TaxTMI 
TaxTMI 
2000 (8) TMI 266
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....that deductions under s. VI-A had to be allowed only after considering brought forward losses, depreciation, investment allowances, etc. Hence aggrieved, the assessee is in appeal before us. 3. We have heard the arguments of both the sides and also perused the records. We have also gone through the written submissions of the learned authorised representative of assessee as also the cited decisions placed on record. 4. The assessee has raised only one ground of appeal disputing the allowance of special deduction under ss. 80HHC and 80HHE of the IT Act, 1961, after deducting the brought forward losses and applying the provisions of s. 80AB and s. 80B(5). The learned authorised representative of assessee has contended that the learned CIT(A) has relied on Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC) but the same does not apply in the instant case, nor is the case covered by the decision dt. 13th Nov., 1995, of Hon'ble Rajasthan High Court in the case of CIT vs. Vishnu Oil & Dal Mills (1996) 132 CTR (Raj) 132 : (1996) 218 ITR 71 (Raj) passed in DBIT Ref. No. 1 of 1991. He has contended that the decision of the Hon'ble apex Court in ....
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....here the deeming provisions is there and that after allowing other deductions including loss, etc., the income of that nature will be worked out regarding which special deduction is to be given. He has contended that s. 80HHC does not so refer. He has contended that in s. 80HHC it is the profit computed in accordance with this section regarding which special deduction is to be given. He has contended that there is material difference in the language of the two sections. He has contended that even the format prescribed for ss. 80HH and 80HHC are quite different from each other. He has also contended that s. 72 of IT Act does not fall within Chapter IV but falls within Chapter VI and so s. 72 does not come in computation under s. 80HHC. He has accordingly contended that the deductions both under ss. 80HHC and 80HHE be allowed before deduction of brought forward losses. 5. As against this the learned Departmental Representative of Revenue has contended that the judgment of Hon'ble Rajasthan High Court in the case of M/s Vishnu Oil & Dal Mills is directly on the point involved in this appeal. He has contended that s. 80 contains incentive provision which applies when there is real i....
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....uoted hereunder: "80HHC(1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel in which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof." "80HH(1)- Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee a deduction of the profits derived by the assessee from the export of such goods or merchandise......" 8. In (2000) 158 CTR (AP) 119, the Hon'ble Andhra Pradesh High Court has held that special deduction under s. 80HHC is to be allowed from current year's profit before adjusting unabsorbed depreciation and business loss carried forward from earlier years. It has been held that deduction under s. 80HHC is to b....
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....f) income from other sources. 10. We may illustratively express the analysis of the working out under s. 80HHC with reference to s. 80AB so as to make the nicety of the issue, involved in two distinct interpretations, self-explicable and to facilitate an easy understanding. Suppose the export profits are of Rs. 7 lakhs and carry forward past losses and depreciation are of Rs. 5 lakhs. As per the view taken by Hon'ble Andhra Pradesh High Court, the special deduction under s. 80HHC will be granted on Rs. 7 lakhs without deducting carry forward past losses and depreciation. As per the other view based on 80AB, the deduction will be allowed on Rs. 2 lakhs (Rs. 7 lakhs minus Rs. 5 lakhs). Even if the carry forward past losses are of Rs. 8 lakhs, as per the Hon'ble Andhra Pradesh High Court, special deduction under s. 80HHC will be allowed of Rs. 7 lakhs whereas according to the other view, no special deduction will be allowed as GTI will be negative figure after adjusting past carry forward Rs. 8 lakhs. 11. The view taken by the Hon'ble Andhra Pradesh High Court, in its decision referred to above, cited by the learned authorised representative of assessee, seems to be not in confo....
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.... of that nature, as computed in accordance with the provisions of this Act, shall alone be deemed to be the amount of income of that nature (export profit in the case in hand) which is derived by assessee and which is included in GTI. The Hon'ble High Court has clearly held that unabsorbed losses and depreciation will have to be deducted first before arriving at the figure that would be eligible for such deduction under s. 80HH or any other section under this head "C" within Chapter VI-A. 13. We may also consider one more contention of the learned authorised representative of assessee being to the effect that for computing deduction under s. 80HHC, s. 80AB would not have any application and such computation has to be done with reference to the current year income i.e. business income computed before setting off the carry forward losses. Explaining further, he submitted that the gross total income (GTI) shall be computed after setting off the brought forward losses and allowances and while allowing the deduction under s. 80HHC as computed above, the claim shall be restricted to the GTI as per the provisions of s. 80AB. In support of this contention, he referred to the "Guidance N....
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....0HHG will be computed with reference to Rs. 50 lakhs. Assuming that in the present cases, manufactured goods are exported, the deduction shall be: 50 lakhs x 200 lakhs/400 lakhs = 25 lakhs But since the income under the head "profits and gains of business or profession" after setting off the brought forward losses and allowance is Rs. 20 lakhs, the deduction shall be restricted to Rs. 20 lakhs." 14. It may be observed that the views expressed by the Institute are in no way different from the decisions of Hon'ble Supreme Court as well as Hon'ble jurisdictional High Court relied upon in our order above so far as the applicability of provisions of s.80AB while allowing the deduction under s.80HHC is concerned. The only issue which remains to be considered is as to whether the computation of deduction under s. 80HHC is also restricted by s.80AB. In this respect, we may analyse the provisions of s. 80AB, for the sake of clarity and better understanding as under: (a) Where any deduction is required to be made or allowed under any section included in this chapter under the heading "C-deductions in respect of certain income" in respect of any income of the nature specified in t....