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Issues:
1. Treatment of machinery under installation for grant of relief under s. 80J of the IT Act, 1961. 2. Admissibility of relief under s. 80M on gross dividend received when gross total income is nil. Issue 1: Treatment of machinery under installation for grant of relief under s. 80J: The assessee contended that the value of machinery under installation should be considered part of the capital employed for the purpose of relief under s. 80J. The ITO had excluded the cost of machinery under installation in the computation of capital employed, a decision upheld by the AAC. However, the assessee relied on various High Court decisions, including Calcutta, Gujarat, Karnataka, and Bombay High Courts, which held that assets under installation should be included in the capital employed. The ITAT, following the precedent, ruled in favor of the assessee, stating that machinery under installation should be treated as part of the capital employed under s. 80J. Issue 2: Admissibility of relief under s. 80M on gross dividend when gross total income is nil: The second issue revolved around the admissibility of relief under s. 80M on a gross dividend received from a company when the gross total income was nil due to overall losses. Initially, the ITO allowed the relief under s. 80M, but in a subsequent order, the ITO reversed the decision, stating that deduction under s. 80M is not admissible when the gross total income is nil. The AAC concurred with the ITO's view. The ITAT analyzed the relevant provisions of the IT Act, noting that deductions under Chapter VI-A, including s. 80M, cannot exceed the gross total income. Since the gross total income was a loss figure, the ITAT upheld the lower authorities' decision that the assessee was not entitled to any deduction under s. 80M due to the absence of positive gross total income. In conclusion, the ITAT partially allowed the assessee's appeal, ruling in favor of including machinery under installation in the capital employed for relief under s. 80J but denying the deduction under s. 80M due to a nil gross total income.
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