Income Tax Appellate Tribunal - Ahmedabad
Vahid Paper Converters And Ors. vs Ito And Ors. on 9 November, 2005
Equivalent citations: [2006]98ITD165(AHD), [2007]289ITR10(AHD), (2006)100TTJ(AHD)532
ORDER
1. The President, Income-tax Appellate Tribunal vide order Under Section 255(3) of the I.T. Act, 1961 dated 07-06-2005 constituted a Special Bench for hearing all the aforesaid appeals to consider the following question.
Whether, the depreciation which is though allowable but not claimed in the return for normal computation of Income has to be allowed while computing the deductions under Chapter VI-A viz., 80HH, 80IA, 80IB, etc. of an Industrial Undertaking.
2. The facts in all the above referred cases are more or less similar. Therefore, we shall discuss herein detail the facts in the case of Vahid Paper Converters vide ITA No 1686/Ahd/2004. The assessee is a partnership firm engaged in the manufacturing of paper, The assessment year under consideration is Asstt.Year 2001-2002. The assessee filed the return of income on 15-10-2001 declaring NIL income. It has a manufacturing unit located in the Union Territory of Daman, which is a Backward Union Territory as specified in Schedule VIII of the IT Act. The income derived from the manufacturing unit is eligible for deduction Under Section 80IB of the Act @ 100% of the income of such manufacturing unit for a period of five years and then restricted to 25%. The year under consideration is the fifth year of manufacturing activity. The assessee did not claim depreciation on fixed assets for the year under consideration though it has claimed the depreciation for the earlier years except for the Asstt.Year 2000-2001. In the opinion of the AO, by not claiming depreciation it has not forgone its right to claim the depreciation and started claiming depreciation from sixth year on the original cost of the assets when the deduction is limited to 25% of the eligible income of the assessee. By adopting this modus operand! he held that the assessee tried to reduces the tax liability from sixth year. This type of modus operandi, if accepted will be an injustice to the honest tax payers, who are still claiming depreciation and showing true state of affairs as far as their income of industrial undertaking is concerned. The assessee, by not claiming depreciation is actually planning the tax avoidance leading to tax evasion. It is a type of colorable devices by using dubious methods and cannot be accepted in view of the finding given by the Hon'ble Supreme Court in the case of Mc Dowells & Co. Ltd. v. Commercial Tax Officer 154 ITR 148 (SC). Considering the ratio laid by the Supreme Court in the case of Cambay Electric Supply Industrial Co. v. CIT 113 ITR 84 (SC) and the decision of Hon'ble Bombay High Court (Jurisdictional High Court for the Union Territory of Damari) in the case of Indian Rayon Corporation Ltd. v. CIT 261 ITR 98 (Bom), the AO recalculated the income of the Industrial Undertaking eligible for deduction Under Section 80IB by allowing depreciation for the year under consideration.
3. The CIT(A) observed that the applicability of the provisions of the Act must be the same for same class / classes of the assessees. If any benefit is given to some class / classes of the assessee, it should be given to them universally without any kind of difference. The method of computation of income should be the same for the assessees, who are eligible and claiming such deduction. But this is not being followed by certain assessees. While computing eligible income of such Industrial Undertakings, certain assessees are claiming depreciation to arrive at the total income of the Industrial Undertaking since inception but certain assessees (mostly firms and individuals) are not claiming depreciation in the guise tax planning for arriving at the total income of their Industrial Undertakings. This modus operandi has been adopted by certain assessees since inception of the Industrial Undertakings and in some cases it was adopted after the decision of Mahindra Mills case of the Hon'ble Supreme Court. If this modus operandi is accepted, it will be a great injustice to the assessees who are following the words of the Act in right spirit. He further observed that the intention of legislature for allowing depreciation @ 100% of the income of such Industrial Undertakings for a period of five years to develop the industrial base in the backward areas like Union Territory of Daman. It was never been the intention of the Legislature to allow certain assessees to deceive the exchequer by avoidance of taxes by using dubious methods under the color of tax planning. This type of device is adopted by certain Industrial Undertakings run by individuals and firms because they are not required to prepare profit and loss account as provided for the companies in the Companies Act. As regards the Mahendra Mills's case, he observed is a case relating to Asstt.Year 1974-75, i.e. prior to 1-4-88. The section Under Section 32 under which the depreciation is allowable has been amended w.e.f. 1-4-88 and it was noticed by the Supreme Court in the judgment itself by stating that "section 32 has since been amended by Taxation Laws (Amendment and Misc Provisions) Act, 1986 w.e.f. April 1, 1988. However, answer to question remains of substantial importance a various matters are stated to be pending in the High Court relating to the assessment year prior to April 1, 1988". He therefore observed that the Supreme Court has decided the issue before them for the assessment year prior to 1-4-88 and this decision can not be applied for the assessment year starting from 1-4-1988 as not only the provisions of Section 32 have been amended but-the vital Section 34 has been omitted from the statute book w.e.f. 1-4-88. The Supreme Court has also referred to the Circular of the CBDT dated 31-8-65, which has no relevant after the omission of Section 34 from the Act w.e.f. 1-4-88 as furnishing of required particulars is not necessary after omission of Section 34 and amendment in Section 32 of the Act w.e.f. 1-4-88. The Hon'ble Supreme Court has also referred to Section 34 of the Act and Rule 5AA of the IT Rules both of which have since been deleted. He further observed that in the Mahendra Mills case it was held that the income under the head "profits and gains of business or profession" is chargeable to income tax Under Section 28 and income Under Section 29 is to be computed in accordance with the provisions contained in Sections 32 to 43A. The arguments that since Section 32 provides for depreciation, it has to be allowed in computing the income of the assessee cannot in all circumstances be accepted in view of the bar contained in Section 34. If Section 34 is not satisfied and the particulars are not furnished by the assessee, his claim for depreciation Under Section 32 cannot be allowed. Section 29 is thus to be read with reference to other provisions of the Act. It is not itself a complete code. The Supreme Court was thus of the view in Mahindra Mills case that depreciation cannot be allowed only because of the bar contained in Section 34. Even the Bombay High Court in Indian Rayon Case has considered the Mahendra. Mills case and opined that it has no application, He also observed Hunt in Mahendra Mills case the issue regarding special deduction was not there. The appellant, therefore, can not derive support from the decision of the Hon'ble Supreme Court in Mahendra Mills case. He then referred to the decision of Cambay Electric Supply Industrial Co. (supra)and observed that though, the facts of above case were difrerent but the ratio laid down by the judgement cannot be overlooked. It has been held that "The important words in Section 80E(1) are those that appear in parenthesis, viz." as computed in accordance with the other provisions of the Act", and, since it is income from business, the same, in view of Section 29, has to be computed in accordance with Section 30 to 43A", It would include Section 32 under which the depreciation is allowed. In Mahendra Mills case, the issue regarding special deduction under Chapter VIA was absent whereas in Cambay Electric Supply Industrial Co. (supra), the issue involved was computation of income where special deduction was claimed. The contention of the counsel is thus not convincing and acceptable. He then referred to the decision of Bombay High Court in Indian Rayon Corporation Ltd. Wherein it was held that "profits and gains of a newly established undertaking therefore, have got to be computed as per provisions of Section 29 to Section 43A and if the assessee claims relief under Chapter VIA of the Act, then it is not open to the assessee to disclaim depreciation allowance. This is because Chapter VIA is an independent code by itself for computing these special types of deductions. The jurisdictional High Court thus decided that the assessee cannot exclude depreciation allowance while computing profits derived from a newly established undertaking. Referring to Explanation 5 to Section 32(1) effective from 1-4-02 which starts with the words "For removal of doubts" which normally implies that the explanation is only clarificatory in nature, the Board vide Circular No. 3/2004 dated 12-2-2004 which though is on Section 80HHE(1) but using the same words "for removal of doubt", and the decision of Hon'ble Kerala High Court in CIT v. Kerala Electric Lamps Works Ltd. 261 ITR 721 (Ker). The Explanation 5 he held that it would thus be clarificatory in nature and retrospective in operation. Considering the above and relying on the decision of the Bombay High Court, he held that it is not open to the assessee to disclaim depreciation while computing the profits derived from its Industrial Undertaking. In view of this, he upheld the finding of the AO in allowing depreciation for working out the total income.
4. The matter came up before the Division Bench, Ahmedabad which found that there were conflicting views of the Tribunal on this issue. The cases which are approving the view that depreciation cannot be enforced upon the assessee for computing Chapter VI-A deductions are, i) Medley Pharmaceuticals v. ITO - 71 TTJ 328 (Mum); ii) Beta Nephthol Pvt. Ltd. v DCIT - 50 TTJ 375 (Indore) and iii) Plastiblends India Ltd. v. ITO [ITA No. 4542/Mum/99] dated 10-2-2004. The case taking a contrary view in favour of the Revenue is Mandhana Exports Pvt. Ltd. 83 ITD 306 (Mum). Therefore, the Division Bench referred the matter to the Hon'ble President, ITAT for constitution of the Special Bench. This is how the Special Bench is constituted.
