(1)
SANTOSH S/O DWARKADAS FAFAT Vs.
STATE OF MAHARASHTRA .....Respondent D.D
10/10/2017
Facts:The appellant, Santosh, was accused of receiving misappropriated food-grains under relevant sections of the IPC and the Essential Commodities Act.The application for anticipatory bail was rejected by the lower courts, but interim protection was granted by the Supreme Court, subject to conditions.The Investigating Officer alleged non-cooperation from the appellant during the investigation, le...
(2)
ARJUN GOPAL AND OTHERS Vs.
UNION OF INDIA AND OTHERS .....Respondent D.D
09/10/2017
Facts:Arjun Gopal and others filed a writ petition seeking relief against various environmental issues, including the use of fireworks during Diwali, which worsened air quality in Delhi and the NCR.The petitioners sought interim relief, which led to the suspension of licenses for the sale of fireworks in the NCR.Subsequent proceedings involved applications for modification of the interim orders fr...
(3)
MANOHAR LAL SHARMA Vs.
CENTRALBUREAU OF INVESTIGATION .....Respondent D.D
09/10/2017
Facts: The petitioner sought CBI investigation into Indian offshore bank account holders revealed in the "Panama Papers," alleging inaction by authorities, particularly SEBI. The petitioner argued serious financial loss to the public due to manipulation of capital markets and the failure of SEBI to regulate properly. The respondents, including the Ministry of Finance and SEBI, highlighte...
(4)
NADIMINTI SURYANARAYAN MURTHY (DEAD) Vs.
KOTHURTHI KRISHNA BHASKARA RAO .....Respondent D.D
09/10/2017
Facts: The case involves an agreement made between the plaintiff and defendants for the sale of a house. However, the defendants executed a sale deed in favor of the appellant, breaching their agreement with the plaintiff.Issues: The genuineness of the agreements, the readiness and willingness of the plaintiff to perform, and the breach committed by the defendants.Held: The Trial Court and Divisio...
(5)
PLASTIBLENDS INDIA LIMITED Vs.
ADDL. COMMISSIONER OF INCOME TAX, MUMBAI .....Respondent
Section Acts, Rules, and Articles mentioned:
Section 80-IA: Income Tax Act, 1961
Section 32, Chapter VI-A, Chapter IV of the Income Tax Act, 1961.
Subject:
Interpretation of deductions under Section 80-IA of the Income Tax Act, 1961, with respect to the computation of profits and gains from industrial undertakings.
Headnotes:
Facts:
The appellants in this case were industrial undertakings engaged in infrastructural development. They claimed deductions under Section 80-IA of the Income Tax Act, 1961, for the profits and gains derived from their industrial activities.
Issues:
Whether depreciation should be reduced while computing the profits eligible for deduction under Section 80-IA, even if the appellants had chosen not to claim depreciation under Section 32.
Held:
The Full Bench of the Bombay High Court held that depreciation had to be reduced for computing the profits eligible for deduction under Section 80-IA. This decision was based on the understanding that Section 80-IA is a comprehensive provision containing both substantive and procedural provisions for the computation of special deductions. Unlike deductions under Chapter IV of the Act, which are linked to investment, deductions under Section 80-IA are linked to profits (Para 12). Any attempt to manipulate profits to inflate deductions under Section 80-IA should be rejected.
Decision: The Court dismissed the appeals, affirming that depreciation should be reduced for computing the profits eligible for deduction under Section 80-IA, as it is a complete code in itself. Allowing assesses to claim 100% deduction under Section 80-IA without considering depreciation would undermine the scheme of the provision, which is designed to incentivize industrial activities based on profits.
