2019 (3) TMI 19 - HC - Income Tax

High Court Upholds Tribunal Decision on Set Off of Depreciation and Business Loss

The High Court upheld the Tribunal's decision to reject the claim for set off of unabsorbed depreciation under section 44BB of the Income Tax Act, ... Computing profit and gains of shipping business u/s 44BB - Different subsection of Section 44BB - Set-off of carried forward depreciation is eligible - Tribunal referred to the provisions contained in Section 44BB and held that, the computation provided therein, would override the provisions of Section 32 and in particular, sub-section 2 thereof - HELD THAT:- The legislature has ruled out applicability of sub-section (2) of Section 32 of the Act while computing the profits and gains of an eligible assessee, arising out of the business in terms of sub-section (1) of Section 44BB of the Act. Any other view would be opposed to the plain language used in this sub-section. We do not discern any indication in this sub-section to come to the conclusion that while providing exclusion of anything contrary to contained in Sections 28 to 41, the legislature intended to exclude Section 32 and, particularly, sub-section (2) thereof. The decision of this Court in case of Hindustan Petroleum Corporation Ltd. [1990 (7) TMI 44 - BOMBAY HIGH COURT] would not change this position. The deeming infection provided under sub-section (1) of Section 44BB of the Act, relates to the profits and gains of an assessee arising out of a business and is not directly connected with or corelated with the non-obstinate clause with which, the said sub-section begins, ruling out any conflict with the provisions contained in Sections 28 to 41 of the Act. - Appeal dismissed Issues:1. Whether the Tribunal was justified in rejecting the claim for set off of unabsorbed depreciation while computing income under section 44BB of the ActRs.2. Whether the Tribunal was justified in restoring the issue of set off of unabsorbed business loss in computing income under section 44BB of the ActRs.Analysis:Issue 1:The Appellant, a partnership firm engaged in the oil business, claimed set off of unabsorbed depreciation against current year's income under section 44BB of the Income Tax Act, 1961. The Assessing Officer rejected the claim, leading to an appeal before the Tribunal. The Tribunal upheld the rejection, stating that the computation under section 44BB would override section 32 of the Act. The Appellant contended that the Tribunal erred in its interpretation, citing a previous court decision. The Appellant argued that the legislative intent did not disallow the benefit of carrying forward unabsorbed depreciation. The Revenue opposed the appeal, emphasizing the clarity of section 44BB. The High Court analyzed the provisions of section 44BB, highlighting that an eligible assessee can opt for lower profits and gains under sub-section (3) by maintaining proper accounts. The Court concluded that the legislative intent was clear in excluding section 32(2) while computing profits under section 44BB. The Court noted previous decisions supporting this view and dismissed the appeal.Issue 2:Regarding the restoration of the issue of set off of unabsorbed business loss, the Tribunal accepted the Appellant's contention but remanded the computation to the Assessing Officer. The Appellant challenged this direction, which was the subject of the second question raised in the appeal. The High Court, after considering the arguments and perusing the documents, found no reason to interfere with the Tribunal's direction. The Court upheld the Tribunal's decision to remand the issue for fresh computation, as per the provisions of the Act.In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decisions on both issues. The judgment provided a detailed analysis of the provisions of section 44BB and the legislative intent behind the computation of profits and gains for eligible assesses, emphasizing the exclusion of section 32(2) in such calculations.