JUDGEMENT
G. Krishnamurthy, President -
(1.)THESE two appeals filed by the assessee, arise out of the orders dated 4-8-1983 and 11-2-1985 of the learned Commissioner of Income-tax (Appeals)-XII, New Delhi for the assessment years 1980-81 and 1981-82.
(2.)They were heard by the Special Bench on account of conflicting views of different Division Benches of the Appellate Tribunal in the following cases, on the point whether the deduction under Section 80HH is to be allowed before or after setting off of the brought forward losses of the earlier years.
(i) Yenpeyees Rubber (P.) Ltd. v. First ITO [1983] 5 ITD 605 (Mad.); and
(ii) in the case of Premier Industrial Drives (P.) Ltd. v. ITO [1984] 7 ITD 800 (Mad.)
The assessee is a limited company engaged in the manufacture and sale of billets (steel ingots, etc.) out of iron scrap. It was incorporated on 30-7-1973 and commenced its business in 1977. The first ground common for both the years relates to the deduction claimed under Section 80HH. The relevant details of the claims etc. are the following:
JUDGEMENT_2321_TLIT0_19890.htm
The assessee claimed deduction Under Section 80HH on the net profits before set off of brought forward loss. The Income-tax Officer took the view that the deduction @ 20% under Section 80HH was to be allowed only after setting off of the brought forward losses of the earlier years from the net income. Since the net income for the assessment year 1980-81 was Rs. 51,51,446 equal to the figure of brought forward loss after wholly setting off, of which there was no income, the Income-tax Officer held that no deduction was allowable under Section 80HH. For the assessment year 1981-82, the Income-tax Officer proceeding on the same premises, set off the brought forward loss and held that the deduction allowable under Section 80HH was only Rs. 5,05,825 (i.e. 20% of Rs. 72,09,236 - Rs. 46,80,109). Thus the controversy developed as to whether the deduction under Section 80HH was allowable after or before set off of brought forward losses.
(3.)BEFORE the learned Commissioner of Income-tax (Appeals) the assessee placed reliance on the decision of Madras Bench 'A' of the Appellate Tribunal in the case of Yenpeyees Rubber (P.) Ltd. (supra) as also on the expression "the amount of income .of that nature..." used in Section 80AB which was inserted by the Finance (No. 2) Act, 1980 with effect from 1-4-1981. However, the learned Commissioner of Income-tax (Appeals) relied upon the subsequent decision of Madras Bench 'A' in the case of Premier Industrial Drives (P.) Ltd. (supra) wherein the earlier decision had been considered along with another decision of Madras Bench 'B' dated 30-11-1981 in the case of Veera Raghave Textiles (P.) Ltd. in IT Appeal Nos. 67 to 70 (Mad.) of 1981. The learned Commissioner of Income-tax (Appeals) held that Section 80AB did not help the assessee as it is intended to clarify a situation where the taxpayer may have an income of a nature other than that on which deduction is admissible. He also held that even Section 80AB provides that income (on which deduction is admissible) had to be computed in accordance with the provisions of the Act i.e. in accordance with, among others, Section 4 (Charging Section), Section 14 (heads of income), Sections 28 to 43 (Computation of business income) and Section 72 (set off and carry forward of business losses). He preferred the view taken in the case of Premier Industrial Drives (P.) Ltd. (supra) as it considered the relevant provisions of Section 80A(2), 80B(5) and 80HH as well as the decisions of the Supreme Court in the cases of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 which according to him were directly on the point. He, therefore, upheld the orders of the Income-tax Officer.
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