Back
Allows Secure Meters' Appeal on Computation of Deductions Under
The , in a significant ruling on , allowed an appeal by Secure Meters Ltd., holding that deductions under different provisions of the must be computed independently. The Division Bench of Dr. Justice Pushpendra Singh Bhati and Mr. Justice Praveer Bhatnagar set aside the 's order regarding the computation of deductions under and for .
Background of the Case
Secure Meters Ltd., engaged in manufacturing solid-state electronic energy meters, had claimed deductions under for its units at Bated, Barotiwala, and Udaipur. It also claimed a deduction under in respect of export turnover. The dispute arose when the Assessing Officer required the appellant to reduce the deduction claimed under from business profits before computing the deduction under .
Additionally, a sum of Rs. 7,77,607 comprising additional Central Sales Tax of Rs. 6,58,989 and interest of Rs. 1,18,618 was claimed as . The Assessing Officer treated this as and disallowed it. While the allowed the claim, the Tribunal held that the amount formed part of the and directed that depreciation be allowed.
The First Legal Issue: Independent Computation of Deductions
The core question was whether, under (3), the profits of the business should be reduced by the amount of deduction allowed under . The Revenue argued that , read with , was intended to prevent repeated deduction in respect of the same profits.
The High Court, relying on the 's decision in Shital Fibers Ltd. v. Commissioner of Income Tax (2025) 476 ITR 309 (SC), held that the restriction under operates only at the stage of allowance, not computation. The Court observed:
"The deduction under was required to be computed independently in accordance with the formula prescribed under (3) … After such computation, , read with , would operate at the stage of allowance so that the same profits are not subjected to repeated deduction."
Thus, the first was answered in the negative, in favor of the .
The Second Legal Issue: Modification of
The second issue concerned whether the actual cost of assets, which had already formed part of the in a preceding year, could be modified in a subsequent year without a specific statutory provision. The Tribunal had treated the entire Rs. 7,77,607 as part of the actual cost and directed depreciation.
The High Court found that the Tribunal failed to separately examine the nature of the additional sales tax and interest, or identify the statutory provision permitting adjustment of . The Court set aside the Tribunal's findings and remanded the issue to the Assessing Officer for fresh determination. The Court directed the Assessing Officer to:
- Examine the invoice/debit note and underlying purchases;
- Determine separately the nature of the additional sales tax and interest;
- Identify the year of ;
- Consider whether either component is allowable as ;
- If any component is claimed as part of actual cost, identify the assets and the statutory provision permitting adjustment.
The second substantial question was answered in the negative, with the observation that
"actual cost already incorporated into the written-down value of the relevant block could not be modified in a subsequent year without identifying the statutory provision and recording the findings necessary for such adjustment."
Court's Decision
The High Court allowed the appeal in the following terms:
- The deduction under shall be computed independently, and the restriction under read with shall apply only at the stage of allowance.
- The issue concerning Rs. 7,77,607 is remanded to the Assessing Officer for fresh consideration in accordance with the directions given.
- The remaining findings of the Tribunal not challenged stand undisturbed.
The judgment provides clarity on the interplay between deductions under and reinforces the principle that each deduction must be computed according to its own formula, with operating only at the .