5. In all the appeals under consideration the assessment year under consideration are Asst. Year 1999-2000 to 2002-2003. Therefore, we are concerned with the law applicable for the period 1-4-1988 to 31-3-2002 because there was an amendment in the provisions relating to grant of depreciation by the Taxation Laws (Amendment and Misc. Provisions) Act, 1986 with effect from 1-4-1988 whereby Section 34 was omitted. Further the Finance Act, 2001 inserted Explanation 5 to Section 32 with effect from 1-4-2002.
6. At the time of hearing before us, Shri S.N. Soparkar, learned Senior Advocate appeared on behalf of M/s Vahid Paper Converters, Daman. He stated that depreciation is choice of the assessee prior to omission of Section 34 by Taxation Laws (Amendment and Misc Provisions) Act, 1986, with effect from 1-4-1988. As per Section 34 the assessee was required to give necessary information to be eligible for depreciation. In view of Supreme Court decision in Mahendra Mills 243-ITR-56 (SC) there is no dispute that prior to 1-4-1988, the assessee was not entitled to depreciation if the particulars as required by Section 34 were not furnished. He stated that though Section 34 is omitted with effect from 1-4-1988, however, there is no change in the legal position with regard to choice of the assessee to claim or not to claim depreciation. The legal position has changed only with effect from 1-4-2002, when Explanation 5 to Section 32 has been introduced by the Finance Act 2001 providing for allowability of depreciation whether or not the assessee claim the deduction in this regard. The learned counsel contended that the assessment year under consideration is Asstt Year 2001-2002 and therefore, Explanation 5 to Section 32 which is made effective from 1-4-2002 would not be applicable. In support of his contention that to claim or not to claim depreciation is choice of the assessee, he has relied upon the decisions of Shri Someshwar Sahakari Sakhar Karkhana Ltd. 177-ITR-443 (Bom); Arun Textile Mills 192-ITR-700 (Guj); and Mahendra Mills 243-ITR-56 (SC)
7. He contended that in the above decisions, the principle that depreciation is choice of the assessee, has been laid down on two conditions: (i) It is assessee's privilege to claim or not to claim depreciation; and (ii) The assessee is required to furnish the necessary particulars so as to be eligible for depreciation. That after the omission of Section 34, the assessee cannot be denied deduction for depreciation for want of particulars. But so-far-as the right of the assessee to claim or not to claim depreciation is concerned, the same has not been affected. When it is a privilege of the assessee to claim or not to claim depreciation, by thrusting depreciation upon the assessee, the privilege of the assessee cannot be converted into liability. He further submitted that similar view is taken by the ITAT in the cases of Sial Sbec Bio-Energy Ltd. v. DCIT ITA No. 5461/Del/2003 (2004) 83-TTJ (Del) 866; Plastiblends (India) Ltd. 94-ITD-295 (Bom); and Uvifort Metaliser (2001) 73-TTJ 381 (AMD). It is submitted that the Gujarat High Court dismissed the Tax Appeal of the Revenue against the above decision of ITAT Ahmedabad Bench vide Income tax Appeal No 175 of 2001.
8. He stated that Explanation 5 to Section 32 is not retrospective. In support of his contention, he relied upon the decisions in CIT v. Sree Senhavalli Textiles P Ltd. 259-ITR-77 (Mad) and CIT v. Kerala Electric Lamp Works Ltd. 261-ITR-721 (Kerala)
9. The learned counsel further contended that the language of Sections 29 and Section 80AB are similar viz. for the purpose of computing deduction under Chapter VI-B, the income of the assessee is to be computed in accordance with the provisions of this Act before making any deduction under Chapter VI-B. That as per Section 29 also the income under the head "Profits and gains of business" is to be computed as per sections 30 to 43D. Under both the provisions the income is to be computed as per the computation provisions for computing the income under the head "Profits and gains of business", which include Section 32 Therefore, the different principle will not be applicable for computing the business income under the head "Profits and gains of business" and computing the income of the Industrial Undertaking for allowing deduction Under Section 80-IB. The computation of income of the Industrial Undertaking would be mirror image of the computation of "profits and gains of business". From the profits and gains of business, only the income which is not in the nature of income derived from Industrial Undertaking will be excluded and remaining income would be income derived from the Industrial Undertaking for computing deduction Under Section 80-IB. He reiterated that the profit cannot be differently computed for the purpose of Section 80-IB and one has to determine income of Industrial Undertaking on the basis of the computation of income of the business Under Section 29 of the Act.
10. The learned counsel further contended that whenever allowability of depreciation is made compulsory, the Legislature has separately provided in the section itself. In this regard he referred to Sections 10A, 10B, 44AD, 44AE, etc. Since there is no specific provision under Section 80-IB for allowability of depreciation, therefore, if the depreciation has been claimed by the assessee and it has been allowed while computing its business income, then only the same can be considered while computing the income of the Industrial Undertaking.
11. The learned counsel referred to the decision of the Bombay High Court in the case of Indian Rayon Corporation Ltd. 261-ITR-98 (Bom) and stated that it was rendered on different facts. In that case, the assessee has claimed depreciation while computing its income under the head "Income from business" but contended that depreciation has to be excluded while computing its income from Industrial Undertaking. On the above stated facts, the Bombay High Court held that when the assessee is claiming depreciation for computing its business income, the same has also to be considered for computing its income from Industrial Undertaking. In the case under appeal before us, the assessee has not claimed depreciation while computing its business income and, therefore, the above decision of the Bombay High Court would not be applicable. With regard to certain observation in the decision giving impression otherwise, he relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works P Ltd. 198-ITR-297 and contended that the observation of the Court has to be understood in the light of question before the Court. It is neither desirable nor permissible to pick a word or sentence from a judgment of the Court divorced from the context of the question under consideration and treat it to be complete law declared by the Court. He, therefore, contended that the decision of the Bombay High Court in the case of Indian Rayon Corporation Ltd. (supra) would be applicable only when the facts are identical and not otherwise. The learned counsel also referred to and distinguished the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. 113-ITR-84 (SC) and Metture Chemicals & Indl. Corporation 217-ITR-768 (SC). He also stated that the decision of the Tribunal Mumbai Bench in the case of Mandhana Exports P Ltd. 82-ITD-306 does not lay down the correct law. In view of above, he contended that the income of the Industrial Undertaking for the purpose of computing deduction Under Section 80-IB should be worked out without allowing depreciation which is not claimed by the assessee.
12. Shri S N Divatia, the learned counsel appeared for M/s Nissan Polyplast [ITA No. 2195/Ahd/04]. Apart from adopting the arguments advanced by Senior Advocate Shri S N Soparkar, he further submitted that the income of the Industrial Undertaking included in the gross total income is to be considered for computing deduction Under Section 80-IB. If the income included in the gross total income is without allowing depreciation to the assessee, the same has to be considered for the purpose of Section 80-IB. There cannot be separate computation of income for 80-IB. The learned counsel further submitted that even if two views are possible, the view which is favourable to the assessee, should be adopted.
13. Shri Ketan H Shah, who appeared for the assessee Siddh International [ITA No. 2520/Ahd/04] supported the contention that the claim of depreciation is optional and if the depreciation is not claimed by the assessee, the same cannot be thrust upon the assessee relying upon the following decision of the Tribunal in the case of Plastiblends India Ltd. v. ITO 94-ITD-295 (Mum).
14. Shri D.H. Vadodaria, who appeared for the assessees Packers India - ITA Nos.3258/Ahd/04 and Polynova Packers vide 3259/Ahd/04, submitted that omission of Section 34 was not to take away the option of the assessee but because, with effect from 1-4-1988 the concept of block of asset has come into operation, whereunder there was no necessity of furnishing the particulars of each asset. In view of block of assets, the provisions of Section 34 have become redundant and therefore, it was omitted. He further submitted that as per Section 80-AB of the Act, deduction is to be worked out on the income included in the gross total income. Therefore, whatever income is included in the gross total income, deduction under Chapter VI-A has to be allowed on such income. In support of his contention, he has relied upon the decisions in cases of Apollo Tyres Ltd. v. DCIT 43-ITD-464 (Cochin); CIT v. Milling Trading Co. Pvt. Ltd. 211-ITR-690 (Guj) and Cambay Electric Supply Industrial Co. Ltd. v. CIT 113-ITR-84 (SC)
15. Shri H.P. Shah, who appeared for the assessee M/s Abhishek Packaging Industries and others in ITA No. 3152/Ahd/04 and others, adopted the arguments advanced by Shri SN Soparkar, Senior Advocate and further relied upon the decisions in the cases of Medley Pharmaceuticals Ltd. 71.-TTJ-328 (Mum) and Gujarat State Fertilizers Co. Ltd. 68-TTJ-862 (Ahd). He reiterated that the gross total income computed under the head "Profits and gains of business" has to be adopted for allowing deduction under Chapter VI-A. There cannot be two separate calculations, one for business income and other for Chapter-VIA.
