9911796707
TMI Blog1972 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by the assessee and the relief admissible as per the Income-tax Officer is as under : -------------------------------------------------------------------------------------------------------------------------------------------------- Item Appellant's working -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Tea income liable to charge 1,18,214 Less: Relief under sec. 80E @ 8% 9,457 ------------------ 1,08,757 Less: Loss in plastic business 48,105 ------------------- Rs. 60,652 -------------------- The Income-tax Officer's working is as under : -------------------------------------------------------------------------------------------------------------------------------------------------- Item Income-tax Officer's working -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Tea income liable to charge 1,18,214 Less : Loss in plastic business 48,105 -------------------- Balance 70,109 Less: Relief under sec. 80E @ 8% 5,608 -------------------- 64,501 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses of different businesses carried on by an assessee. Section 80E(1), in his opinion, provides, as it does, that every allowance has to be made first and thereafter the allowances under section 80E(1) are taken into consideration. In that view of the matter, he confirmed the order of the Income-tax Officer. 6. The assessee came up in further appeal before the Appellate Tribunal. It was contended that deduction under section 80E at 8% of the profits and gains attributable to the manufacturing business should have been accorded. The Income-tax Officer's action in deducting from the income attributable to an activity specified in the 5th Schedule of a loss from another activity not mentioned therein could not be justified on any grounds. It was further contended that for the purpose of deduction under section 80E profit of the tea business as determined under the Income-tax Act should have been considered and not the net income after setting off the losses from another business. 7. The Appellate Tribunal examined the position. In this context it referred to the provisions of section 80E which are in the following terms : " 80E. Deduction in respect of Profits and gains from spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the very same activity. It accordingly was of tile opinion that deduction had to be made on such profits which were attributable to such an activity. In that view of the matter, the Appellate Tribunal held that the assessee was entitled to a relief of Rs. 9,457 and not Rs. 5,608 as accorded to it by the Income-tax Officer. 9. From the aforesaid order of the Appellate Tribunal, tile following question of law arises : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the purpose of allowing a deduction under section 80E of the Income-tax Act, 1961, the words such profits' occurring in that section mean ' the profits and gains attributable to an activity as specified in the 5th Schedule ' before deducting any loss incurred in any business activity ? [After setting out the statement of the case, GOVINDA BHAT J. Continued] This is a reference under section 256(1) of the Income-tax Act, 1961, hereinafter called " the Act ". In relates to the assessment year : 1966-67. The assessee is a limited company which owns tea, coffee, and rubber plantations from which it derived income during the relevant accounting year. It also car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said section has now been replaced by section 80-I. Sub-section (1) of section 80E reads thus: " 80E. Deduction in respect of Profits and gains from specified industries in the case of certain companies.--(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. (Underlining is ours). Briefly stated, the argument of Sri Rajasekhara Murthy was that the effect of this provision is that the deduction under section 80E will be allowed from the profits from the specified priority industries as computed after allowing all the deductions admissible in computing the business income under sections 30 to 43 of the Act, and also after giving effect to the relevant provisions for set-of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business loss carried forward from earlier years should be set off on a proportionate basis, both against the profits from the specified priority industries and the profits from other business activities. If the loss is set off on a proportionate basis, the quantum of the deduction available in respect of the former profits under section 80E of the Income-tax Act may be reduced to the disadvantage of the company. The Income-tax Act does not, however, provide for the set-off of losses on a proportionate basis against income from different types or categories of business activities. It will, therefore, be permissible for the company to claim that the loss should be set off, in the first instance, against its business profits other than profits from the specified priority industries and as to the balance, if any, against its profits from the specified priority industries." We are unable to agree with the views of the Central Board of Direct Taxes that the effect of the provision is that the deduction under section 80E will be allowed from the profits from the specified priority industries, as computed after allowing all the deductions admissible in computing the business income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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