TMI Blog1970 (9) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... he future profits ? Assessment year 1955-56 : (2) Whether the unutilised portion of the exemption granted under section 15C of the Indian Income-tax Act, 1922, could be carried forward to be set off against the future profits ? Assessment year 1956-57 : (3) Whether the assessee is entitled to the set-off of the tax exemption under section 15C of the Indian Income-tax Act, 1922, to which effect could not be given owing to insufficiency of profits in the assessment years 1952-53 to 1955-56 ? " The assessee is a public limited company incorporated on October 11, 1949. It own is a cement factory at Rajgangpur, District Sundergarh, Orissa, which started production from December 22, 1951. The assessment year 1952-53 (the relevant accounting period being January 1, 1951, to December 31, 1951) was thus the first year in which production was commenced for the first time, although the first assessment of the company was made in the assessment year 1951-52, when its income from interest alone was taxed. In this case we are concerned with the assessment years 1953-54, 1955-56 and 1956-57 only. The following table gives the assessment history of the assessee during the relevant year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. As those very illustrations have been given by Mr. Natesan, the learned counsel for the company appearing before us, we shall advert to them when we come to deal with the main contention urged by Mr. Natesan. It may be mentioned here that, although section 15C has been on the statute book since 1949 and has also undergone some changes, there is no decided case in which the question raised in this case has come up for discussion. The question is therefore res integra. It is apparent that the object of the section is to give impetus to the establishment of new industrial undertakings by exempting from tax, income-tax as well as super-tax, the profits of the industrial undertakings to which the section applies to the extent of six per cent. per annum on the capital employed in the undertaking. Relief under the section is available for the first five years after the undertaking goes into production. We have already seen that it was in the assessment year 1955-56 only that the assessee made profits and therefore the question of granting exemption under section 15C was raised by the assessee before the Income-tax Officer and it was contended that on the basis of the average capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re which we obviously do not possess. The plain meaning of sub-section (6) is to make the relief under this section available to the industrial unit to which the section applies for the first five years after production commences and not to carry forward the benefit from one year to another so as to give it a cumulative effect. As regards sub-section (1) all it says is that the assessee shall not have to pay tax on the profits or gains derived from the industrial undertaking owned by it to the extent of six per cent. per annum on its capital outlay in the undertaking. Since the profits or gains derived from the undertaking are the very basis of its eligibility to claim exemption, the benefit of exemption cannot possibly be extended to a year when it does not make any profits. It cannot be disputed that for the purpose of assessment to tax each year of assessment is a self-contained unit. Computation of tax is, therefore, to be made on the basis of total assessable income of the previous year and the loss of profits or gains in any year can be carried forward for the purpose of set-off to the following year under the conditions and in the manner specifically provided for in sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, agree with the Tribunal that without express words regarding the " carry forward " or " carry back " of the exemption one cannot speculate on the supposed intention of the legislature. Mr. Natesan next referred to section 80J of the Income-tax Act, 1961, where by sub-section (3) the principle of " carry-forward " and " set-off " has been made applicable to profits and gains from a newly established industrial undertaking or ships or hotel business in certain cases and submitted on the authority of a decision by Vaughan Williams J. in Attorney-General v. Wood, that the provision in the Act of 1961 would appear to be merely declaratory of the law as it stood under the Act of 1922. The argument does not appear to us to be well-founded. The scheme of section 80J is entirely different from that of section 15C. Apart from the fact that the section as introduced two other categories of income-earning units, eg., ships and hotel business, the concession given therein is in the form of deduction from profits and gains for the purpose of computing the total income of the assessee and not in the form of exemption from tax. There is a well-recognised distinction between a permissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is argument, Mr. Kirpal drew our attention to section 15 of the Act which relates to exemption in the case of life insurance and submitted that the exemption is evidently restricted to the years of assessment and it is not open to an assessee to claim the benefit of carry-forward to a subsequent year or to accumulate the unabsorbed exemption of earlier lean years for being availed of against the income of subsequent years. Even as regards the deduction in section 80J of the Act of 1961, Mr. Kirpal urged that the section had been inserted in place of original section 84 which was deleted by the Finance (No. 2) Act, 1967, with effect from April 1, 1968, but its benefit was made effective from April 1, 1967, only by expressly providing for the same. Similar language was used in other provisions also wherever the legislature wanted to give retrospective effect to them. See section 31 of the Indian Income-tax (Amendment) Act, 1953 (25 of 1955), which provided for validating certain notices and assessments under section 34 of the Income-tax Act, 1922, with respect to an earlier period or clause (iii) of section 2(m) defining the expression " net wealth " in the Wealth-tax Act, 1957. No ..... X X X X Extracts X X X X X X X X Extracts X X X X
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