16. Shri SNL Agarwala, who appeared for some of the assessees mentioned in Cause Title, relied upon the decision of the Supreme Court in the case of Mahendra Mills 243-ITR-56. He submitted that the above decision of the Supreme Court would be squarely applicable for the purpose of computation of income for allowing deduction Under Section 80-IB. The option is with the assessee to claim or not to claim the depreciation. He further submitted that when the Legislature wanted to give different meaning to the normal profits and gains of business for computing deduction under Chapter VI-A, it has clearly provided in the relevant section. For example, Explanation (baa) to Section 80HHC(3) defines the words "Profits and gains of business" but when there is no separate definition of the words "Profits and gains of business" for the purpose of Section 80-IB, then the profit and gains as computed under the head "Profits and gains of business" has to be adopted. He also stated that for the purpose of computing deduction chapter VI-Ai profits and gains as computed under the Act is to be taken and not the commercial profit. In support of this contention, he relied upon the decisions in the cases of Cambay Electric Supply Industrial Co. Ltd. (supra); Distributors (Baroda) P. Ltd. 155-ITR-120. (SC); Indian Rayon Corporation Ltd. 261-ITR-98 (Bom); and Plastibends India Ltd. v. ITO (Mum) 94-ITD-295 (Bom). He further stated that whenever the Legislature wanted to allow the depreciation whether or not it is claimed by the assessee, it has been specifically provided under the Act. In this regard he referred to Sections 10A, 10B, 44AD, 44AE, etc. Since there is no similar deeming provision Under Section 80-IB, the depreciation, he submitted, cannot be thrusted upon the assessee. He further submitted that if two views are possible, the view which is in favour of the assessee should be adopted. In support of this contention, he relied upon the decisions of Vegetable Products Ltd. 88-ITR-192 (SC); and Thana Electricity Supply Ltd. 206-ITR-727 (Bom). He further submitted that in certain appeals, the AO initially accepted the computation of income of the Industrial Undertaking made by the assessee and has allowed deduction Under Section 80-IB as claimed. However, later on the AO rectified his order Under Section 154 and reduced the deduction Under Section 80-IB by 'thrusting upon the assessee the depreciation which was not claimed by the assessee. He contended that in any case the issue whether the AO can allow depreciation or not when it is not claimed by the assessee, is a debatable issue and, therefore, the same was out of purview of rectification Under Section 154. in support of this contention, he relied upon the decision of the Delhi High Court in the case of CIT v. Krishak Bharti Co-operative Ltd. 266-ITR-208 (Delhi).
17. Shri M.K. Patel, who appeared for the assessee M/s Cello Pens & Stationery [ITA No. 299/Ahd/05] has adopted the arguments advanced by the other counsels and has relied upon the decision of the Tribunal Mumbai Bench in the case of Plastibends India Lid. -(supra). He has also relied upon the decision of the Supreme Court in the case of Azadi Bachao 263-ITR-706 in support of his contention that it is the right of the assessee to minimize his tax liability.
18. The learned DR, on the other hand, submitted that the decision of the Supreme Court in the case of Mahendra Mills (supra) was applicable till 1-4-1988. He stated that in the above decision itself the Supreme Court has mentioned that the law laid down by them would be applicable till 1-4-88.
19. It is contended by the learned DR that the depreciation is not being claimed by the assessees for claiming higher deduction under Chapter VI-A. Therefore, it is not a case where the assessees are foregoing their privilege. On the other hand, by not claiming the depreciation, the assessees have tried to gain double advantage i.e. To claim higher deduction Under Section 80-IB and at the same time do not reduce the value of their assets so as to entitle them to claim higher depreciation when the period of allowability of deduction Under Section 80-IB or 80-IA which are permissible to the new Industrial Undertaking for a limited period is over. He contended that for computing deduction under Chapter VI-A, the depreciation has to be allowed. In support of this contention, he relied upon the decisions in Cambay Electric Supply Industrial Co. Ltd. (supra); Cadila Chemicals Pvt. Ltd. 259-ITR-692 (Guj); Indian Rayon Corporation Ltd. 261-ITR-98 (Bom); Vijay Industries 270-ITR-175 (Raj); Gautam Sarabhai. 129-ITR-133 (Guj); Metture Chemicals & Indl. Corporation 217-ITR-768 (SC); Mandhana Exports (supra) and Maha Laxmi Sugar Mills 160-ITR-829 (SC)
20. The learned DR also stated that the decision of the Mumbai High Court in the case of Sree Someshwar Sahkari Sakhar Karkhana Ltd. 177-ITR-443 as well as Jurisdictional High Court in the case of Arun Textiles 192-ITR-700 were not for computing income of the Industrial Undertaking for the purpose of Chapter VI-A. Moreover when the above decisions were delivered, Section 34 was applicable. Similar is the position with regard to the decision of the Supreme Court in the case of Mahendra Mills (supra). He further submitted that in Sections 10A, 10B, 44AD and 44AE, etc, there is a deeming provision for allowability of depreciation because there is no specific provision for separate computation of income in those sections as provided in Section 80-AB for allowing deduction under Chapter VI-A. He further-submitted that the provisions of the Statute are to be strictly construed and no violation should be made to the plain language of section. In support of this contention he relied upon the decision of the Supreme Court in the case of Peteon Engineering Construction Pvt. Ltd. v. CBDT 175-ITR-523. He stated that Section 32 use the word "shall" which means that providing of depreciation was mandatory, It became optional only because of Section 34 which provides for not allowing of depreciation unless the necessary details are furnished by the assesses. By the omission of Section 34 with effect from 1-4-88 the claim of depreciation has become mandatory even while computing the income under the head "Profits and gains of business". He also submitted that Explanation 5 to Section 32 is explanatory and therefore will have retrospective effect. In the Explanation itself it has been mentioned "for removal of doubt". These words clearly prove that insertion of Explanation is only explanatory. He, therefore, submitted that the orders of the AO in all the cases should be sustained.
21. In the rejoinder, Shri S N Soparkar, the learned Senior Advocate stated that the use of words "for removal of doubt" does not necessarily mean that the provision is retrospective. In support of this contention, he relied upon the decisions in Patel Brothers and Co. Ltd. 215-ITR-165 (SC) and Assistant Collector of Central Excise v. Dunlop India Ltd. 154-ITR-172 (SC)
22. We have carefully considered the rival submissions and perused the material placed before us. From the question referred to us it is clear that the assessees are entitled to depreciation but have not claimed the same in the returns of income for normal computation of income. The limited question that remains is whether the AO in that case can allow and deduct the depreciation while determining the income derived from Industrial Undertaking for the purpose of computing the deduction under Chapter VI-A. SCHEME OF THE ACT
23. In order to deal with the issue we have to examine the scheme of the Act for granting deduction under this Chapter VIA. Section 80A, 80AB and 80B contain the general provisions for governing the allowance and computation of the deductions under this Chapter. Section 80A(1) provides that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in Section 80C to 80U. Sub-section (2) put a limit to the effect that the aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. Section 80B(5) defines the "gross total income" to mean the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter.
24. "Total income" is defined in Section 2(45) to be the total amount of income referred to in Section 5, computed in the manner laid down in the Act. The manner is laid down in Chapter IV of the Act and it is computed under 5 heads, one of which is in Part "D" dealing with computation of business income consisting of Sections 28 to 43D. Section 29 provides as to how the income from business is to be computed. It states that the income as referred in Section 28 (i.e., the business income) shall be computed in accordance with provisions of sections 30 to 43D. Section 32 falls in these sections and it provides that "In respect of depreciation of (i) building, machinery...owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed..." thereaftewr certain items of deduction for depreciation are provided.
25. On a fair reading of these provisions it is apparent that for allowing deductions under Chapter VIA the first step is to compute the gross total income of the concerned assessee in accordance with all the provisions of the Act, except Chapter VIA. The second step is to ascertain what part of the total income so computed represents the profits and gains derived from the business of the Industrial Undertaking that is included in that gross total income. If there be any profits and gains so derived found included in the gross total income, a deduction of such profits and gains or a part thereof is to be allowed under a particular section to arrive at the total income liable to tax.
26. Section 80HH is one of the specified sections. It provides for relief of 20% of profits. Sub-section (1) of this section reads "Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. It may be noted that the deduction is from such profits and gain as are included in Gross Total Income and it is equal to 20% of the profits so included. Sub-section (6) provides for certain specific adjustments for computing the profits of an Industrial Undertaking where any goods held for the purposes of the business of the industrial undertaking are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of the industrial undertaking are to be computed as if the transfer, in either case, had been made at the market value of such goods as on that date. Similarly sub-section (7) provides for an adjustment in arriving at such profits where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking, the Assessing Officer, in computing the profits and gains of the industrial undertaking or the hotel for the purposes of the deduction under this section, is to take the amount of profits as may be reasonably deemed to have been derived therefrom.
