Deduction u/s 80HHDD(4) not available to Utilization of Reserved Amount for the Current Year: Rajasthan HC [Read Judgment]

Rajasthan HC - Reassessment Notices - Income Tax Act - taxscan

The division bench of the Rajasthan High Court recently held that benefit of deduction under section 80HHDD(4) of the Income Tax Act is confined only to utilization of reserved amount for the previous year and the same would not be available to utilization of reserved amount for the current year.

Assessee approached the High Court against the order of the Appellate Tribunal wherein it was held that there was a preemptive utilization of the reverse and, therefore, the assessees’ claim for deduction under Section 80HHD(1) is liable to be rejected. It was further observed that no disallowance could be made to the assessee in the year under consideration, even if it is assumed that there was no utilization of reserve and thereby not properly applying Section 80HHDD(4) & (5) of the Income Tax Act.

Assessee contended that the interpretation given by the Tribunal while analyzing the provision of s. 80HHDD(4) was not correct. They further contended that as per s. 80HHDD(5), charging of the amounts which was utilised even during the same year in which the amount was credited to the reserves account and under clause (b) of sub-section (1) even the amount of Rs.42,00,000/- has been disallowed can be taxed after six years and not for the year it has been taxed.

Dismissing the arguments of the assessee, the bench found that there is no room for ambiguity in s. 80HHDD(4). “The reserve of the previous year as shown on 31st March 1999 can be utilised for the benefit of Section 80HHD and reserved amount for the current year cannot be utilised for the same year. It has to be utilised in the subsequent year and before the expiry of the period of five years and sub-clause (4) contemplates for non utilization of reserve fund which can be taxed only on completion of five years of the assessment year.”

Read the full text of the Judgment below.

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