Referred Cases:
CIT Vs. Kirloskar Oil Engines Ltd., (1986) 157 ITR 762
CIT Vs. Mahendra Mills, (2000) 243 ITR 56
CIT, Bombay Vs. M/s Gwalior Rayon Silk Manufacturing Co. Ltd., (1992) 3 SCC 326
Commissioner of Income Tax Vs. M/s Alps Theatre, AIR 1967 SC 1437 : (1967) 3 SCR 181
Commissioner of Income Tax Vs. Sree Senhavalli Textiles P. Ltd., (2003) 259 ITR 77
Commissioner of Income Tax Vs. Williamson Financial Services, (2008) 297 ITR 17
Commissioner of Income Tax, Dibrugarh Vs. Doom Dooma India Ltd., (2009) 310 ITR 392
Commissioner of Income Tax-I, Ahmedabad Vs. Gold Coin Health Food Private Limited, (2008) 9 SCC 622
Commissioner of Income-Tax Vs. Kerala Electric Lamp Works Ltd., (2003) 261 ITR 721
Grasim Industries Ltd. Vs. Assistant Commissioner of Income-Tax, (2000) 245 ITR 677
Liberty India Vs. Commissioner of Income Tax, (2009) 317 ITR 218
Plastiblends India Limited Vs. Additional Commissioner of Income-Tax, (2009) 318 ITR 352
Scoop Industries P. Ltd. Vs. Income-Tax Officer, (2007) 289 ITR 195
Shri Ram Nath Jindal and Shri Jaghjiwan Ram Vs. The Commissioner of Income-Tax, Haryana, Rohtak, (2001) 252 ITR 590
JUDGMENT
A.K. Sikri, J.—The singular issue which needs to be considered in these appeals pertains to claim of depreciation under Section 80-IA of the Income Tax Act, 1961 (hereinafter referred to as the `Act'). Interpreting the provisions of Section 32 of the Act (which prevailed in the relevant Assessment Years[1*]) this Court in CIT v. Mahendra Mills, (2000) 243 ITR 56 held that it is a choice of an assessee whether to claim or not to claim depreciation. As aforesaid, that decision was rendered in the context of assessing business income of an assessee under Chapter IV of the Act which is regulated by Sections 28 to 43D of the Act. Section 32 deals with depreciation and allows the deductions enumerated therein from the profits and gains of business or profession. Section 80-IA of the Act, on the other hand, contains a special provision for assessment of industrial undertakings or enterprises which are engaged in infrastructure development etc. This provision allows certain specific kind of deductions in respect of depreciation. The issue is as to whether claim for deduction on account of depreciation under Section 80-IA is the choice of the assessees or it has to be necessarily taken into consideration while computing the income under this provision. For better understanding of the aforesaid issue, the factual environment in which the aforesaid question has germinated, needs to be recapitulated. For the sake of convenience, facts appearing in Civil Appeal No. 238 of 2012 are taken note of.
[1* Section 32 was amended by Finance Act, 2001 and Explanation 5 was added to nullify the effect of Mahendra Mills case.]
2. The Assessment Years involved in this appeal are 1997-98 to 2000-01. The assessee is engaged in the business of manufacture of master batches and compounds. For this purpose, it had manufacturing undertakings at Daman Units I and II. Units I and II began to manufacture article or things in the previous years relevant to Assessment Years 1994-95 and 1995-96 respectively. Accordingly, for the year under consideration i.e. Assessment Year 1997-98 profits of the business of both the undertakings were eligible for 100% deduction under Section 80-IA of the Act. The assessee did not claim depreciation while computing its income under the head profits and gains of business. Consequently, deduction under Section 80-IA was also claimed on the basis of such profits i.e. without reducing the same by depreciation allowance. This position was accepted by the Assessing Officer (AO) in an intimation made under Section 143(1)(a) of the Act. Likewise, for the Assessment Year 1996-97, the assessee did not claim deduction on account of depreciation. Though, this position was not accepted by the AO, the claim of the assessee was upheld by the Tribunal.
3. Coming to the Assessment Year 1997-98, from which Assessment Year the dispute has arisen, the annual accounts prepared by the assessee for the year disclosed that it earned a net profit of Rs. 1,80,85,409/-. This was arrived at after charging depreciation of Rs. 64,98,968/- in accordance with the Companies Act, 1956. The assessee filed its return of income for Assessment Year 1997-98 determining the gross total income at Rs. 2,46,04,962/-. The gross total income included profits and gains derived from business of undertakings I and II at Daman aggregating to Rs. 2,46,04,962/- which profits were eligible for deduction under Section 80-IA of the Act. After reducing the gross total income by the deductions available under Section 80-IA, the total income was computed at Rs. Nil. The AO initiated reassessment proceedings and passed an assessment order under Section 143(3) read with Section 147 computing the gross total income at Rs. 34,15,583/-. Though, the assessee had disclaimed deduction in respect of depreciation, the AO allowed deduction on this account as well in respect of the same in the sum of Rs. 2,13,89,379/- while computing the profit and gains of business. After reducing the gross total income by the brought forward loss of Rs. 98,47,170/-, he determined the business loss to be carried forward to Assessment Year 1998-99 at Rs. 66,25,587/-.