27. Another section involved is Section 80IA providing for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Sub-section (1) provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any eligible business a deduction of an amount equal to hundred per cent of the profits and gains derived from such business is to be allowed for ten consecutive assessment years. Here also the deduction is from such profits and gain as are included in Gross Total Income. Further under sub-section (5) of this section, the profits and gains of an eligible business are to be, for the purposes of determining the quantum of deduction under that sub-section, computed as if such eligible business were the only source of income of the assessee during the previous year. Sub-section (8) of this section similarly provides like sub-section (6) of Section 80HH, that where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if 4 the transfer, in either case, had been made at the market value of such goods as on that dale. Again sub-section (10), like sub-section (7) of Section 80! II I, provides that where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom.
28. The other section involved in these appeals is Section 80 IB which provides for deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Sub-section(1) of this section states that where the gross total income of an assessee includes any profits and gains derived from any eligible business referred to in sub-sections (3) to (11), (11 A) and (11B), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. Here also the deduction is from such profits and gain as are included in Gross Total Income. Sub-section (13) incorporate the provisions contained in sub-section (5) and sub-sections (7) to (12) of Section 80-IA are to, so far as may be, apply to the eligible business under this section.
29. We have noted that in all these sections the emphasis is on "a deduction from such profits and gains" and the question is as how to determine that? In our opinion that is, to be computed as stated in Section 80AB in accordance with provisions contained in the Act. Section 80AB provides as to how to find out the income included in that gross total income and states that where the deduction is to be where any deduction is required to be made or allowed under any section included in Chapter VI-A under the heading "C. -Deductions in respect of certain incomes", in respect if any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is includible in the gross total income.
30. It is true that certain adjustments are provided in these sections like transfer of goods to close concerns or at rate below market price, but these are adjustments in addition to the computation of income in accordance with normal provisions of computation of income from Industrial Undertaking. These provisions, in fact, give an indication that it is not the choice of the assessee to show a larger profit than what is reasonable and the eligible income is to be arrived at irrespective of the agreement of the parties and in accordance with the provisions of the Act and after taking into consideration the prevailing market price of the goods & services.
31. The Jurisdictional High Court has considered the identical issue in the case of CIT v. Cadila Chemicals Pvt. Ltd. 259-ITR-692 and observed after quoting Section 80AB held that "the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is includible in the gross total income meaning thereby depreciation will have to be deducted before making any deduction under Section 80HH.
(Underlined by us to emphasis)
32. The Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra), which is incidentally relied upon by the Revenue as well as by the assessees' counsel, dealt with the issue as how the income for the purposes of this Chapter is to be computed. In this case two disputes were : i) whether unabsorbed depreciation and unabsorbed development rebate carried forward from earlier years are to be deducted from such profits of the Industrial Undertaking and ii) whether the balancing charge arising as a result of the sale of old machinery and building taxable Under Section 41(2) of the Act, was to be included in the profits and gains attributable to the Industrial Undertaking for the purpose of computing the deduction Under Section 80-E. While dealing with the inclusion of profits from the sale of old machinery and building Under Section 41(2), their Lordships examined the scheme of the Act for arriving at the profit eligible for deduction under Chapter VI-A. It stated have held at page 91 of the Report as under :-
First, compute the total income of the concerned assessee in accordance with the other provisions of the Act, i.e., in accordance with all the provisions except Section 80E; secondly, ascertain what part of the total income so computed represents the profits and gains attributable to the business of the specified industry (here generation and distribution of electricity); and, thirdly, if there be profits and gains so attributable, deduct 8% thereof from such profits and gains and then arrive at the net total income exigible to tax. As regards the first step mentioned above, the important words in sub-section (1) are those that appear in parenthesis, namely, "as computed in accordance with the other provisions of this Act" and these words clearly contain a mandate that the total income of the concerned assessee must be computed in accordance with the other provisions of the Act without reference to Section 80E and since in the instant case it is income from business the same as per Section 29 will have to be computed in accordance with Sections 30 to 43A which would include Section 41(2) . It is also clear that under the second step the profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) forms a component of the total income spoken of in the first step. Reading these two steps together, therefore, it is obvious that in computing the total income of the concerned assessee the balancing charge arising as a result of the sale of old machinery and buildings and worked out as per Section 41(2), irrespective of its real character, will have to be taken into account and included as income of the business.
33. And in dealing with the set off of carried forward depreciation and development rebate, it was held at page 94 of the Report as under :-
Here again the answer to the question must depend upon the construction of sub-section (1) of Section 80E and the construction which we have placed on the said provision while disposing of the revenue's appeal will furnish the correct answer to the question posed. As indicated earlier, sub-section (1) contemplates three steps being taken for computing the special deduction permissible thereunder and arriving at the net income exigible to tax and the first two steps read together contain the legislative mandate as to how the total income - of which the profits and gains attributable to the business of the specified industry forms a part - of the concerned assessee is to be computed and according to the parenthetical clause, which contains the key words, the same is to be computed in accordance with the provisions of the Act except Section 80E and since in this case it is income from business the same will have to be computed in accordance with sections 30 to 43A which would include Section 32(2) (which provides for carry forward of depreciation) and Section 33(2) (which provides for carry forward of development rebate for eight years). In other words, in computing the total income of the concerned assessee, items of unabsorbed depreciation and unabsorbed development rebate will have to be deducted before arriving at the figure that will become exigible to the deduction of 8% contemplated by Section 80E(1).
[Underlined ours to supply emphasis]
34. From the above it is evident that for the purpose of Section 80E, the income is to be computed in accordance with the provisions of the Act. The business income is to be computed as per Section 29 in accordance with sections 30 to 43A. As these sections include both sections 32(2) /33(2) dealing with the allowance of unabsorbed depreciation and unabsorbed development rebate and Section 41(2) dealing with the balancing charge resulting from the sale of old machinery, the same are to be deducted or included as the case may be in the profits and gains of the Industrial Undertaking, to arrive at the profits eligible for deduction Under Section 80E.
UNABSORBED CARRIED FORWARD DEPRECIATION VERSUS CURRENT DEPRECIATION
35. The contention of the assessees' counsel that in the above case, the Supreme Court directed exclusion of depreciation and development rebate because it was already allowed in the earlier years and then carried forward, but in the cases under appeals before us, the assessees have not claimed the depreciation and, therefore, the same cannot be allowed or deducted for arriving the eligible profit for deduction has no force. The basis for allowability of the unabsorbed depreciation and unabsorbed development rebate while computing the profits of the eligible business as held by the Supreme Court is not that the same is already allowed in the earlier year but because the income has to be computed in accordance with sections 30 to 43A of the Act which includes Section 32(2) providing for carry forward of depreciation. Section 80-AB of the IT Act provides that the income eligible for deduction under Chapter VI-A(C) is to be computed in accordance with the provisions of this Act before making any deduction under Chapter VI-A. The phrase used in Section 80AB "computed in accordance with the provisions of this Act" is identical to the phrase used in Section 80E, which is considered by the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra). Therefore, the ratio of the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. would be squarely applicable for the purpose of determining the eligible income for the purpose of computing the deduction under Chapter VI-A(C). The distinction attempted by the Id. Counsel in our opinion, is therefore of no avail.
36. The controversy, however, is no longer res-integra and the above decision is followed by the Supreme Court in a later case of Mettur Chemical & Industrial Corporation Ltd. (supra), even in a case where the dispute was whether the development rebate has to be deducted or not from the total income for the purpose of determining the profits eligible for deduction Under Section 84(1). At page 774, their Lordships have held as under :-
Coming to the third question, the relevant fact as already stated is that the profit with reference to the additional unit of sixty hooker cells which was called caustic soda plant No. 2 was worked out by the appellant at Rs. 1,08,282 before allowing the development rebate. The development rebate pertaining to this second plant came to Rs. 12,15,055. If the development rebate was adjusted against the sum of Rs. 1,08,282, then the net result would be a loss of Rs. 11,06,773. There would, thus, be no profit which would be eligible for the relief under Section 84 of the Act. In order to avail of this relief, the submission of the appellant is that the development rebate should not be deducted in arriving at the business income because it had no bearing on the business profits of the industrial undertaking.
In view of the decision of this court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT (1978) 113 ITR 84, this question is no longer res integra. Dealing with a similar provision, i.e., Section 80E of the Act prior to its amendment by the Finance (No. 2) Act, 1967, this court came to the conclusion that in computing the profits of the assessee for the purpose of the special deduction provided under Section 80E, items of unabsorbed depreciation and unabsorbed development rebate, carried forward from earlier years, will have to be deducted before arriving at the figure from which the eight per cent contemplated by Section 80E is to be deducted.
37. Thus, the Supreme Court in the above case has hold that not only the carried forward development rebate but the development rebate of the current year is also to be reduced from the total income for determining the eligible profits for computing the deduction Under Section 84. The above decision with regard to current year's development rebate would be squarely applicable with regard to current year's depreciation as well.
