ble Supreme Court in Chowringhee Sales Bureau (P) Ltd. vs. CIT. The Tribunal also observed that the provisions of Section 43B, as amended by the Finance Act, 1988, apply to the textile cess. Accordingly, the Tribunal upheld the CIT(A)'s order confirming the disallowance under Section 43B.

5. Computation of Deduction Under Section 80HH:
The Tribunal noted that this issue is covered by the decision of the Hon'ble Rajasthan High Court in CIT vs. Loonker Tools (I) Ltd., which held that deduction under Section 80HH is allowable on profits and gains derived from an industrial undertaking included in the gross total income of the assessee and not on commercial profit. Accordingly, the Tribunal dismissed this ground raised by the assessee.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the orders of the CIT(A) on all issues.

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