Aggrieved by the said assessment order, the assessee filed the appeal before the Commissioner of Income Tax (Appeals) {CIT(A)} urging that the AO erred in not considering the Tribunal's decision in the assessee's own case for the Assessment Year 1996-97 wherein it had been held that depreciation cannot be thrust on it. The CIT(A) upheld the assessee's submission that claim for depreciation is optional, based on the Tribunal's order in its own case for Assessment Year 1996-97 and hence allowed the appeal.
Aggrieved by the appellate order of the CIT(A), the AO filed an appeal before the Tribunal with the plea that CIT(A) erred in directing him to work out business profit and deduction under Section 80-IA of the Act without taking into account the corresponding depreciation amount. The Tribunal reversed the appellate order of the CIT(A) following the decision of the High Court of Bombay in Scoop Industries P. Ltd. v. Income-Tax Officer, (2007) 289 ITR 195. Aggrieved by the Tribunal's order, the assessee filed the appeal thereagainst before the High Court of Bombay under Section 260A of the Act on the basis that a substantial question of law arose for consideration. The High Court was pleased to admit the appeal and formulated the following question of law as arising for determination:
"Whether the eligible income of an undertaking in respect of which deductions available under Section 80-IA has to be reduced by the allowance of depreciation for the year even though the assessee has exercised the option not to claim depreciation under Section 32 in arriving at its income of the undertaking for the purposes of computing the assessee's income under the head profits and gains of business or profession?"
The Division Bench of the High Court at Bombay in the assessee's case noticed that there was a conflict of opinion in two earlier decisions viz. Grasim Industries Ltd. v. Assistant Commissioner of Income-Tax & Ors., (2000) 245 ITR 677 wherein it was held that the profits and gains eligible for deduction under Chapter VI-A shall be the same as profits and gains computed in accordance with the provisions of the Act and included in the gross total income and the decision in Scoop Industries P. Ltd. where it was held that depreciation whether claimed or not has to be reduced for arriving at the profits eligible for deduction under Chapter VI-A. Noticing this conflict of opinion, the matter was referred to the Full Bench, to resolve the conflict.
The Full Bench of the High Court of Bombay has upheld the stand of the Revenue, that, whilst computing a deduction under Chapter VI-A, it was mandatory to grant deduction by way of depreciation. The High Court has proceeded on the basis that the computation of profits and gains for the purposes of Chapter VI-A is different from computation of profits under the head `profits and gains of business'. It has, therefore, concluded that, even assuming that the assessee had an option to disclaim current depreciation in computing the business income, depreciation had to be reduced for computing the profits eligible for deduction under Section 80-IA of the Act. The High Court concluded that Section 80-IA provides for a special deduction linked with profits and is a code by itself and in so doing relied on the decisions of this Court in the case of Liberty India v. Commissioner of Income Tax, (2009) 317 ITR 218, Commissioner of Income Tax v. Williamson Financial Services & Ors., (2008) 297 ITR 17 and Commissioner of Income Tax, Dibrugarh v. Doom Dooma India Ltd., (2009) 310 ITR 392. The High Court proceeded on the basis that this Court in the aforementioned decisions has held that for computing such special deduction, any device adopted by an assessee to reduce or inflate the profits of such eligible business has to be rejected. The High Court ultimately held that the quantum of deduction eligible under Section 80-IA has to be determined by computing the gross total income from business after taking into consideration all the deductions allowable under Sections 30 to 43D including depreciation under Section 32.
4. After the Full Bench answered the reference in the aforesaid manner, the appeal of the assessee was disposed of by the Division Bench vide order dated November 03, 2009 following the aforesaid opinion of the Full Bench. This is how the matter has travelled up to this Court.