38. A direct issue on deductibility of depreciation came up before the Jurisdictional High Court in the case of CIT v. Cadila Chemicals Pvt. Ltd. (supra) and in connection with determining the eligible income for the purpose of Section 80HH itself. At page 693 of the Report, their Lordships have held as under:-
Coming to question No. 2, the learned counsel or the Revenue relies on the decision of this court in Paushak Ltd. v. CIT (1994) 210-ITR-535, wherein this court relied on the decision of the Supreme court in the case of Cambay Electric Supply Industrial Co. Ltd. v CIT (1978) 113 ITR 84 and CIT v Gautam Sarabhai (1981) 129 ITR 133 (Guj), holding that unabsorbed losses and unabsorbed depreciation have to be deducted before arriving at the figures that would be quantified for the purpose of deduction under Section 80HH of the Income-tax Act, 1961. We may also add that with effect from April 1, 1989, Parliament inserted Section 80AB laying down that where any deduction is required to be made or allowed under any section in Chapter VI-A under the heading "Deductions in respect of certain incomes", then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed under the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is includible in the gross total income meaning thereby depreciation will have to be deducted before making any deduction under Section 80HH.
[Underlined ours to supply emphasis]
39. Similar issue came up before the Rajasthan High Court in the case of Vijay Industries v. CIT 270-ITR-175 again with regard to computation of eligible profits for the purpose of Section 80HH. The claim of the assessee was that for computing the profits and gains of Industrial Undertaking, unabsorbed depreciation, current depreciation and investment allowance should not be considered. The High Court did not agree with the assessee's contention and held that in allowing the deduction Under Section 80HH, the profits and gains of Industrial Undertaking should be computed by taking into consideration the unabsorbed depreciation, current depreciation and investment allowance. Thus, in this case the Rajasthan High Court has also taken a similar view and held that not only unabsorbed depreciation but current year's depreciation is also to be reduced from the profits and gains of an Industrial Undertaking for computing the deduction Under Section 80HH.
40. This issue is also considered by the Bombay High Court in the case of Indian Rayon Corporation Ltd. (supra). Though it seems to be case of allowability of unabsorbed depreciation of earlier years but consideration of the issue is not restricted to that and it dealt with issue in general for allowability of current depreciation as well. At page 102 of the Report, their Lordships have held as under:-
The conspectus of the above sections show that income tax is a charge on an assessee in respect of his total income computed in accordance with the provisions of the Act. However, in cases where the total taxable income comprises profits derived from newly established undertaking under Section 80HH, then such profits have got to be computed separately as laid down by the Supreme Court in he case of Cambay Electric Supply Industrial Co. Ltd. (1978) 113 ITR 84 as if it concerns a separate assessee. While calculating such profits, we must bear in mind Sections 29 to 43A of the Act. Hence, depreciation has got to be set off as an expense against gross income of the newly established undertaking in order to arrive at profits and gains of newly established undertaking. Hence, the net profits as per the profit and loss account of newly established undertaking would be computed, after taking depreciation into account and 20 per cent, of such net profit would be deductible from the gross total income of the assessee to arrive at the total income of the assessee.
[Underlined ours to supply emphasis]
41. From the above it is evident that the courts have, in an unambiguous term, held that depreciation and other deductions falling within sections 30 to 43A will have to be deducted before making any deduction under Chapter VIA of the Act. The above observations of their Lordships explain the logic behind the deductibility of depreciation while computing the eligible profits for Chapter VI-A, because if the depreciation is not reduced while computing the income, the assessee would claim on gross amount of income and that would be amount to making a more deduction than what he is entitled to OPTION TO CLAIM OR DISCLAIM DEPRECIATION
42. It was however contended by the assessee's counsel Shri Soparkar that the above decisions would be applicable where the depreciation has been claimed by the assessee and would not be applicable where the an assessee has disclaimed the same. He stated that depreciation can be allowed while computing eligible income for the purpose of Chapter VI-A only if while computing normal income under the head profit & gains of business, the assessee claimed depreciation. We are unable to accept this contention. In the Income tax Act there is no provision for "disclaimer" of depreciation. Moreover, the Bombay High Court has directed for allowing depreciation while computing deduction Under Section 80HH not on the ground that the assessee claimed depreciation while computing its business income. They have allowed depreciation because for the purpose of computing deduction under Chapter VI-A the amount of income of that nature as computed under the provisions of this Act has to be taken. Therefore, while computing eligible income effect to all the provisions of the IT Act (excluding Chapter VI-A) is to be given. The provisions of Income tax Act include Section 32 which provides for deducibility of depreciation therefore the same was held to be deductible before making any deduction Under Section 80HH. The proposition laid down by their Lordships was general proposition and not restricted to the facts of the said case, is evident from the following observations at page 102 of the Report :-
The reason is that Chapter VI-A deals with special types of income. The deduction of 20 per cent, is not to be equated with depreciation, which is an ordinary expense. The idea under the above formula is that the assessee should not claim more than what he is entitled to. Take the case of Section 80HHC under which deduction is given in commensuration with the foreign exchange, which the assessee brings in. Therefore, if an assessee claims deduction under Section 80HHC, depreciation has got to be set off against the gross income. Our view is supported by the judgment of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v CIT (1978) 113 ITR 84.
[Underlined ours to supply emphasis]
43. At pages 106 and 107 of the Report, their Lordships have further held as under :-
The question basically in this matter is concerning computation of deduction under Chapter VI-A in which Section 80HH falls. Profits and gains of a new established undertaking, therefore, have got to be computed as per the provisions of Section 29 to Section 43A and if the assessee claims relief under Chapter VI-A of the Act, then it is not open to the assessee to disclaim depreciation allowance. This is because Chapter VI-A is an independent code by itself for computing these special types of deductions. In other words, one must first calculate the gross total income from which one must deduct a percentage of incomes contemplated by Chapter VI-A. That such special income s were required to be computed as per the provisions of the Act viz., Section 29 to Section 43A, which included Section 32(2). Therefore, one cannot exclude depreciation allowance while computing profits derived from a newly established undertaking for computing deductions under Chapter VI-A. Therefore, the appellant's claim for allowance of deduction under Section 80HH, without taking into consideration the current depreciation will have to be rejected.
[Underlined ours to supply emphasis]
44. On behalf of the assessees, heavy reliance has been placed on the decision of the Supreme Court in the case of Mahendra Mills (supra) in support of claiming / disclaiming depreciation. However, we find that the above decision given by the Supreme Court was for Asstt Year 1974-75, when Section 34 was on the statute book, which is omitted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 with effect from 1-4-1988, As per Section 34, the assessee was entitled to depreciation Under Section 32 only if the prescribed particulars have been furnished by the assessee. At page 80 of the Report, their Lordships have held as under:-
Section 34 is not in the nature of merely an enabling provision. In the absence of particulars of depreciation as required by Section 34, there is no mandate on the Income tax Officer under Section 29 to compute the income by allowing depreciation under Section 32.
45. Thus, their Lordships have held that in the absence of particulars of depreciation as required by Section 34, there is no mandate on the ITO to allow depreciation Under Section 32. From the above it is evident that the decision given by the Supreme Court was by taking into consideration the provisions of Section 34. Their Lordships at page 58 of the Report, observed as under :-
This question has been answered differently by various High Courts some in favour of the assessee and others in favour of the Revenue.
Section 32 has since been amended by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 with effect from April, 1,1988, However, the answer to the question remains of substantial importance as various matters are stated to be pending, in the High Courts relating to the assessment years prior to April 1, 1988.
46. Their Lordship made these observations quoting the Section 32 as it stood prior to April 1, 1988. From the above it is evident that even as per the Supreme Court, the decision was applicable for the period prior to 1-4-1988, i.e., before the law was amended by Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986. Moreover in the above case the dispute was not with regard to the computation of income for the purpose of Chapter VI-A but with regard to normal computation of income Under Section 29. In the cases under consideration before us, the Special Bench is constituted to consider the allowability or otherwise of depreciation for the purpose of computing the income where the assessee is entitled to deduction under Chapter VI-A. Therefore, the above decision of the Supreme Court would not be applicable. We may point out that before the Bombay High Court in the case of Indian Rayon Corporation Ltd. (supra), the decision of the Supreme Court in the case of Mahendra Mills's case was relied upon by the assessee. It was distinguished by their Lordships of Bombay High Court, at page 105 of the Report, by stating that the controversy in Mahendra Mills's case was not concerning the deduction under Chapter VI-A of the Act, therefore, that judgment would not apply to this case.
Privilege v. Obligation
47. Relying upon the above observations by the Supreme Court in the case of Mahendra Mills (supra) at page 80 of the Report: "It is rightly said that a privilege cannot be to a disadvantage and an option cannot become an obligation.", it was vehemently contended that to claim depreciation is a privilege given to the assessee. Therefore, there is an option with the assessee to claim or not to claim the depreciation. When the depreciation is not claimed by the assessee, by thrusting the depreciation upon the assessee the privilege would be converted into disadvantage and an option become obligation.
48. Apropos the above submissions of the learned counsel, it was argued by the learned DR that in the normal computation of income by claiming depreciation the assessee gets deduction from the income. Therefore, the right of claiming the depreciation may be a privilege for the assessee. But, when the deduction under Chapter VI-A is to be computed by not claiming the depreciation, the eligible income of the assessee would be more and thus the assessee would be entitled to higher deduction Under Section 80IB. By not claiming depreciation W.D.V. of the assets would be more and assessee will have the right to claim depreciation thereon in subsequent years. Therefore, for the purpose of Chapter VI-A, it is not privilege of the assessee to claim or not to claim the depreciation. Placing reliance on the decision of Supreme Court in the case of Mahalaxmi Sugar Mills Co. Ltd. 160-ITR-920 (SC) wherein the set of, was held to be a duty of AO to allow, even if claimed to be option of the assessee.
