9911796707
TMI Blog2000 (4) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1974-75, it claimed relief under section 80HH of the Income-tax Act, 1961 ("the Act"), in respect of the profit of a new industrial undertaking in backward areas. The assessee claimed that it had established a unit in a backward area in District Dharwar, Karnataka, and it had started production in May, 1972. That it had fulfilled all the conditions for claiming special deduc tion under section 80HH. Before the Assessing Officer, the assessee claimed that it was entitled to deduction under section 80HH on the profits and gains of the said undertaking without deduction of development rebate. This argument was rejected by the Assessing Officer, whose order was confirmed by the appellate authority and the Tribunal. Hence, this appeal. Mr. Mistry, learned counsel appearing on behalf of the assessee, contended that in this appeal we are concerned with the accounting year relevant to the assessment year 1974-75. He contended that by the Finance (No. 2) Act of 1980, Parliament introduced two sections in Chapter VI-A, viz., section 80AA and section 80AB. He contended that while section 80AA was deemed to have been inserted with effect from April 1, 1968, section 80AB came to be inse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B which was expressly made prospective, i.e., with effect from April 1, 1981. Mr. Mistry contended that both section 80AA and section 80AB constituted a part of the Finance (No. 2) Act of 1980. He pointed out that the Finance (No. 2) Bill of 1980, was introduced on June 18, 1980. He, therefore, contended that Parliament clearly intended section 80AB to be prospective whereas it intended section 80AA to be retrospective. In this connection, Mr. Mistry has relied upon Circular No. 281, dated September 22, 1980, indicating reasons for giving retrospective effect to section 80AA and prospective effect to section 80AB. Mr. Mistry invited our attention to para. 15.7 of the said circular in which it has been stated that in view of the observations of the Supreme Court in Cloth Traders (P.) Ltd.'s case [1979] 118 ITR 243, regarding provisions of other sections contained in Chapter VI-A, the Finance Act inserted section 80AB to clarify that while calculating the deductions in sections 80HH to 80TT, the net income as computed in accordance with the provisions of the Act (before making any deduction under Chapter VI-A) shall alone be regarded as the income which is received by the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bright Morarji [1999] 236 ITR 914, was delivered ex parte. He contended that in that judgment this court has not considered the contentions now raised by the assessee, viz., that section 80AB which was introduced by the Finance (No. 2) Act of 1980 was prospective and not retrospective. He further contended that the circular referred to above has also not been pointed out to this court in the case of Albright Morarji [1999] 236 ITR 914. He, therefore, contended that the matter requires consideration in the light of the above circular indicating that section 80AB was prospective. We do not find any merit in the submissions. Section 80HH begins with the words "where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking". The expression "gross total income" is defined under section 80B(5) to mean the total income computed in accordance with the provisions of the Act, before making any deduction under Chapter VI-A. Therefore, what is included in the gross total income in such a case is not only the category of such income included in the gross total income but also the quantum of the income so included. This is the basic test which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood in relation to the deductions to be made in respect of the income specified under Chapter VI-A. Therefore, in any view of the matter, it is clear that even without section 80AB, the profits and gains derived from an industrial undertaking referred in section 80HH have to be computed in accordance with the provisions of sections 30 to 43A of the Act and in any event since section 80AB has been held to be retrospective by the Supreme Court in H. H. Sir Rama Varma's case [1994] 205 ITR 433, it is not open to the assessee to say that the said section is prospective. As stated above, Mr. Mistry, however, placed reliance on the judgment of the Supreme Court in the case of UCO Bank v. CIT [1999] 237 ITR 889, in support of his contention that in view of the circular issued by the Central Board of Taxes, it was not open to the Department to contend that such a circular was not binding on the Department particularly when the said circular has made it clear that section 80AB was prospective. We do not find any merit in this contention. Firstly, the Department has not relied upon the circular. The Department has placed reliance on the judgment of the Supreme Court in the case of H. H. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no dispute that if the investment allowance was adjusted against the profits of the new industrial undertaking, there would be a loss from the undertaking and the assessee would not be entitled to relief under section 80HH of the Act. The Department appealed to the Tribunal, who affirmed the order of the Commissioner. Accordingly, the matter came by reference under section 256(1) to this court. After considering the provisions of section 80HH(1) read with section 80B(5) and without reference to section 80AB, the Division Bench of this court came to the conclusion that profits and gains derived from an industrial undertaking included in the gross total income would obviously be the profits and gains computed in accordance with the provisions of the Act. That under section 29 of the Act, which deals with the manner of computation of income from profits and gains of business, it was clear that such income was required to be computed in accordance with the provisions of sections 30 to 43A. In that judgment, this High Court has considered the entire case law including the judgment of the Supreme Court in H. H. Sir Rama Varma's case [1994] 205 ITR 433. Therefore, on a bare rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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