TaxTMI 
TaxTMI 
2008 (9) TMI 10
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.... representative before the Assessing Officer. Details were sought and clarifications were supplied by the assessee. The net result was that with regard to issue, whether in calculating deduction under Section 80 IB and Section 80 HHC the assessee had deducted depreciation from profits and gains derived from such businesses - it was revealed that the assessee's six (6) industrial units at Baddi, which are eligible for deduction under Section 80 IB, no depreciation had been provided for in determining profits and gains eligible for deductions under Section 80 IB while, with regard to all other industrial units of the assessee depreciation had been charged. 2.3 It was also noticed that similarly, in the case of deduction under Section 80 HHC deduction had been claimed without deducting depreciation while arriving at eligible profits and gains in terms of the said section. 2.4 The Assessing Officer after a detailed discussion, and specially, after noticing the judgment of Supreme Court in the case of CIT vs. Mahindra Mills Ltd., 243 ITR 56 came to the conclusion that depreciation is a statutory allowance and even if the Assessee has not furnished the particulars, it is open to th....
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...., Assessee had an option to claim depreciation under Section 32 of the Act, and that, it cannot be thrust on the Assessee while determining the eligible profits and gains for the purpose of ascertaining the amount deductible under Section 80 IB and 80 HHC. 1st contention 7. In so far as the first contention is concerned, according to us, the submission is thoroughly misconceived. The ITAT has, after considering the applicability of the decision of the special bench in the case of Vahid Paper Converters (supra), come to the conclusion that the ratio of the said decision is squarely applicable to the facts of the instant case. That being so, in our view, the ITAT had no choice but to pay obeisance at the altar of judicial discipline and abide by the decision of the larger bench. The submission that the ITAT ought to have followed the decision of a co-ordinate bench in the teeth of the decision of a larger bench is wholly untenable as it would amount closing one's eyes to the exceptions to the principle of consistency ? one such exception being; that it need not be followed where a decision is passed in ignorance of a decision of a bench of a greater numerical strength or, of a hig....
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....of the Act to mean any financial year which immediately precedes the assessment year. The expression 'total income' is in turn defined under Section 2(45) of the Act. The said section defines 'total income' to mean total amount of income referred to in Section 5, computed in the manner laid down in the Act. The scope of 'total income' is provided under Section 5 of the Act. Section 5, inter alia, provides that the total income of any previous year of a person who is a resident will include all income derived from any source which is, received or is deemed to have been received in India by or on behalf of such person ; or accrues or arises or is deemed to accrue or arise in India or, even that, which accrues or arise outside India. Similarly, sub-Section (2) of Section 5 of the Act provides that total income of any previous year of a person who is 'non-resident' is that, which is, received or deemed to be received in India or, that which accrues or arises or is deemed to accrue or arise to a 'non-resident' in India during such year. The indicia for a person to be held as 'resident' in India is contained in Section 6 of the Act. Section 9 of the Act is a deeming section which provide....
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....e full effect to depreciation allowance as provided in sub-Section (1) in any previous year, owing to the fact that there are no profits or gains chargeable for that previous year, or owing to the fact that profit or gains chargeable being less than the depreciation allowance then, the Assessee can carry forward unabsorbed depreciation subject to the provisions of sub-Section (2) of Section 72 and sub-Section (3) of Section 73 of the Act. Sections 30, 31 and 32 (A) to 35(E) provide for rebates, allowances and deductions under various heads. Section 36 provides for certain 'other deductions' specified therein while, computing the income referred to in Section 28. Section 37 of the Act is a residuary head whereby, any expenditure which, not being in the nature of a capital expenditure or a personal expense of the assessee but being otherwise laid out or expended fully and exclusively for the purposes of business or profession is allowed to be deducted in computing income chargeable under the head 'Profits and gains of business or profession.' The other provisions mentioned in Chapter IV and provisions of Chapter V not being relevant for the issue at hand are not referred to her....
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....80 HHC a prescribed percentage of deduction is allowed while computing the total income of the assessee on the profits and gains derived by the assessee from the export of such goods or merchandise. Similarly, under Section 80 IB an Assessee is allowed a deduction in computation of his total income of a prescribed percentage of his profits and gains derived from industrial undertakings which are defined as eligible businesses under sub-Sections (3) to (11) and (11A) of Section 80-IB, for such assessment years as provided therein. 10. A conjoint reading of the provisions of the Act would show that Chapter VIA of the Act refers to special types of deductions available to the assessee while computing his total income. Section 80A(1), referred to herein above, clearly sets out that in computing the Assessee's total income there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter VI-A deductions specified in Section 80 (C ) to 80(U). The deductions sought by the assessee under Section 80-IB and 80 HHC therefore are required to be allowed in computing the total income of the assessee. Section 80-B(5) in turn, as noticed above, ....
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....ing to us important to bear in mind the scheme of the Act which envisages that, while computing normal profits which does not involve relief by way of special deduction provided for under Chapter VI-A of the Act, an Assessee is entitled to opt out of a claim for depreciation allowance. In other words, the Assessee can choose to declare and pay tax on a greater amount of income. Where, however, the Assessee seeks to claim 'special deductions' under Chapter VI-A of the Act, there is no option available to the assessee, but to provide for depreciation allowance while calculating the eligible profits and gains on which deduction is permissible under the provisions specified in Chapter VI-A. In this context, as discussed also by the authorities below, the decision of the Supreme Court in the case of CIT vs. Mahindra Mills Ltd. (2000) 243 ITR 246 is clearly distinguishable for following reasons:- 13.1 Firstly, the decision in Mahindra Mills Ltd. (supra) pertained to assessment years 1974-75 when, Section 34 was present on the Statute book. Briefly, Section 34 provided that in order to claim depreciation under Section 32 of the Act, the Assessee was required to give particulars a....
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....be set off before calculating the deduction under Section 80E. It is not possible to accept the view that section 72 has no bearing on, or is unconnected with, the computation of the total income of an assessee under the head 'Profits and gains of business or profession'. Actually, section 72(1) provides that where the net result of computation under the head 'Profits and gains of business or profession' is a loss and such loss cannot be or is not wholly set off against the income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off, subject to the other provisions of the Chapter, shall be carried forward to the following assessment year and shall be set off against the profits and gains, if any, of any business or profession for that assessment year. Therefore, section 72(1) has a direct impact upon the computation under the head 'Profits and gains of business or profession'. In other words, the correct figure of total income, which is otherwise taxable under other provisions of the Act, cannot be arrived at without working out the net result of computation under the head 'Profits and gains of business or professi....
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....Therefore, net profit will have to be computed in accordance with the provisions of the Act. The argument of the assessee is that in view of the judgment of the Supreme Court in Mahendra Mills' case (2000) 243 ITR 56, it is open to the assessee not to claim depreciation allowance under section 32 and consequently it is argued that 20 per cent rate of deduction should be applied to Rs.100 in the above illustration, without taking into account the depreciation. We do not find any merit in this argument. The scheme of section 4 and section 5 of the Income-tax Act does indicate that income-tax is a tax in respect of income computed as per the provisions of the Act. There is a distinct dichotomy between cases of computation of normal income under the Act de hors Chapter VI-A and computation of taxable income where the assessee claims the benefit of deduction under Chapter VI-A because the Legislature has intended that these special deductions should be restricted to the profits derived from a newly established undertaking. To give an illustration, export profits under section 80HHC are required to be restricted to the receipt of foreign exchange. If this object is kept in mind, th....