49. We agree with the above submissions 'of the learned DR. When the assessee is entitled to certain deduction or exemption by claiming the deduction his income is reduced. Therefore, if such deduction is not claimed, the interest of the Revenue is not prejudicially affected. Therefore, it could be the privilege of the assessee to claim such deduction or not to claim. However, the position is not same when the income of the assessee is to be determined for the purpose of computing deduction under Chapter VI-A. Under this Chapter either whole or a certain percentage of the income is exempt. Therefore, if the depreciation is not claimed, the resultant income would be more and consequently more deduction would be available to the assessee under Chapter VI-A. Certainly, therefore, it cannot be privilege of the assessee to claim more deduction than what he is entitled to. The assessee is entitled to deduction under Chapter VI-A on the basis of income computed in accordance with the provisions of this Act. Therefore, the income is to be computed taking into account all the provisions applicable while computing the business income including allowance of depreciation. By not claiming the depreciation, the assessee is in fact claiming higher deduction under Chapter VI-A, and at the same time keeping W.D.V. of their assets high (Because if depreciation is claimed, W.D.V. would be reduced by the amount of depreciation actually allowed). The assessee would claim depreciation on such high W.D.V. in the subsequent year. Thus by not claiming depreciation in the years in which assessee is entitled to deduction under Chapter VI-A, assessees are claiming double advantage, (i) claiming higher deduction under Chapter VI-A than their entitlement, (ii) keeping W.D.V, of assets high resulting in higher claim of depreciation in subsequent years. This can not be privilege of the assessee.
50. The above observations of the Supreme Court have to be considered in the context in which it was made. These observations were made where the dispute was about the normal computation of income where it could be a privilege of the assessee to claim a particular depreciation or not. The above observations of the Supreme Court cannot be applied for the computation of deduction under Chapter VI-A where by not claiming depreciation the assessee would be claiming a higher deduction. We may refer to the Supreme Court decision in the case of Sun Engineering Works P Ltd. (supra) holding:-
It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered' in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, courts must carefully try to ascertain the true principle laid down by the decision.
51. In the light of the above decision of the Supreme Court, we hold that the observations of the Supreme Court in the case of Mahendra Mills (supra) be taken as applicable only in the context of computing normal income for assessment years prior to Asstt.Year 1988-89 and not for the computation of income for the purpose of Chapter VI-A.
52. On the facts and circumstances of these cases, the other decision of the Supreme Court in the case of CIT v. Mahalaxmi Sugar Mills Co. Ltd. 160-ITR-920 (SC) as relied upon by the learned DR is more apt to resolve the controversy. In this case, the assessee company sustained business loss in India of Rs. 20,30,006/- for the assessment years 1956-57 and Rs. 9,11,7287- for 1957-58 and it received dividends of Rs. 2,30,832/- and Rs. 2,27,472/- respectively, for those years in respect of shares held in a company in Pakistan. Under item No. 8 of the Schedule to the Agreement for the Avoidance of Double Taxation between India and Pakistan read with Article IV thereof, the profits of the company were wholly taxable in Pakistan and the dividend was also wholly taxed in Pakistan. The question was whether in computing the total world loss under the Indian Income tax Act, 1922, the dividends from the company in Pakistan could be deducted from business loss. The High Court, on a reference, held that the dividends from the Pakistan company cannot be set off and deducted from the Indian business loss under Section 24(1) of the Act. On appeal by the assessee the Supreme Court observed:
Held, reversing the decision of the High Court that the dividend received from the Pakistan company was deductible in arriving at the total world Joss of the respondent company under Section 24(1). The Double Taxation Agreement preserved the right of each dominion to determine the assessable income in accordance with the operation of its own laws and the agreement was concerned only with the question of retention of the tax charged by the dominion consequent upon such assessment. Assessment under the law of the dominion had to be made in the ordinary way under its own laws and such assessment would include the determination of the consequential tax liability.
53. In this case also it was contended on behalf of the assessee that it is open to the assessee to claim or not to claim the benefit of Section 24 of the IT Act, 1922 and if he does not claim the benefit of Section 24, there was no question of applying Section 24 for setting off the loss in India against the dividend income in Pakistan. The above contention of the assessee was rejected by their Lordships of the Supreme Court and it was held as under:-
There is a duty cast on the ITO to apply the relevant provisions of the Indian Income tax Act for the purpose of determining the true figure of the assessee's taxable income and the consequential tax liability. That the assessco fails to claim the benefit of a set-off cannot relieve the ITO of his duty to apply Section 24 in an appropriate case.
54. In our opinion, the above observations of the Supreme Court would be squarely applicable while determining the income for the purpose of computing the deduction under Chapter VI-A. In the light of the above decision of Supreme Court It is the duty cast upon the AO to apply the relevant provisions of the Income tax Act for the purpose of determining the true figure of the eligible income for the purpose of deduction under Chapter VI-A. The relevant provisions of the IT Act include Section 32 under which deduction for depreciation has to be allowed. Therefore, while computing the income for the purpose of deduction under Chapter VI-A, the depreciation has to be allowed whether it is claimed by the assessee or not.
CASES RELIED UPON BY ASSESSEES
55. Shri S N Soparkar, the learned counsel for the assessees has referred to the decision of the Jurisdictional High Court in the case CIT v Arun Textile Mills 192-ITR-700 (Guj) and the decision of the Bombay High Court in the case of CIT v. Shri Someshwar Sahakari Sakhar Karkhana Ltd. 177-ITR-443 (Bom). These two decisions are applied by Supreme Court in Mahendra Mills. The assessment years involved in both the cases before the Jurisdictional High Court and before the Bombay High Court were prior to amendment w.e.f. 1-4-1988 and further, in both the above cases the dispute was for computation of income as normal business income and not for the purpose of eligible income for computing deduction under Chapter VI-A. Therefore, both the above decisions like the case of Mahendra Mills of Supreme Court would not be applicable for the issue under consideration before us, wherein the issue is with regard to computation of income for the purpose of Chapter VI-A.
56. The learned counsel for the assessees also relied upon the decision of the Ahmedabad Bench of the ITAT in the case of Uvifort Metalizers 73-TTJ-381 (Ahd), which is claimed to have been approved by the Hon'ble Jurisdictional High Court vide Tax Appeal No. 175 of 2001. He also contended that since this decision is approved by the Jurisdictional High Court, the same is binding upon the Tribunal in Ahmedabad. Copy of the decision of the Jurisdictional High Court is produced before us. We find that their Lordships dismissed the Revenue's appeal on the ground that no substantial question of law arose by observing as under:-
In our opinion, no substantial question of law arises in this appeal as the Tribunal has rightly decided the appeal in view of the ratio laid down by the Hon'ble Supreme Court in the case of Mahendra Mills (supra). It is also pertinent to note that the Tribunal had taken similar view in the case of Sun Pharmaceutical Industries v DCIT (Assessment) in IT A Nos. 2355/A/98, 1261 and 1190/A/89 for the Asstt.Years 1995-96 and 1996-97 and against the said view taken by the Tribunal in the case of Sun Pharmaceutical Industries (supra), the revenue had not filed an appeal though an appeal has been filed by the revenue in the said case on other points. It has been submitted by learned advocate Shri Qureshi that the revenue proposes to amend the appeal memo filed in the case of Sun Pharmaceutical Industries, but as on today, the fact remains that the issue regarding claim of depreciation in the case of Sun Pharmaceutical Industri-es decided by the Tribunal has not been challenged by the revenue.
Looking to the view expressed by the Supreme Court in the case of Mahendra Mills (supra), in our opinion, the Tribunal was justified in taking the view with regard to the depreciation in the instant case and, therefore, we do not find any substantial question of law involved in this appeal and, therefore, the appeal is dismissed.
57. The Jurisdictional High Court dismissed the Revenue's appeal holding that no substantial question of law arises. It is not a decision on merit by the Jurisdictional High Court. On the contrary we noted that the Jurisdictional High Court in a series of cases have taken the consistent view that for the purpose of computing deduction under Chapter VI-A, effect to all other provisions of the IT Act, is to be given. The first decision is in the case of CIT v. Cambay Electric Supply Industrial Co. Ltd. (1976) 104-ITR-744 (Guj), wherein it was held that unabsorbed depreciation and development rebate should be considered while computing eligible profit for the purpose of Section 80-E. This decision was upheld by the Supreme Court in the case of CIT v. Cambay Electric Supply Industrial Co. Ltd. (1978) 113-ITR-84 (SC). The second decision is in the case of CIT v. Miling Trading Co. Pvt. Ltd. (1995) 211-ITR-690 (Guj), wherein it was held that while granting special deduction Under Section 80M of the Act, the profits and gains of the business cannot be computed without reference to the provisions contained in sections 32 and 33. The third decision is in the case of Cadila Chemicals Pvt. Ltd. (supra) wherein it is held that depreciation will have to be deducted before making any deduction Under Section 80HH. Thus, wherever the computation of eligible income for the purpose of deduction under Chapter VI-A is to be considered, the Jurisdictional High Court has consistently taken the view that all other provisions of the IT Act including Section 32 have to be considered. In view of above, either in the case of Unifort Metaliser (supra) the issue before the Jurisdictional High Court was for computation of normal income ; or in any case if it was for the computation of profits and gains of the Industrial Undertaking for the purpose of Chapter VI-A, it was not brought to the knowledge of their Lordships. Be that as it may there is no decision on merit in the case of Unifort Metaliser (supra) as the Revenue's appeal was dismissed holding that no substantial question of law arises. Therefore the decision in the case of Uvifort Metalisers (supra) relied upon by the learned counsel would not help the case of the assessee.
