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TMI Blog1992 (1) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... ok the view that after allowing deductions under sections 32, 32A, 71 and 72, there was no positive income of the assessee for the relevant assessment year and, therefore, no deduction was available to the assessee under section 80HH. The assessee was successful in appeal before the learned CIT(A) who, following the Hon'ble Madras High Court decision in CIT v. Katpadi Co-operative Timber Works Ltd. [1982] 135 ITR 287, took the view that deduction under section 80HH " has to be allowed from the gross total income ". He, accordingly, directed the Assessing Officer to allow deduction under section 80HH " before adjusting the carry forward losses ". 5. The learned Standing Counsel for the department, Shri Saxena, argued that for computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past losses and/or unabsorbed depreciation, etc. however, when there are past business losses including unabsorbed depreciation, the manner in which the same are to be treated for the purpose of working out income for deduction under section 80HH is required to be looked into in accordance with the relevant provisions of the Act. Insofar as brought forward business losses are concerned, it is settled law that the same are to be taken in computation of profits and gains from business. This is because the time available for carry forward of business loss is limited to eight years. Therefore, brought forward business losses are necessarily required to be taken into account for the purpose of computing income under the head profits and gains. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for compensation of the same by an allowance. Such allowance by itself is not a loss but if it cannot be absorbed in a particular year against business income, then it is carried forward as unabsorbed depreciation allowance under section 32(2). This unabsorbed depreciation allowance does not enter into the computation of the business loss of the assessee in that particular year. In the subsequent year, such unabsorbed depreciation allowance is treated to be a part of the depreciation allowance of the succeeding year and the assessee is entitled to claim absorption in respect of the same in the succeeding year. On a strict reading of section 72, it cannot be said that unabsorbed depreciation allowance of an assessee is a business loss, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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