COMMISSIONER OF INCOME TAX vs RAJASTHAN CO-OPERATIVE SPINNING MILLS LTD.

B. R. ARORA, J. :

The Tribunal, Jaipur Bench, Jaipur for the asst. yr. 1975-76, at the instance of the Revenue, has referred the following question of law for the opinion of the High Court under s. 256(1) of the IT Act :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in confirming CIT(A)s direction that the amount of 20% has to be calculated with reference to the profit and loss account of the assessee and deductions on account of depreciation, initial or additional depreciation, development rebate, investment allowance, adjustment on account of unabsorbed depreciation, additional depreciation, investment allowance, development rebate etc. are not to be adjusted at all and agreeing with the ITO in allowing deduction under s. 80HH with reference to profit as per profit & loss account of the assessee. They further erred in quashing the order passed by the CIT for asst. yr. 1980-81 ?"

The identical question came up for consideration before the Division Bench of this Court in DB IT Ref. No. 1 of 1991 Commissioner of Income Tax Vs. Vishnu Oil and Dal Mills, and the Division Bench of this Court answered the question as follows :

"If we read s. 80HH with s. 80AB of the Act then it is very much clear that for the purpose of determination of the relief under s. 80HH of the Act, 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 s. 80HH will be the net income as computed in accordance with the provisions of the Act and not the gross income."

For the reasons given in our judgment in Vishnu Oil Mills case (supra), we are of the opinion that the learned Tribunal was not justified in confirming CIT(A)s direction that the amount of 20% has to be calculated with reference to the profit and loss account of the assessee and deductions on account of depreciation, initial or additional depreciation, development rebate, investment allowance, adjustment on account of unabsored depreciation, additional depreciation, investment allowance, development rebate, etc., are not to be adjusted at all and the learned Tribunal was not right in agreeing with the ITO in allowing deduction under s. 80HH with reference to profit as per profit & loss account of the assessee. The income eligible to deduction under s. 80HH will be the net income as computed in accordance with the provisions of the Act and not the gross income.

Consequently, the reference is answered in favour of the Revenue and against the assessee.