COMPUTATION OF INCOME - UNDER GENERAL PROVISIONS VIS-AVIS UNDER CHAPTER VI-A
58. Yet another vehement contention from the assessees' side is that the computation of income for normal business income and for the purpose of Chapter VI-A, cannot be different. The income for the purpose of Chapter VI-A is a mirror image of the income computed under the head "Income from business". Therefore, when the assessee can be permitted not to claim depreciation and the income can be computed without depreciation, the same income has to be the basis for Chapter VI-A Deduction. We are unable to accept the above contention of the learned counsel for the assessee. Exceptions are provided in Chapter VI-A itself. We can find these in sub-section (5) of Section 80IA providing that for the purpose of determining the quantum of deduction under this section, the profits and gains of the eligible business is to be computed as if such eligible business were the only source of income of the assessee. This provision overrides the other provisions of the Act which is clear from the sentence "notwithstanding anything contained in other provisions of this Act". Thus the separate computation of the profits and gains of the eligible business for the purpose of deduction under this section is the clear mandate of the Legislature. Sub-section (8l) of Section 80IA provides another exception i.e., where there is transfer of goods or services by the eligible business to any other business carried on by the assessee or vice-versa and the consideration for such transfer as recorded in the accounts does not correspond to the market value of such goods, then for the purpose of deduction under this section the profits and gains of the eligible business is to be computed by taking the market value of such goods or services on the date of transfer. Therefore, though in the accounts the goods or services are transferred at a different rate and the said rate will be taken for the purpose of computation of profits and gains of business but for the purpose of computing the profits and gains of eligible business for the purpose of deduction Under Section 80IA, the profits and gains is to be recomputed by taking the market value of goods or services transferred to or from the eligible business. This aspect was considered by the Jurisdictional High Court in the case of Alembic Chemical Works Ltd. v. DCIT 266-ITR-47 (Guj). In that case, the assessee company claimed deduction Under Section 80HH and 80I in respect of the Industrial Undertaking, viz., Panpharma Division located in Panchmahal District. The entire production of Panpharma Division was transferred to main division which sold the same in the market. The AO did not accept the profits and gains of Panpharma Division as shown in the accounts of the assessee. The working of the AO was upheld by Gujarat High Court to re-compute the income for the purpose of deduction under Chapter VI-A and held at page 58 of the Report, by observing as under :-
In the present case, admittedly, Panpharma Division is an eligible industrial undertaking, it transferred goods to other business carried on by the assessee and recorded consideration for such transfer in the accounts of the Panpharma division. In these circumstances, the controversy has arisen as to whether the consideration recorded in the accounts corresponds to the market value of such goods on the date of transfer or not ; and if the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then the profits and gains of the industrial undertaking are required to be computed for the purpose of deduction under Section 80HH of the Act, as if the transfer had been made at the market value of such goods. Therefore, this sub-section itself stipulates that in cases where an industrial undertaking transfers goods to any other business carried on by the assessee the consideration has to be at the market value, and if it is not so, the AO can substitute the figure of consideration for transfer for the purpose of computing deduction under this section.
59. It is thus evident that for the purpose of Chapter VI-A, the AO has to compute the profits and gains of business separately. Of course, the computation has to be made as per the provisions of the IT Act meaning thereby, while computing the profits and gains of the eligible business, the AO has to give effect to all the relevant provisions of the IT Act, which include Section 32 also. Therefore, while computing the profits and gains of the eligible business the AO has to give effect to the provisions of Section 32 also and work out the profits and gains after allowing the depreciation,
60. In the case of Milling Trading Co. Pvt. Ltd. (supra) relied upon by Shri D H Vadodaria in support of his contention that the income included in the gross total income has to be considered for the purpose of Chapter VI-A, the dispute was with regard to computation of special deduction Under Section 80M. The question was whether unabsorbed depreciation and development rebate should be taken into account or not for the purpose of computing deduction Under Section 80M. The following observations of the bove decision in fact supports the contention of the Revenue that while computing the profits and gains of business, the provisions of sections 32 and 33 cannot be ignored:
While granting special deduction under Section 80M two important points have to be borne in mind, namely, (1) the total income of an assessee cannot be computed in accordance with the provisions of the Act without computing his income under different heads prescribed by Section 14, and (2) the computation of income under the head of "Profits and gains of business" cannot be made without reference to the provisions contained in sections 32 and 33.
[Underlined ours to supply emphasis] RIGHT OF ASSESSEE TO ARRANGE HIS AFFAIRS
61. Shri M K Patel, the learned counsel for the assessee has relied upon the decision of the Supreme Court in the case of Azadi Bachao Andolan (supra) to support his contention that it is the right of the assessee to arrange his affairs so as to minimize his tax liability. We find that the issue in this case was with regard to the interpretation of Double Taxation Avoidance Agreement with Mauritius and the Instructions issued by CBDT in this regard for the purpose of determination of the residence of the assessee. The facts in that case were altogether different and the there is no relevance with the facts of that case and the case under appeal before us. There is no dispute about the right of the assessees to plan their affairs within four corners of law in such a manner so as to minimize the tax liability. However, here the issue under consideration before us is with regard to the determination of eligible profit for the purpose of computing deduction under Chapter VI-A. The same has to be computed in accordance with the provisions of law. Therefore, the above decision of the Supreme Court in the case of Azadi Bachao Andolan (supra) would be of no help to the assessees, OTHER DIVISION BENCH CASES OF THE TRIBUNAL
62. In the case of Plastiblends India Ltd. v. ITO 94-ITD-295 (Mum), Tribunal has accepted the assessee's contention that depreciation cannot be thrust upon the assessee if no claim has been put by the assessee, primarily relying upon the decision of the Supreme Court in the case of Mahendra Mills (supra). We have already discussed the decision in the case of Mahendra Mills (supra) and have come to the conclusion that the above decision was given for Asstt. Year 1974-75 i.e. with reference to the law applicable prior to the period 1-4-88 and in the above case the dispute was not with regard to computation of income for the purpose of Chapter VI-A.
63. In the case of Medley Pharmaceuticals Ltd., the Tribunal has accepted the assessee's contention that deduction Under Section 80IA is to be allowed without deducting the depreciation from the profits. In this case also the Tribunal has relied upon the decision of the Supreme Court in the case of Mahendra Mills (supra). In the case of Gujarat State Fertilizers Co. Ltd. (supra), the Ahmedabad Bench of ITAT has held that the depreciation is a choice left to the assessee and cannot be allowed when not claimed. The Tribunal has given the above finding following the decision of the Gujarat High Court in the case of Arun Textiles 192-ITR-700. We have discussed the decision in the case of Arun Textiles above and found that the above decision was also prior to 1-4-88 and in the above case also the computation of income was for normal business income and not for the purpose of eligible income for the purpose of computing the income under Chapter VI-A. On the contrary the Gujarat High Court in the case of CIT v. Cadila Chemicals Pvt. Ltd. 259-ITR-692 has taken the view that the depreciation will have to be deducted before making any deduction Under Section 80HH and therefore in view of this decisions of the Jurisdictional High Court, the decision of the Division Bench of ITAT Ahmedabad in the case of Gujarat State Fertilizers Co. Ltd. (supra) may not be a good law.
POSSIBILITY OF TWO VIEWS
64. Lastly, the contention on behalf of the assessees that it is a settled rule of interpretation that if language of a taxing statute is capable of more than one meanings or when two views are possible, the view favourable to the assessee should be adopted in view of the decision of the Supreme Court in the case of Vegetables Products (supra) observing :
If the court finds that the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee, more particularly so where the provision relates to the imposition of a penalty.
65. However this is to be read in the light of the decision In the case of CIT v. Thana Electricity Supply Ltd. 206-ITR-727 (Bom), on, which reliance was also placed on behalf of the assessees, observing :
If a provision of a taxing statute can be reasonably interpreted in two ways, that interpretation which is favourable to the assessee has got to be accepted. This is a well accepted view of law. It is the satisfaction of the court interpreting the law that the language of the taxing statue is ambiguous or reasonably capable of more meanings than one, which is material. If the court does not think so, the fact that two different views have been advanced by the parties and argued forcefully or that one such view which is favourable to the assessee has been accepted by some Tribunal or High Court, by itself will not be sufficient to attract the principle of beneficial interpretation.
