COMMISSIONER OF INCOME TAX TAMIL NADU I MADRAS Vs. VISWAS FOOTWEAR COMPANY LIMITED A 2 III PHASE GUINDY INDUSTRIAL ESTATE CHENNAI

JUDGEMENT

(1.) THE vexed substantial question of law, as raised by the revenue, arises for consideration is, "whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that deduction under section 80hhc shall be granted before setoff of the unabsorbed depreciation, unabsorbed business loss and unabsorbed investment allowance of the earlier years before grant of depreciation ?" under the following facts and circumstances of the case.

(2.) 1. The relevant assessment year is 1996-97. The assessee is an exporter of leather footwear. Originally, a'nil'return of income was filed by the assessee and the assessment was completed under Section 143 (3) of the Income Tax Act, 1961 (in short'the Act') on a total income of rs. 3,18,715/-, which was reduced to'nil'after giving setoff of the carried forward loss for the assessment year 1993-94. Later, finding that the assessee has claimed excess deduction resulting in escapement of income, assessment was reopened by issuing notice under Section 148 of the Act. In response to this, a return of income was filed on 12. 6. 2001 and the assessing officer, by his order dated 14. 3. 2002, held that if the assessee has suffered loss under any other business or has carried forward the business loss, unabsorbed depreciation, etc. , deduction under section 80hhc, though worked out on profit of the year, would be restricted to gross total income and hence, the assessee is not entitled to any relief. The said view of the assessing officer was also, on appeal by the assessee, confirmed by the Commissioner of Income-tax (Appeals), by his order dated 3. 10. 2002. 2. 2. Aggrieved by the same, the assessee went on further appeal before the Appellate Tribunal and the Tribunal, by order dated 21. 7. 2003, after considering the provisions of section 80 HHC (3) of the Act and various decisions of this Court, held the issue in favour of the assessee holding that the deduction under section 80hhc should be granted before setting off the unabsorbed depreciation, unabsorbed business loss and unabsorbed investment allowance of the earlier years. Hence, the present appeal by the revenue raising the substantial question of law, referred to above.

(3.) 1. That apart, the view taken by the Bombay High Court in Commissioner of Income-tax v. Shirke Construction Equipments Ltd. [ (2000)246 I. T. R. 429 (Bom.)], which is relied upon by the assessee in the case of asvini Cold Storage and in the case of Sharon Vaneers P. Ltd. , referred supra, has now been reversed by the Apex Court in the recent decision reported in [ (2007) 291 I. T. R. 380 (SC)], wherein the Apex Court has held as follows:- ". . Section 80ab of the Income-tax Act, 1961, specifying that profits are those as determined for the purpose of the Act, will apply for determining profits from export business for the purposes of the deduction under section 80 HHC. . . In determining business profits for the deduction under section 80 HHC, the unabsorbed business losses of earlier years under section 72 should be set off. "