TaxTMI 
TaxTMI 
2006 (8) TMI 125
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....e of the assessee. Although the industrial operations are stated to have been commenced in the assessment year 1988-89, the assessee, however, did not claim the benefits under section 10B in the assessment years 1988-89, 1989-90 and 1990-91. On the other hand, it claimed the said benefits for a consecutive period of 5 years starting from the assessment year 1992-93. In the assessment year 1994-95, the assessee is stated to have other income beyond the profits and gains of the export-oriented commercial unit. Unabsorbed depreciation available to the assessee in the assessment year 1988-89 was carried forward to this year and was claimed by the assessee to be adjustable against the income from other sources, thereby it reduced for assessment purposes at nil. The Assessment Officer, in the assessment order passed on March 17, 1995, accepted the above claim of the assessee and assessed the total income at nil. The Commissioner of Income-tax, exercised his power under section 263 and passed an order on March 25, 1996. He considered the above action on the part of the Assessing Officer of adjusting the brought forward unabsorbed depreciation against the income from the sources of the ass....
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....he brought forward balance representing unabsorbed depreciation relating to the assessment years 1988-89 to 1990-91 and unabsorbed investment allowance relating to the assessment years 1989-90 and 1990-91 were carried forward instead of being adjusted against profits from the undertaking. A reply was obtained and thereafter the Commissioner has chosen to hold that it is a fit case for taking action under section 263 of the Income-tax Act to set right the loss of revenue caused by the impugned orders of the Assessing Officer. Both the assessments are revised to take into account as proper deductions, the unabsorbed depreciation and investment allowance awaiting adjustment in each of these years. The Assessing Officer should recompute the income exempted under section 10B and the income, if any, liable to tax in the normal course. Against this order, a second appeal was filed and the Tribunal has chosen to hold that the order passed under section 263 is bad in law. To come to this conclusion, the Tribunal has chosen to look into section 10B and also section 32 in the matter of depreciation and in the matter of calculation. Section 10B is a special provision in respect of newly est....
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....me of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that in the case of a person not ordinarily resident in India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. Chapter III provides for incomes which do not form part of total income. Chapter IV provides for computation of total income. Section 32 of the Income-tax Act provides for deduction on depreciation. Section 32(2) provides for adjustment for subsequent years. If we see section 10B, it provides for exemption of payment of tax with reference to profits and gains derived by 100 per cent, export-oriented undertakings. To arrive at a profit and gain, one has to necessarily take into consideration the total income in terms of ....
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....e Revenue as argued by the Department. The Tribunal has taken a narrow view of the matter without taking into consideration, the laudable object of exemption and at the same time providing for tax liability towards other liability. The interpretation has to be meaningful and acceptable and it cannot be against the intention of the legislation. Legislation never wanted the entire income to be exempted by taking advantage of section 10B of the Act. The approach of the Tribunal to our mind is incorrect and, hence, we find substance in the argument of the Revenue. Several case law have been placed before us by the parties concerned. Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120 (SC) deals with section 80AA of the Income-tax Act. In the said judgment, the Supreme Court has ruled that in so far as sub-section (1) of section 80M of the Income-tax Act, is concerned, the deduction required to be allowed under that provision is liable to be calculated with reference to the amount of dividend computed in accordance with the provisions of the Act and forming part of the gross total income and not with reference to the full amount of dividend received by the assessee.....
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.... the relief under section 80HH of the Act, the gross total income of the assessee has to be worked out after deducting unabsorbed losses and unabsorbed depreciation and the income eligible for deduction under section 80HH will be the net income as computed in accordance with the provisions of the Act ..." The Rajasthan High Court again in the case of CIT v. Surendra Textiles [2002] 258 ITR 387 ruled that: "... the gross total income of the assessee has to be worked out after deducting unabsorbed loss and unabsorbed depreciation and the income eligible for deduction under section 80HH of the Income-tax Act, 1961, will be the net income as computed in accordance with the provisions of the Act and not the gross income." The Bombay High Court in the case of Indian Rayon Corporation Ltd. v. CIT [2003] 261 ITR 98 has considered the depreciation in the matter of special deduction. In the said case, the following reference was made: "Whether, on the facts and in the circumstances of this case, the Tribunal was justified in coming to the conclusion that depreciation allowance ought to be deducted while computing the total income for the purposes of deduction under section 80HH?"....