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TMI Blog1996 (7) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... ta, C.A. and the Revenue was represented by Shri Brajesh Gupta, Sr. D.R. Both have been heard at length. 4. Briefly stated, the facts are that the assessee claimed before the Assessing Officer that after adjusting current year's depreciation and carry forward business losses the inter se priority between different kinds of allowances as admissible under the Act should be allowed in the following order : (i) Unabsorbed deduction under section 80J. (ii) Unabsorbed development rebate. (iii) Unabsorbed depreciation. 5. The assessee's claim was not acceptable to the Assessing Officer. He allowed set off of loss/allowances in the following priority on the basis of decision in the case of Monogram Mills Co. Ltd. v. CIT [1982] 135 ITR 122 (Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. He pointed out that sub-section (3) read with proviso (i) of section 80J provide for set off and carry forward of unabsorbed deductions under section 80J. According to him, the assessee-company started production in the account year relevant to the assessment year 1967-68 and, therefore, leaving the initial assessment year 1967-68, the set off and carry forward of unabsorbed deduction under section 80J could be allowed up to further seven years, i.e, up to assessment year 1974-75 in accordance with sub-section (3), read with proviso (i) of section 80J. Referring to the provisions of sub-section (2)(ii) of section 33, Shri Mehta pointed out that the assessee is entitled to set off and carry forward of unabsorbed development rebate for ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Mehta further argued that the beneficial provisions should be construed liberally. In this connection, he placed reliance on the decision of the Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188. 8. Assailing the contentions of Shri Mehta, the ld. D.R., Shri Brajesh Gupta, strongly supported the view taken by the Revenue authorities. Inviting our attention to sub-section (1) of section 80A, he submitted that in computing the total income of an assessee, deductions specified in sections 80C to 80U are allowed from his gross total income. However, sub-section (2) of section 80A limits the aggregate of the deductions under the aforesaid sections, i.e, the deductions allowable under sections 80C to 80U cannot exceed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nacted to declare the law as it always stood in relation to the deductions to be made in respect of the income specified under the head 'C' of Chapter VI-A. Shri Gupta argued that if section 80J is read with section 80AB, it would be seen that the gross total income of the assessee has to be worked out after deducting unabsorbed depreciation and unabsorbed development rebate and the income eligible for deduction under section 80J will be the net income as computed in accordance with the provisions of the Act. In support of his contentions, he placed reliance on the following decisions :--- (i) CIT v. Patiala Flour Mills Co. (P.) Ltd. [1978] 115 ITR 640; and (ii) CIT v. North Arcot District Co-operative Spg. Mills Ltd. [1985] 151 ITR 238 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy of the past assessment years against the profits and gains referred to in sub-section (1) of section 80J, as computed after allowing, inter alia, the deduction admissible under that sub-section and, therefore, if, for the purpose of sub-section (1) of section 80J, the profits or gains of the new industrial undertaking are to be computed in accordance with the provisions of the Act and no part of the losses, depreciation allowance or development rebate for the past assessment years which has been fully set off against the profit from other businesses or income under any other head is liable to be adjusted over again in computing the profits or gains of the new industrial undertaking, no such adjustment would equally be permissible in app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation. When the matter came up before the Tribunal, the Tribunal held that the carried forward loss and the unabsorbed development rebate of earlier years have to be taken note of before granting relief under section 80J. The Tribunal was, however, of the view that the carried forward unabsorbed depreciation will be taken note of only after granting the relief under section 80J. The assessee did not question the decision of the Tribunal whereas it related to the unabsorbed development rebate and the carried forward business loss. The Revenue, however, challenged the decision of the Tribunal that the unabsorbed depreciation will be set off lastly after working out the relief under section 80J. On reference, their Lordships held, thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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