2010 (3) TMI 447 - HC - Income Tax

Export- Special Deduction- The assessee is engaged in textile industry. Section 34A of the Income Tax Act, 1961, restricts the unabsorbed depreciation and unabsorbed investment allowance for limited period, in the case of certain domestic companies. Section 34A was introduced by legislature w.e.f. 1 April, 1992. The set off of unabsorbed income should be restricted to the extent of two third. Held that- the Tribunal was right in directing the Assessing Officer to recomputed the relief under section 80HHC by setting off Rs 1,47,45,098 being two third of the unabsorbed depreciation for the earlier year.

Summary

Issues:
Interpretation of section 34A of the Income-tax Act for restricting unabsorbed depreciation in computing relief under section 80HHC.

Analysis:
The High Court of Madras heard an appeal filed by the Revenue under section 260A of the Income-tax Act, 1961, against a decision of the Income-tax Appellate Tribunal, Madras. The main issue revolved around the correctness of setting off unabsorbed depreciation for computing relief under section 80HHC. The court admitted the appeal based on the substantial question of law regarding the validity of directing the Assessing Officer to recompute the relief under section 80HHC by setting off two-thirds of unabsorbed depreciation for earlier years. The case involved an assessee engaged in the textile industry for the assessment year 1992-93, now under liquidation. The Assessing Officer had set off unabsorbed depreciation while computing the relief under section 80HHC, leading to an appeal by the assessee to the Commissioner of Income-tax (Appeals), who partially allowed it. Subsequently, the Tribunal upheld the Commissioner's decision, prompting the Revenue to file the present appeal.

The Revenue contended that the Tribunal's order was not in accordance with the law, emphasizing that the Assessing Officer correctly set off unabsorbed depreciation for the relief under section 80HHC. However, despite notice, the respondent did not provide any representation. The court examined section 34A of the Income-tax Act, which restricts unabsorbed depreciation and investment allowance for a limited period for certain domestic companies, effective from April 1, 1992. Section 34A mandates restricting the deduction to two-thirds of such allowance or allowances, with the balance to be carried forward or added to subsequent years as specified.

The court analyzed that both the Commissioner of Income-tax and the Appellate Tribunal correctly applied the provisions of section 34A in restricting the set off of unabsorbed depreciation. Consequently, the court found that the Tribunal's decision was in accordance with the law and based on the available materials. As the Revenue failed to present any fresh evidence or compelling reasons for a contrary view, the court upheld the Tribunal's order, confirming that it was in conformity with the law. Ultimately, the court ruled in favor of the assessee and against the Revenue, dismissing the Tax Case (Appeal) as lacking merit and imposing no costs.