5. The relevant portion of the provisions of Section 80-IA of the Act, which was in vague during the concerned Assessment Years[8*], reads as under:
[8* It may be mentioned that Section 80-IA inserted by the Finance (No.2) Act, 1991 and was amended from time to time. The provision was recasted and substituted by Finance Act, 2001 and certain amendments made to that provision also thereafter. We are, however, concerned with the provision that was in force before its amendment vide Finance Act, 2001.]
"80-IA. Deductions in respect of profits and gains from industrial undertakings etc., in certain cases.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange services or construction and development of housing projects or operating an industrial park or commercial production or refining of mineral oil in the North Eastern Region or in any part of India on or after the 1st day of April, 1997 (such business being hereinafter referred to as the eligible business), 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 the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6)."
6. It is not in dispute that all the assessees in these appeals are those industrial undertakings which fulfil the conditions mentioned in Section 80-IA and, therefore, are entitled to deductions as stipulated in sub-section (5) of the said Section. It is also not in dispute that all the assessees fall in that category of industrial undertakings which are entitled to 100% deduction of the profits and gains derived from such industrial undertakings for the specified number of years. It is also an admitted fact that for the Assessment Years in question, they were entitled to the aforesaid deduction and their assessments were completed under Section 80-IA of the Act. Submission of Mr. Pardiwala, the learned senior counsel for the assessees, was that deduction is to be allowed from `such profits and gains' and, therefore, in the first instance, profits and gains which are earned by the assessees in the relevant Assessment Year are to be computed. For computation of such profits and gains, one has to go back and apply the provisions from Section 28 onwards contained in Part D of Chapter IV dealing with `profits and gains from business or profession'. Section 29 of the Act, in this behalf, specifically stipulates that income referred to in Section 28 shall be computed in accordance with provisions contained in Sections 30 to 43D. In this hue, he argued, when it comes to claiming depreciation, Section 32 of the Act gets attracted and interpreting this D.D
09/10/2017
Facts: The appellants in this case were industrial undertakings engaged in infrastructural development. They claimed deductions under Section 80-IA of the Income Tax Act, 1961, for the profits and gains derived from their industrial activities.Issues: Whether depreciation should be reduced while computing the profits eligible for deduction under Section 80-IA, even if the appellants had chosen not...
(6)
RAJESH KUMAR C.K. JAIN Vs.
STATE OF KARNATAKA .....Respondent D.D
09/10/2017
Facts:Dispute regarding entries in Pahani (land record) concerning certain survey numbers.Allegation of a settlement reached between parties, reduced to writing on a bond paper.Appellant accused of taking the bond paper without permission and later returning it torn.Conviction by trial court under IPC sections 379 (theft) and 201 (causing disappearance of evidence) based on the statement of the in...
(7)
STATE OF KERALA AND OTHERS Vs.
FR. WILLIAM FERNANDEZ ETC. ETC. .....Respondent D.D
09/10/2017
Facts: The case concerned the imposition of entry tax on goods imported from outside India by the State of Kerala and others.Issues: The legislative competence of the State Legislature to impose entry tax on imported goods and the interpretation of relevant statutes.Held:The Court held that the State Legislature had the legislative competence to impose entry tax on goods entering a local area from...
(8)
STATE (NCT OF DELHI) Vs.
BRIJESH SINGH @ ARUN KUMAR .....Respondent D.D
09/10/2017
Facts: The case involved the interpretation of various provisions of MCOCA in the context of the prosecution of the respondents under the Act. The charge-sheet mentioned multiple FIRs filed in Delhi and Uttar Pradesh, leading to a dispute over jurisdiction and the application of MCOCA.Issues: The interpretation of MCOCA, particularly regarding the territorial jurisdiction, the definition of "...
(9)
BIRBAL CHOUDHARY @ MUKHIYA JEE Vs.
STATE OF BIHAR .....Respondent D.D
06/10/2017
Facts:The case involves the conviction of several appellants-accused under various sections of the Indian Penal Code (IPC) including Sections 364A, 395, and 412.The trial court based its conviction on witness testimonies, identification parades, and recoveries. Some accused were sentenced to death or life imprisonment due to their criminal antecedents.The High Court confirmed the convictions but r...