9911796707
TMI Blog1983 (6) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... 80,48,125 Add : Reserve Rs. 19,636 . D.R. Reserve Rs. 20,09,854 20,29490 . . 1,00,77,615 Ded. Profit Loss A/c . 11,07,414 . . 89,70,201 6% of Rs. 89,70,201 = 5,38,212- set off of the extent of Rs. 5,07,948 Total Income..... Rs. -NIL- The assessee had claimed deduction under ss. 80P (2) (a) (i) of the Act and 80P (2)(d) of the Act against the business income for the year under consideration. The ITO rejected this claim on the ground that the deduction under Chapter VI-A comes into operation after determination of total income. Since in the instant case after, deduction of unabsorbed depreciation and development rebate as also relief u/s 80J (as set out in the above table) the resultant net income was nil, the assessee's claim with regard to the allowance of relief under the aforesaid sections was not tenable. He accordingly rejected the claim of the assessee. 2. Being aggrieved the assessee went in appeal before the CIT(A) and reiterated its claim that the ITO should have allowed deduction u/s 80P as aforesaid before adjusting carried forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted his contention by relying on the decision of the Madras High Court in case of CIT, TamilNadu-III vs. Katpadi Co-operative Timber Works Ltd. (1981) 25 CTR (Mad) 312 : (1982) 135 ITR 287 (Mad). He submitted that this decision is based on the principle laid down by their Lordships of the Supreme Court in case of Cloth Traders Pvt. Ltd. vs. Addl, CIT (1979) 10 CTR (SC) 393 : (1979) 118 ITR 243 (SC). The ld. Departmental Representative on the other hand relying on the order of the authorities below pointed out that according to the decision of the Gujarat High Court in case of CIT vs. Gautam Sarabhai (1981) 129 ITR 133 (Guj) the above deduction as claimed by the assessee u/s 80P was not permissible. He further supported his claim by relying on the decision of the Gujarat High Court in case of CIT vs. Cambay Electric Supply Industrial CO. Ltd. 1976 CTR (Guj) 282 : (1976) 104 ITR 744 (Guj) which was approved by the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. vs. CIT as also the decision in case of CIT, Gujarat vs. Amul Transmission Line Hardware (P) Ltd. (1976) 104 ITR 771 (Guj). In reply Shri Desai for the assessee pointed out that the decisions of the Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought forward losses under the head capital gains for earlier years. Rejecting the contention of the assessee their Lordships have observed thus: "A combined reading of s. 80A (1) and s. 80B of the IT Act, 1961, shows that in computing the total income of an assessee, certain deductions provided for in Chapter VI-A are to be permitted from the gross total income of the assessee, and while computing the gross total income of the assessee, as laid down by cl. (5) of s. 80B, no deductions are contemplated by Chap. VI-A or under s. 280-O. are to be made form the various heads forming part of the gross total income. Therefore, the computation of capital gains is to be made under s. 45 read with s. 48 of the IT Act, 1961, and after the capital losses carried from the previous year have been set off against the capital gains as per the provisions of s. 74 (1) (a) (ii), if any balance of capital gains remain during the relevant accounting year which is to be added to the gross total income for that year as contemplated by s. 80A (1) read with s. 80B (5), it is only in that eventuality that the further deduction contemplated by s. 80T can be effected. If there is no balance of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery and building and worked out as per s. 41(2), irrespective of its real character, will have to be taken into account and included as income of the business. In other words, the balancing charge as worked out under s. 41(2) will have to be taken into account before computing the deduction of 8% under the third step. On proper construction of sub-s. (1) and having regard to the legislative mandate contained in the three steps that are required to be taken in the manner indicated above we are clearly of the view that the item of Rs. 7,55,807 will have to be taken into account before computing the 8% deduction contemplated by the said provision. 9. In Amul Transmission's case the controversy was also akin to one which is before us. The question which arose for consideration was whether relief u/s 80-I (as it stood for the relevant year) should be allowed before setting of unabsorbed losses, depreciation and development rebate carried forward from earlier years. Rejecting the contention of the assessee their Lordships held that deduction u/s 80-I the Act should be made after setting of unabsorbed losses, depreciation and development rebate carried forward from earlier years. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er each head of income. Now in the instant case the computation of income from business would require setting off of unabsorbed depreciation in computation the aforesaid income from profits and gains of business because by fiction enacted in s. 32 (2) the unabsorbed depreciation is deemed to be depreciation of the current year and is required to be set off subject to past losses which have a precedence over unabsorbed depreciation in spite of the fiction, in view of the decision of the Supreme Court in case of CIT vs. Jaipuria China Clay Mines (P) Ltd. (1966) 59 ITR 55 (SC). The excess of unabsorbed depreciation which cannot be set off against the income form business will be set off against income form any other heads if any. If however, any surplus remains after setting off of such unabsorbed depreciation then by virtue of s. 33 (2) the unabsorbed development rebate would reduce the total income to nil if such unabsorbed development rebate is found to be in excess of the residuary income is determined after setting off of unabsorbed depreciation. In other words the computation of total income would require setting off of unabsorbed depreciation and unabsorbed development rebate a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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