66. We therefore have to consider is whether there are two reasonably possible views on allowability of the depreciation. Two views stated to be (i) the depreciation has to be allowed while determining the profit and gains of Industrial Undertaking for the purpose of computing deduction under Chapter VI-A. The view canvassed by the Revenue is supported by the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra), & Mettur Chemical and Industrial Corporation (supra), the decision of the Jurisdictional High Court in the case of Cadila Chemicals P Ltd. (supra), Rajasthan High Court in the case of Vijay Industries (supra) and the Bombay High Court in the case of Indian Rayon Corporation Ltd. (supra) ; (ii) The other view stated to be canvassed on behalf of the assessees that to claim or not to claim the depreciation is choice of the assessees and it cannot be thrust upon them even for the purpose of Chapter VI-A. This view is claimed to be supported by the decisions of the Supreme Court in the case of Mahendra Mills (supra), Jurisdictional High Court in the case of Arun Textiles (supra), Bombay High Court in the case of Someshwar Sahakari Sakhar Karkhana Ltd. (supra).
67. We have already noted earlier that all the above three decisions relied upon by the assessees are prior to Asstt.Year 1988-89 and they were with regard to the computation of income under the head "Profits and gains of business" and not for the purpose of computation of eligible income for the purpose of working out deduction under Chapter VI-A. In the cases under consideration before us we have reached a conclusion that the AO has the duty as well the power to allow the depreciation while computing profit and gains of Industrial Undertaking for the purpose of deduction under Chapter VI-A. It is true that there are certain Division Benches of Tribunal have taken the view that for computing deduction under Chapter VI-A also it is the option of the assessee to claim the depreciation or not to claim. However, when the view canvassed by the Revenue is supportable by the decisions of the Supreme Court, the Jurisdictional High Court and other High Courts in the sense that while working out the income for the purpose of Chapter VI-A the depreciation has to be deducted whether opted to be claimed by the assessee or not ; and the view canvassed on behalf of the assessees is only supported by the decisions of the Tribunal that it is choice of the assessee as in the case of normal computation of income, it cannot be said that both the views are equally possible or reasonable views. The view which is supported by the decisions of the Supreme Court, Jurisdictional High Court and other High Courts has to be preferred than the view taken by the Tribunal.
68. A question was raised by the assessees that if the depreciation can be disclaimed in the normal computation of income but the same has to be allowed as a deduction while computing the income for the purpose of Chapter VI-A deductions, then there would be anomaly in the amount of WDV of the assets of the undertaking. It may be 'x' figure for the purpose of computation of income Under Section 29 whereas it would be 'x' minus depreciation allowed for Chapter VI-A deductions. Firstly, this is a situation created by the assessee itself by disclaiming the depreciation in normal computation ; secondly these Sections 80HH, 80IA and 80IB contemplate these situations in providing for different computation for Chapter VI-A deductions by providing exceptions referred to above ; and thirdly the assessees cannot be allowed a higher deduction by disclaiming depreciation which, in actually, it is not surrendering the right to claim the depreciation but postponing the same in subsequent years. On the facts of these cases the assessees want to avail both the benefits and opt to pay lesser tax ultimately by resorting this type of disclaimer. In any case by virtue of deeming fiction that the Industrial Undertaking would be the only source of income for computing the income on that hypothesis, there is bound to be difference in both the incomes as well as written down values from year to year. Again the different written down values is for computing the income for the purpose of Chapter VI-A and would have no impinging effect in disturbing written down values for the purpose of Section 43(6) in determining the income of the assessee Under Section 29 of the Act. This contention of the assessees therefore has no decisive value for deciding the issue before us.
69. In view of the aforesaid discussion we, therefore, hold that the depreciation, which is though allowable but not claimed in the return for normal computation of income, has to be allowed while computing the deductions under Chapter VI-A viz. 80HH, 80IA, 80IB, etc. of an Industrial Undertaking.
70. Before we part with the matter, we may state that the Revenue has contended that Explanation 5 to Section 32 introduced by the Finance Act, 2001 with effect from 1-4-2002 is retrospective while the learned representatives of the assessees have contended that the amendment is prospective. However, as we have come to the conclusion, that the depreciation has to be allowed while computing the income for the purpose of computation of deduction under Chapter VI-A even prior to above amendment, therefore, it is unnecessary to examine the rival contentions with regard to retrospective effect of Explanation 5 to Section 32 introduced by the Finance Act, 2001.
71. The following 26 appeals where other issues are also involved, they are to be placed before the division bench for disposal on other issues including the issue of validity of rectification by AO Under Section 154, as the case may be.
-------------------------------------------------------------------------------------
Sr IT Appeal Appellant Respondent Appearance
-------------------------------------------------------------------------------------
No. No. Appellant Respondent
-------------------------------------------------------------------------------------
1 2195/A/04 M/s Nissan " Shri SN
AY:-2001- Polyplast, Divatla, CA
2002 Nani Daman
-------------------------------------------------------------------------------------
2 2520/A/2004 Siddh " Shri Ketan H
AY:-2001- International, Shah
2002 Daman
-------------------------------------------------------------------------------------
3 3064/A/2004 Shree " NONE Shri PK
AY:-2001- Fashion, Nani Ambastha,
2002 Daman Senior DR
-------------------------------------------------------------------------------------
4 3065/A/2004 Smt. " NONE Shri PK
AY:-2001- Shailaben K Ambastha,
2002 Damania Senior DR
-------------------------------------------------------------------------------------
5 3152/A/2004 M/s Abhishek " Shri HP "
AY:-2001- Packaging " Shah, CA
2002 Ind.
-------------------------------------------------------------------------------------
6 3153/A/2004 M/s Veer " " "
AY:-2001- Packacing 2002
-------------------------------------------------------------------------------------
7 3154/A/2004 M/s Ultra " " "
AY:-2001- Polymers,
2002 Daman
-------------------------------------------------------------------------------------
8 3155/A/2004 M/s Siddharth " " "
AY:-2001- Corporation,
2002 Daman
-------------------------------------------------------------------------------------
9 3156/A/2004 M/s Radha " " "
AY:-2001- Madhav
2002 Industries
-------------------------------------------------------------------------------------
10 3160/A/2004 M/s Mayura " " "
AY:-2001- Industries,
2002 Daman
-------------------------------------------------------------------------------------
11 3161/A/2004 Gautam " " "
AY:-2001- Enterprise 2002
-------------------------------------------------------------------------------------
12 3258/A/2004 M/s Packers " Shri DH "
India Vadodaria
CA
-------------------------------------------------------------------------------------
13 3259/A/2004 M/s Polynova " " "
AY:-2001- Packers 2002
-------------------------------------------------------------------------------------
14 3717/A/2004 Perfect ACIT, Written "
AY:-2001- Colourants Circle-4, Submissions
2002 and Plastics Baroda
P. Ltd.
-------------------------------------------------------------------------------------
15 3265/A/2004 Bahadurbhal " Shri SNL "
AY:-1999- S Bhanwadia Agrawal,
2000 Advocate
-------------------------------------------------------------------------------------
16 3266/A/2004 " " " "
AY:-2000-2001
-------------------------------------------------------------------------------------
17 3267/A/2004 " " " "
AY:-2001- 2002
-------------------------------------------------------------------------------------
18 3336/A/2004 Pacific " " "
AY:-1999- Plastics 2000
-------------------------------------------------------------------------------------
19 3338/A/2004 Roshman Pet " " "
AY:-2001- Plat 2002
-------------------------------------------------------------------------------------
20 3393/A/2004 M/s Deep " " "
AY:-1999- Jyoti Textile
2000 Mills
-------------------------------------------------------------------------------------
21 3394/A/2004 M/s Deep " " "
AY:-2000- Jyoti Textile
2001 Mills
-------------------------------------------------------------------------------------
22 3416/A.2004 M/s Shivarn ITO, Vpi Shri SNL Shri PK
AY:-1999- Multiplast, Ward-4, Agrawal, Ambastha,
2000 Daman Daman Advocate Seniior DR
-------------------------------------------------------------------------------------
23 3417/A/2004 M/s Shivam ITO, Vpi " Shri PK
AY:-2000- Multiplast, Ward-4, Ambastha,
2001 Daman Daman Seniior DR
-------------------------------------------------------------------------------------
24 3724/A/2004 M/s Essel ITO, Vapi Shri SNL
AY:-1999- Industries Ward-4, Agrawal,
2000 Daman Advocate
-------------------------------------------------------------------------------------
25 3725/A/2004 M/s Essel " " "
AY:-2000- Industries 2001
-------------------------------------------------------------------------------------
26 3726/A/2004 M/s Essel " " "
AY:-2001- Industries 2002
-------------------------------------------------------------------------------------
72. In the result, two appeals filed by the Revenue i.e. ITA Nos. 2844 and 2847/Ahd/04 are allowed and remaining 24 appeals filed by the assessees are dismissed.