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TMI Blog2014 (7) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... only if such income is positive would be eligible for deduction under Section 80HH & 80I of the IT Act. The gross total income of the assessee has to be worked out after deducting the aforesaid deductions only to arrive at the net income and in case, after deducting all these statutory deductions, some income remains, then obviously the assessee would be entitled to deduction under Section 80HH & 80I of the IT Act - when there is no taxable income, then no deduction under Chapter VIA could be allowed - after allowing depreciation, unabsorbed loss and unabsorbed depreciation, there was no positive income - the assessee was not entitled to any deduction u/s 80HH & 80I of the Act – Decided against Assessee. - DB ITA No.185/2004, DB ITA No.20/2005, DB ITA No.31/2006 - - - Dated:- 6-1-2014 - MR. AJAY RASTOGI AND MR. J.K. RANKA, JJ. Mr.Sanjay Jhanwar, for the appellant Mrs.Parinitoo Jain, for the respondent BY THE COURT (PER HON.RANKA,J.): 1. These three Income Tax Appeals u/sec. 260A of the Income Tax Act, (for short, 'IT Act') are directed against the order passed by the Income Tax Appellate Tribunal, Jaipur (for short, 'ITAT') in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act? (ii)Whether the 'Profits and Gains' of current year of the eligible undertaking would be relevant for computing deduction u/s 80HH of the Act or the income computed after reducing depreciation allowance u/s 32(1) shall be relevant for this deduction? 4. The brief facts, as reveal from record (Assessment Year 1990-91), are that the appellant-assessee commenced its commercial production of crushing of oil seeds through oil mill and solvent plant and the turnover in the first assessment year is at ₹ 4,58,31,787/- and it is the claim of the appellant-assessee that the major part is from the sale of solvent extracted mustard oil for ₹ 2,63,73,825/- 5. The appellant-assessee claimed deduction u/s 80-HH 80-I of the IT Act amounting to ₹ 14,23,468/- ₹ 17,79,334/- respectively as per the audit report annexed to the return of income. The said amount had been claimed before deducting depreciation of ₹ 72,28,897/-. Whereas according to the Assessing Officer, the balance-sheet and profit loss account of the appellant-assessee showed net loss of ₹ 1,11,559/- after deduction of depreciation of ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant conceded that the issue is no more res-integra in so far as the present issues are concerned and not only this Court but the Hon'ble Apex Court has come to the conclusion that the deduction u/Sec.80HH and 80I are not allowable in the facts and circumstances of the case. However, in so far as the question No.1 is concerned, he contended that in none of the cases, the term profit and gains has been referred to and in this regard he tried to distinguish and contended that the Calcutta High Court in the case of Commissioner of Income Tax Vs. Orient Paper Mills Ltd., reported in (1983) 139 ITR 763 (Cal); Orissa High Court in Commissioner of Income Tax Vs. Tarun Udyog, reported in (1991) 191 ITR 688 (Ori.) and Karnataka High Court in the case of Commissioner of Income Tax Vs. H.M.T. Ltd., reported in (1993) 1999 ITR 235 (Kar.) have considered the term income vis-a-vis profits and gains and this is required to be considered in Sec.80HH and Sec.80I as well. He contended that both these sections specifically deals about the term profit and gains and nowhere refers to word 'income' and, therefore, he contended that the term profit and gains is wider than income and in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence is required in the matter. 12. We have considered the arguments advanced by counsel for the parties. 13. The Hon'ble Apex Court in the case of SYNCO Industries Ltd.: (2008) 299 ITR 444, while considering the question whether deduction under Section 80HH and 80I were allowable, observed as under:- The above discussion makes it very evident that predominant majority of the High Courts have taken the view that while working out gross total income of the assessee the losses suffered have to be adjusted and if the gross total income of the assessee is 'Nil' the assessee will not be entitled to deduction under Chapter VI-A of the Act. It is well settled that where the predominant majority of the High Courts have taken certain view on the interpretation of certain provisions, the Supreme Court would lean in favour of the predominant view. therefore, this Court is of the opinion that the High Court was justified in holding that gross total income must be determined, by setting off against the income, the business losses of earlier years, before allowing deduction under Chapter VI-A and if the resultant income is 'Nil', then the Assessee cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 14. The Hon'ble Apex Court in the case of Motilal Pesticides (I) Pvt. Ltd. (supra) had also an occasion to consider the above issue and observed as under:- Both sections 80HH and 80M fall in Chapter VI-A relating to deductions to be made in computing total income. It will be seen that the language of sections 80HH and 80M is the same. It was held in Cloth Traders (P.) Ltd.'s case : [1979] 118 ITR 243 (SC) that deduction is to be allowed on the gross total income and not on the net income. But then the decision in Cloth Traders (P.) Ltd.'s case: [1979] 118 ITR 243 (SC) was overruled in Distributors (Baroda) P. Ltd. v. Union of India: [1985] 155 ITR 120 (SC) . After the decision in Cloth Traders (P.) Ltd.'s case [1979] 118 ITR 243 (SC) , two sections 80AA and 80AB were introduced by the Finance (No. 2) Act, 1980. While Section 80AA was to have retrospective effect with effect from April 1, 1968, Section 80AB was to have operation with effect from April 1, 1981. Section 80AA had the effect of effacing the decision of this court in Cloth Traders (P.) Ltd.'s case : [1979] 118 ITR 243 (SC) , which had interpreted Section 80M. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, we are of the opinion that the Civil Appeal being devoid of any merit deserves to be dismissed and is dismissed accordingly. 16. This Court in the case of Loonkar Tools (I) Ltd. (supra) observed as under:- In view of the above discussion, we are of the view that the depreciation and investment allowance have to be deducted before giving the special deduction as provided under Chapter VI-A and the profits and gains which are alleged to be equivalent to commercial profits have to be restricted only to the extent of such profits and gains which are included in the gross total income on which the deduction is available. In these circumstances, we are of the view that the Income Tax Appellate Tribunal was not justified in coming to the conclusion that the deduction under Section 80HH is to be computed on the commercial profits and in computing the commercial profits the assessee is entitled to require addition of the provision for tax, depreciation and investment allowance reserve to the net profit as per the profit and loss account to arrive at the commercial profits. 17. This Court in the case of Vishnu Oil Dal Mills (supra; Agarwal Gum Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive would be eligible for deduction under Section 80HH 80I of the IT Act. The gross total income of the assessee has to be worked out after deducting the aforesaid deductions only to arrive at the net income and in case, after deducting all these statutory deductions, some income remains, then obviously the assessee would be entitled to deduction under Section 80HH 80I of the IT Act. However, when there is no taxable income, then no deduction under Chapter VIA could be allowed. 20. It is an admitted fact that in so far as the present facts and circumstances of the case are concerned, after allowing depreciation, unabsorbed loss and unabsorbed depreciation, there was no positive income and we accordingly hold that the assessee was not entitled to any deduction under Section 80HH 80I of the IT Act. 21. The judgments relied upon by learned counsel for the appellant are of no assistance. In our view, no different answer is required to be given in the facts and circumstances of the present cases and consequently, the substantial questions are answered in the negative i.e. against the assessee and in favour of the revenue. 22. Consequently, the appeals, being devoid of me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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