The Nakodar Cooperative Sugar Mills, Ltd., Nakodar V. Commissioner of Income Tax-II, Jalandhar and another

ITA/2/2006

AI Insights

The case involves The Nakodar Cooperative Sugar Mills, Ltd., Nakodar, the appellant, against the Commissioner of Income Tax-II, Jalandhar, and another, the respondents. The core issue was the computation of profits and gains derived from an industrial undertaking for the purposes of computing deduction under Section 80-I of the Income Tax Act, 1961, specifically whether losses brought forward from the previous assessment years 1992-93 and 1993-94 should be set off from the total income. The Income Tax Appellate Tribunal had earlier ruled against the appellant, leading to this appeal. The High Court of Punjab and Haryana, referencing a Supreme Court decision, dismissed the appeal, affirming that the brought-forward losses should be set off before calculating the deduction under Section 80-I.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 796362 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 21-02-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-Tax v. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (SC)
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: M R SHARMA
• Keywords: Assessment Year; Brought forward losses; Deduction; Income Tax; Industrial Undertaking; Taxable income
• Section: 143(3); 154; 72; 260A; 143(1A); 80-I; 80-P(2)(a)(iii)

Judgement Text

" 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 of 2006 2 Amritsar Bench, Amritsar (in short “the Tribunal”) in ITA No. 61(ASR)/ 2004, relating to the assessment year 1994-95. The following substantial questions of law have been claimed for determination by this Court: (i) Whether in the facts and circumstances of the case, the orders, Annexure P-1, P-2 and P-3 are legally sustainable? (ii) 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 u/s 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? (iii) 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? The facts, in brief, necessary for adjudication as narrated in the appeal, are that the appellant-assessee is engaged in manufacturing of sugar etc for which the sugarcane is the main raw material. The sale of sugar is controlled by the Government and the rate of sugarcane is also fixed by the Government of India. The appellant-society runs a Sugar Mill at Nakodar in the State of Punjab and the sugarcane growers are the members of the said Society. The appellant filed its return for the assessment year 1994- 95 on 31.10.1994 declaring nil taxable income. The assessing officer completed assessment under Section 143(1A) vide order dated Income-tax Appeal No. 2 of 2006 3 30.12.1994 and subject to certain adjustments, assessed the net income at 3,85,39,654/-. The assessee sought refund after claiming deduction under Section 80-P(2) (a)(iii) of the Act. The assessing officer, however, refused to refund as claimed by the assessee but only allowed deduction of Rs. 90,87,694/-, under Section 80-I of the Act. The assessee claims that the Revenue does not dispute the admissibility of the assessee with regard to deduction under Section 80-I of the Act and the sole dispute is about the quantum of such deduction only. Elaborating the controversy, it is further stated in the appeal that the perusal of assessment order dated 27.3.1996 would reveal that while completing assessment under Section 143(3) the assessing officer worked out the income at Rs.6,81,22,461/- and reduced the brought-forward losses of Rs. 2,21,76,475/- and Rs. 5,58,327/- for the assessment years 1992-93 and 1993-94 respectively and thereby worked out the taxable income at Rs. 4,54,38,472/- and then allowed deduction at the rate of 20% thereon, under Section 80-I at Rs.90,87,694/-. According to the assessee, the assessing officer ought to have allowed the deduction on income of Rs. 6,81,22,461/- which worked out to Rs.1,36,24,492/- as against the amount of Rs.90,87,694/-. The application of the assessee moved under Section 154 of the Act on 18.6.2001 for rectification of the order dated 27.3.1996 of the assessing officer was rejected vide order dated 25.10.2001. Appeal of the assessee was allowed by the Commissioner of Income Tax (Appeals), [hereinafter referred to as “CIT(A)”] vide order dated 5.11.2003. The Revenue carried appeal against the order of the CIT(A) before the Tribunal. The Tribunal, vide order under appeal, allowed the appeal of the Revenue holding that the CIT(A) was not Income-tax Appeal No. 2 of 2006 4 justified in allowing deduction under Section 80-I of the Act without setting off the brought-forward business losses of the assessment years 1992-93 and 1993-94. This is how the assessee is in appeal before us. The point in issue is, whether for determination of profits for the purposes of deduction under Section 80-I of the Act, the unabsorbed business losses of earlier years under Section 72 of the Act should be set off. Learned counsel for the appellant-assessee very fairly conceded that the issue raised in this appeal is covered by the judgment of the apex Court in Commissioner of Income-Tax v. Shirke Construction Equipment Ltd. (2007) 291 ITR 380 (SC) and stands concluded against the assessee. In view of the above, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) February 21, 2011 JUDGE *rkmalik* "