TMI Blog1972 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... re used for spraying, etc. The assessment year is 1966-67 for which the corresponding account year is the year ended 31st March, 1966. 2. The assessee claimed a deduction of an amount equal to 8% of the profits which were attributable in respect of an activity mentioned in the 5th Schedule to section 80E of the Income-tax Act. 3. The profits attributable to the business of tea plantation amounted to Rs. 1,18,214. On this amount the assessee claimed a deduction equal to 8%. The relief claimed by the assessee worked out to Rs. 9,457. As against this the Income-tax Officer, however, allowed only a sum of Rs. 5,608. The relief as claimed 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 pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from payment of tax by newly established undertakings and, in the natural sequence of computation of tax, the amount of losses carried forward is liable to be deducted out of the income of the year of account and it is only after the question of tax is ascertained, exemption from payment to the prescribed extent will be given by the taxing authorities. " 5. The Appellate Assistant Commissioner considered that section 80E(1) specifically provided that before allowance was made under this section the total income should be computed as in accordance with the other provisions of the Act. The total income, according to him, is computed by aggregating the profits and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of a provision which did not create such a differentiation. Section 15C of the Indian Income-tax Act, 1922, and section 80E, in the opinion of the Appellate Tribunal, had no similar connotation. It affirmed the fact that in computing the total income liable to tax various factors have to be taken into consideration. In the ordinary course, in computing the total income the losses arising to an assessee from another business have to be given allowance for. As, in this case, the section itself provided for relief in respect of activities enumerated in the section and the Schedule annexed thereto, the deduction of an allowance of 8% was provided from the profits of 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 holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the 5th Schedule ' before deducting any loss incurred in any business activity? Sri S. R. Rajasekhara Murthy, learned counsel for the department, conceded, and in our opinion rightly, that the decision of the Bombay High Court in Commissioner of Income-tax v. National Electrical Industries Ltd. on which strong reliance was placed by the department before the Tribunal, has no relevance to the facts of the present case. The learned counsel on both sides submitted that there is no decision of any court on the question before us. The answer to the question rests on the interpretation of subsection (1) of section 80E which was introduced by the Finance Act of 1966. The 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, manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant provisions for set-off or carry-forward of loss, contained in Chapter VI of that Act. The business income of a company may consist of profits from the specified priority Industries, as well as profits from other business activities, and the company may also have a loss in the same previous year under a head of income other than ' profits and gains of business or profession ' or a business loss carried forward from earlier years and eligible for set-off against the business profits of that previous year. In such a case, a question may arise as to whether the loss of the relevant previous year under a head other than ' Profits and gains of business or profession ', or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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