Judgment:
D.A. Mehta, J.
The Tribunal, Ahmedabad Bench `B, has raised the following common question for the opinion of this court under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) :
'Whether, the Tribunal is right in law and on facts in directing the Income Tax Officer to allow deduction under section 80HH before allowing weighted deduction under section 35B of the Act ?'
2. The assessment years are 1977-78 and 1978-79, the relevant accounting periods being samvat year 2032 and 2033. The assessee claimed deduction under section 80HH of the Act, without deducting weighted deduction under section 35B of the Act, from the profits and gains relatable to the industrial undertaking. The said claim was rejected by the assessing officer. In appeal, the Commissioner (Appeals) upheld the claim made by the assessee by following the decision of the Tribunal, Calcutta Bench, in the case of Bihar Mercantile Union (P) Ltd. v. ITO (IT Appeal No. 1424 (Cal) of 1982). The order of the Commissioner (Appeals) came to be confirmed by the Tribunal without assigning any independent reasons as the Tribunal chose to adopt the view expressed by the Calcutta Bench of the Tribunal.
3. Mr. M.R. Bhatt, the learned senior standing counsel appearing on behalf of the applicant-revenue, submitted that in the light of the definition of `gross total income given in section 80B(5) of the Act, it was not possible to hold that the assessee should be allowed deduction under section 80HH before allowing weighted deduction under section 35B of the Act. It was also submitted by Mr. Bhatt that the nature of income, which fell under the head 'Profits and gains of business or profession' was specified in section 28 of the Act and the mode for computing the same was prescribed in section 29 of the Act.
4. He placed reliance upon an unreported decision of this court in the case of CIT v. Cadila Chemicals (P) Ltd. (IT Reference No. 80 of 1990, dated 24-9-2001). It was submitted that an almost identical question was raised by the revenue vide question No. 2 in the said reference, the only point of difference being, there the item was initial depreciation. Thus, according to Mr. Bhatt, the controversy raised in the present reference was concluded by the decision rendered in relation to question No. 2 in the aforesaid reference.
5. In the case of Cadila Chemicals (P) Ltd. (supra), this court has taken into consideration the decision of this court in Paushak Ltd. v. CIT : [1994]210ITR535(Guj) , wherein two decisions of Cambay Electric Supply Industrial Co. Ltd. v. CIT : [1978]113ITR84(SC) and CIT v. Gautam Sarabhai : [1981]129ITR133(Guj) have been taken into consideration for holding that unabsorbed losses and unabsorbed depreciation have to be deducted before arriving at the figure that would be quantified for the purpose of deduction under section 80HH. The earlier decision has also taken into consideration the provisions of section 80AB, which have been inserted with effect from 1-4-1989.
6. Therefore, for the reasons stated in the aforesaid decision of this court, we hold that the Tribunal was not right in law in holding that the assessee should be allowed deduction under section 80HH before allowing weighted deduction under section 35B. The question referred to us is, therefore, answered in the negative, that is, in favour of the revenue and against the assessee.
The reference stands disposed of, accordingly, with no order as to costs.