M/S THE NAKODAR COOP. SUGAR MILLS LTD. vs. COMMISSIONER OF INCOME TAX AND ANR.

ITA/2/2006HC Punjab & HaryanaPHHC01074887200621 February 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL4 pages
AI SummaryDismissed

What were the facts?

The assessee, Nakodar Cooperative Sugar Mills Ltd., filed an appeal under Section 260A of the Income-Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated October 27, 2005. The appeal pertains to assessment year 1994-95. The assessee's return declared nil taxable income, but the Assessing Officer (AO) assessed net income at Rs. 3,85,39,654/-. The AO allowed a deduction of Rs. 90,87,694/- under Section 80-I. The assessee contended that the AO should have allowed a higher deduction of Rs. 1,36,24,492/-. The dispute centers on whether brought-forward losses from assessment years 1992-93 and 1993-94 should be set off against the income before calculating the deduction under Section 80-I. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, but the ITAT reversed this, allowing the Revenue's appeal.

What did the High Court hold?

The High Court held that the issue raised in the appeal is covered by the judgment of the Supreme Court in Commissioner of Income-Tax v. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (SC). In that judgment, the Apex Court had held that for the purpose of computing deduction under Section 80-I, losses brought forward from previous years are to be set off against the profits of the current year. Therefore, the Tribunal was correct in holding that brought-forward losses of assessment years 1992-93 and 1993-94 should be set off before allowing deduction under Section 80-I. The reasoning is that the deduction under Section 80-I is to be computed on the profits and gains of the industrial undertaking, and such profits and gains must be arrived at after considering all eligible set-offs, including brought-forward losses under Section 72. The ratio decidendi is that the 'profits and gains' for Section 80-I deduction are net profits after set-off of losses. The appeal was dismissed.

What were the issues?

1. Whether in the facts and circumstances of the case, the orders of the authorities below are legally sustainable? (Mixed law and fact, concerning the overall validity of the orders). 2. Whether the Tribunal is correct in law in holding that while computing the profits and gains derived from an industrial undertaking for the purposes of computing deduction under Section 80-I, the losses brought forward from the previous assessment years 1992-93 and 1993-94 are to be set off from the total income? (Question of law, concerning Section 80-I and set off of losses). 3. Whether in the facts and circumstances of the case, the order disallowing the deduction under Section 80-I is legally sustainable, the same being based on mere presumptions and surmises and mere difference of opinion which cannot form the basis of adjudication? (Mixed law and fact, concerning the basis of the disallowance). Assessee's Contentions: The assessee argued that the deduction under Section 80-I should be calculated on the income of Rs. 6,81,22,461/- without setting off the brought-forward losses, leading to a higher deduction. The assessee also contended that the disallowance was based on presumptions and surmises. Revenue's Contentions: The Revenue contended that brought-forward losses from assessment years 1992-93 and 1993-94 must be set off against the income before computing the deduction under Section 80-I. The ITAT upheld this view.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80-I,Section 72,Section 143(1A),Section 143(3),Section 154,Section 80-P(2)(a)(iii)

AI-generated summary — verify with the full judgment below

Income-tax Appeal No. 2 of 2006 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 2 of 2006 Date of decision: 21.2.2011 The Nakodar Cooperative Sugar Mills, Ltd., Nakodar --- Appellant Versus Commissioner of Income Tax-II, Jalandhar and another --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. M.R. Sharma, Advocate for the appellant-assessee. --- AJAY KUMAR MITTAL, J. The paper-book of this case has not been received from the concerned Branch as the same is said to have burnt in the fire incident that took place in the premises of this Court on the night of 30 th January, 2011. Learned counsel for the appellant has made available two copies of paper-book to the Court for reconstruction of the file. The said copies are taken on record and the paper-book of the appeal is treated as having been re-constructed. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the assessee against the order dated 27.10.2005, passed by the Income Tax Appellate Tribunal

Income-tax Appeal No. 2

The order continues below.

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