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TMI Blog2016 (4) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... of computing and allowing deduction under Section 32-AB ? (2) Whether on the facts and in the circumstances of the case the Tribunal was right in not appreciating that deduction under Section 32-AB had to be allowed before set off under Section 72 and hence before deducting unabsorbed investment allowance from the earlier years ? 2. Heard Mr.R.Vijayaraghavan, learned counsel for the Assessee and Mrs.Hema Muralikrishnan, learned Junior Standing Counsel for the Department. 3. The appellant is a non-banking finance company. Their assessment for the Assessment Year 1988-89 was reopened under Section 147 of the Act by issuing a notice under Section 148 of the Act, on 27.9.1991. The appellant filed a Return of Income admitting the same total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under Section 216 was correct. 8. The first Appellate Authority upheld the contention of the assessee on the first question relating to the depreciation written back, on the ground that the issue is covered by Circular No.550 dated 1.1.1990 and that therefore, the Assessing Officer should verify the claim with reference to the Board Circular and allow relief. But the first Appellate Authority held against the assessee, the second question relating to deduction under Section 32-AB on the ground that if there is no positive income under the head income from business, there cannot be any scope for allowing this deduction. 9. The assessee as well as the Revenue filed further appeals before the Tribunal. While the appeal filed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sages set off of the relief under the Section against "profits and gains of business" prior to setting off of carried forward business losses or unabsorbed depreciation under Section 72. 12. In support of the said contentions, the learned counsel relied upon a decision of this Court in Seshasayee Paper and Boards Limited v. Deputy Commissioner of Income Tax [272 ITR 165]. In the said case, this court was concerned with the question whether the unabsorbed depreciation should be allowed before the unabsorbed investment allowance and what could be the order of priority in claiming the unabsorbed depreciation and unabsorbed investment of allowance. After referring to the decision of the Supreme Court in CIT v. Mother India Refrigeration Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of earlier years (ss 32 (2) and 35(4); Then, unabsorbed development rebate of earlier years (ss.33(2)(ii) Then, current year's development rebate (ss.33(2)(i) Then, unabsorbed development rebate (ss.33A(2)(ii) Then, current year's development allowance of earlier years (s.32A(3)(ii); and Lastly, current year's investment allowance (s.32A(3)(i). 15. We have carefully considered the above submissions. 16. At the outset, it should be pointed out that Sections 28 to 44DB are grouped together under the heading "D-Profits and gains of business or profession" under Chapter IV which deals with "Computation of Total Income". Section 28 of the Act lists out the different types of income that are chargeable to income tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the computation under the head "Profits and gains of business or profession" for any assessment year is a loss to the assessee. 20. Sub-section (2) of Section 72 states that where any allowance is to be carried forward in terms of Section 32(2) or 35 (4), effect should first be given to the provisions of Section 72. Under sub-section (2) of Section 32, as it stood at the relevant point of time, the following rules were provided: (i) If full effect cannot be given to any allowance covered by the section, in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits and gains being less than the allowance, then the allowance to which effect has not been given may be set off again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1987 were "such deduction being allowed before the loss, if any, brought forward from earlier years is set off under Section 72. Therefore, it is clear that any deduction under Section 32AB has to be allowed before a set off is made under Section 72 in respect of the loss brought forward from the earlier years. Hence, the second question of law, is even as per the plain language of Section 32AB(1), as amended by Finance Act, 1987, has to be answered in favour of the assessee. 23. On the first question it is seen from para 4 of the order of the Tribunal that the Tribunal was persuaded to take a view in favour of the Revenue, only on account of the fact that the assessee was left with no positive income for the purpose of grant of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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