COMMISSIONER OF INCOME-TAX vs. SABARKANTHA DISTRICT CO-OP. MILK PRODUCERS UNION LTD.

ITR/222/1984HC GujaratGJHC24011896198410 February 1999Author: HONOURABLE DR. JUSTICE J.N.BHATT,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
AI SummaryDismissed

What were the facts?

The assessee, Sabarkantha District Co-op. Milk Producers Union Ltd., is a co-operative society. For Assessment Years 1976-77 and 1977-78, it claimed deduction under Section 80P of the Income-tax Act, 1961. The Income Tax Officer (ITO) denied this deduction due to unabsorbed depreciation and development rebate from past years, resulting in a computed income of nil. The Commissioner of Income-tax (Appeals) upheld the denial, citing Sections 80B(5) and 80A(2) and the Supreme Court decision in Cambay Electric Supply Industrial Co. Ltd. The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeal, relying on the Madras High Court decision in CIT v. Katpadi Co-operative Timber Works Ltd. The Revenue has filed this reference application to the High Court.

What did the High Court hold?

The High Court answered the reference in the negative, against the assessee and in favour of the Revenue. The Court noted that the ITAT's decision relied on the Madras High Court's interpretation of Section 80P, which in turn relied on the Supreme Court's decision in Cloth Traders (P.) Ltd. However, the Revenue brought to the Court's attention that the Cloth Traders decision had been reversed by the Supreme Court in Distributors (Baroda) Pvt. Ltd. The Court observed that the Kotagiri Industrial Co-operative Tea Factory Ltd. decision followed the later Supreme Court ruling. Therefore, in view of the latest Supreme Court decision which reversed the earlier one relied upon by the ITAT, the High Court held that unabsorbed depreciation and development rebate are not deductible before allowing deduction under Section 80P. The reference was disposed of accordingly.

What were the issues?

1. Whether unabsorbed depreciation under section 32(2) and unabsorbed development rebate under section 32(2)(iii) are deductible before allowing deduction under section 80P of the Income-tax Act, 1961, for Assessment Years 1976-77 and 1977-78? (Question of law) Assessee's Contention: The ITAT allowed the deduction, relying on CIT v. Katpadi Co-operative Timber Works Ltd. (135 ITR 287), which in turn relied on Cloth Traders (P.) Ltd. v. Addl. CIT (118 ITR 243). Revenue's Contention: The Revenue argued that the assessee is not entitled to the benefit under Section 80P due to the provisions of Section 80B(5). The Revenue also pointed out that the Supreme Court decision in Cloth Traders (P.) Ltd. (supra) was reversed by Distributors (Baroda) Pvt. Ltd. v. Union of India (155 ITR 120), a decision followed in Kotagiri Industrial Co-operative Tea Factory Ltd. (225 ITR 604).

Which sections of the Income-tax Act were involved?

Section 32(2),Section 32(2)(iii),Section 80P,Section 80B(5),Section 80A(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 222 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE J.N.BHATT and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? 1 & 2 Yes

The order continues below.

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