TaxTMI 
TaxTMI 
2013 (5) TMI 152
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....sent case? 3. Whether on the facts and circumstances of the case benefit of section 80HHC of the Act can be claimed on the total income after deduction of unabsorbed losses and unabsorbed depreciation or otherwise?" 2. The assessee is a limited company and insofar as the present appeal is concerned, is aggrieved by the order of the Tribunal in taking the view that the Appellate Commissioner had committed an error in allowing the appeal of the assessee and to hold that the benefit of deduction claimed by the assessee under section 80HHC of the Act could not have been allowed before setting off the accumulated unabsorbed depreciation of the earlier years. 3. The brief facts insofar as the question in issue is concerned is that the assessee had export business and manufacturer of tyres and exports some part of its production. It is in respect of the export turnover, the assessee had put forth a claim for deduction from out of its assessable income under the provisions of section 80HHC of the Act. 4. The assessee had quantified the benefit available to the assessee under section 80HHC of the Act for the accounting period relevant for the assessment ....
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....is inapplicable to the facts of the present case; that the Judgment of the Supreme Court was rendered in IPCA Laboratory Ltd.'s case (supra) in the context of the assessee having two activities of export and as to whether the assessee should set off the losses, if any, incurred in one of the activity before arriving at the profit attributable to exports for the purpose of deduction under section 80HHC of the Act. 10. It is submitted that in the present case, the assessee's activity is only one and the assessee has made profit from out of its export business and therefore the questions examined in IPCA Laboratory Ltd.'s case (supra) really does not cover the case of the assessee. 11. Apart from this, Sri Shankar, learned counsel for the appellant - assessee also submits with reference to the provisions of section 32 of the Act which provides for allowing depreciation allowance and also provides for carry forward of unabsorbed depreciation in any given year for want of commensurate profits to the assessee in that year and that the section had undergone a change, in the sense, by Finance Act No.2/1996 with effect from 1.4.1997, it has come to be amended. 12. It is submitted t....
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....at in the case of the assessee though gross total income is brought down to 'Nil' because of the brought forward unabsorbed depreciation of the earlier years for arriving at this figure, profits attributable to exports having already been factored, there is profit from export activity and therefore the assessee is entitled for claiming deduction. 17. On the other hand, with reference to the Judgment of the Supreme Court in the case of A M Moosa v. CIT. particularly to paragraph-12, submission is that the Supreme Court had rejected the plea that the word 'profit' in section 80HHC[3][c] of the Act would not include losses and if there are any losses, they are to be ignored. On such premise, it is submitted that the losses cannot be factored and on the same logic carried forward unabsorbed depreciation, but only profit is to be ascertained and given benefit as per section 80HHC of the Act. 18. On the other hand, appearing on behalf of the revenue, Sri E R Indra Kumar, learned senior, counsel, would vehemently urge that the questions are not res integra; that the Judgment of the Supreme Court in IPCA Laboratory Ltd.'s case (supra) did cover the issue; that the ratio of the decisi....
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....that unabsorbed depreciation, unabsorbed business loss and unabsorbed investment allowance of the earlier years cannot be granted before deduction under section 80HHC of the Act; that provisions of section 80AB of Act cannot be applied while determining business profits under section 80HHC of the Act. 22. Sri Indra Kumar, learned senior counsel submits that the Madras High Court having expressly reversed the finding of the Tribunal in that case and present view being no different and applying the Judgment and ratio of the Supreme Court in IPCA Laboratory Ltd.'s, Shirke Construction Equipment Ltd.'s and A.M. Moosa's cases (supra), and as applied by the Madras High Court, the present appeal of the assessee should be dismissed. 23. However, Sri Shankar, learned counsel for the appellant - assessee would point out that the decision of the Madras High Court related to assessment year 1994-95 i.e., prior to the amendment by Finance Act, 1996 and therefore that decision cannot be applied to the present case. 24. It is in this background and in the wake of the submissions made by learned counsel for the assessee and the revenue, we are required to examine the questions. 25. The....
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....earned counsel for the appellant has taken us through history of provision of section 32 of the Act i.e., providing for depreciation and that as to how a deeming provision was not available for the assessment year in question, we are of the view that this really cannot have any bearing on the question that we are considering for the simple reason that in arriving at the income, in the sense, whether total income, gross total income or taxable income, so long as the unabsorbed losses of the earlier years permitted to be carried forward and unabsorbed depreciation allowance of earlier years brought forward are permitted to be set off against the profits of the year in question, that is determinative of the question of availability or otherwise of the income against which the assessee can claim a deduction under section 80HHC of the Act or for that matter, under any other section of Chapter VI-A of the Act. 30. Section 32 of the Act deals with the manner of allowing depreciation allowance and also provides for taking forward unabsorbed depreciation allowance of any year. Whether such brought forward depreciation of earlier years is treated as depreciation of the current year by fic....
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....he Act and as expressly defined in section 2[45] of the Act. In arriving at the total income even as per the provisions of the Act, depreciation is a factor which is always to be taken into consideration and is in no way regulated or controlled by the provisions of section 80HHC of the Act. 33. In the present situation, we find that the assessee did have unabsorbed allowance of the earlier three assessment years and the benefit of section 80HHC of the Act can be claimed only as against total income of the assessee for the current year as determined after allowing for the absorption of unabsorbed depreciation allowance of the earlier years against the profits of the assessee for the year. 34. Though Sri Shankar, learned counsel for the appellant points out to the language of section 80HHC[1] of the Act to submit that deduction is allowable in computing the total income, it cannot be said that section 80HHC[1] of the Act either control or regulate the computation of total income, but can be a factor for claiming the benefit under section 80HHC of the Act from out of the total income and apart from this, the more important provision of section 80AB of the Act which had come in f....