TMI Blog1993 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... djustments were given to the extent permissible. The assessee was also having carried forward losses of ₹ 6,65,000. After examining the income-tax records for the assessment year 1976-77, the Commissioner of Income-tax issued a show-cause notice dated December 20, 1978, under section 263 of the Act wherein it is, inter alia, stated that the Income-tax Officer has erred in computing the total income for the assessment year 1976-77 and has wrongly given the deduction of ₹ 1,02,578 under section 80M of the Act because the gross total income, as computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A, was nil in the case of the assessee. Therefore, there was no question of giving any deduction under section 80M of the Act. It was also stated that the loss of ₹ 6,84,909 on account of the goods alleged to have been destroyed by fire has also been allowed without proper scrutiny and enquiry. He, therefore, proposed that the order passed by the Income-tax Officer requires to be set aside. In pursuance of the show-cause notice dated December 20, 1978, the assessee replied by letter dated January 9, 1979. After considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee filed reference applications. At the instance of the Revenue and the assessee, the Tribunal has referred the following questions for our opinion under section 256(1) of the Act : At the instance of the Revenue : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that as the Income-tax Officer had not adjusted any carried forward loss in his assessment order but what was adjusted was unabsorbed depreciation and unabsorbed development rebate of earlier years, the order of the Commissioner of Income-tax under section 263 cannot survive ?... 5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order of the Commissioner of Income-tax under section 263 cannot survive? At the instance of the assessee : 2. If answer to question No. 1 (above) is in the negative, whether, on the facts and in the circumstances of the case, the assessee had an option not to set off loss of Kanisha Steels against the income from a different source taxable under the head 'Business income' ? 3. If the answer to question No. 2 is in the affirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Commissioner of Income-tax has set aside the order only on the ground that the profits required to be adjusted against the carried forward losses of the earlier years. The Commissioner of Income-tax has merely indicated that, as per the principles laid down by the Supreme Court, before grant of benefit under section 80M, there should be a surplus. The Commissioner has finally directed the Income-tax Officer to withdraw the deduction allowed under section 80M in respect of inter-corporate dividends of ₹ 1,02,578 and pass a fresh order after giving reasonable opportunity of hearing to the assessee. This part of the order would mean that the Income-tax Officer should withdraw the deduction allowed under section 80M and pass an (sic) cannot be said that the Commissioner has directed that the profits of the assessee-company should first be adjusted against the carried forward loss of the earlier years. In the order of the Commissioner of Income-tax, there is no such direction. In this view of the matter, the Tribunal manifestly erred in not properly considering the show-cause notice issued and the final order passed by the Commissioner of Income-tax under section 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions contained in sections 32 and 33. Thereafter, the court considered the question as to at what stage the benefit under section 80E(1) can be given. The relevant observations are as under : The purpose for which section 80E is enacted is to provide for certain deduction to be made in computing total income in the case of specified industries. This deduction is over and above other general deductions contemplated by the Act. Depreciation allowance and development rebate--whether current or carried forward--go to reduce the figure of total income and hence the assessee concerned has to pay less tax to the extent to which the said figure stands reduced. The special deduction contemplated by section 80E(1) was not intended to result in a double benefit on the same amount. If the contention of the assessee is accepted it would obviously result in a double benefit as will be clear from the following illustration : Suppose an assessee's total income from the business of a specified industry, without deducting depreciation and development rebate, is 'X'. But after deducting these two items it becomes 'X (A plus B)'. Here (A plus B) represents that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to the eight per cent. deduction, and observed as under (at page 95 of 113 ITR) : It is not possible to accept this contention for ore than one reason. First, in sub-section (1) of section 80E, the expression 'total income' is followed by the words 'as computed in accordance with the other provisions of this Act' in parenthesis and the mandate of these words clearly negatives the argument that the expression 'total income' has been used in the sense of commercial profits. Secondly, the expression 'total income' has been defined in section 2(45) of the Act as meaning 'the total amount of income referred to in section 5, computed in the manner laid down in this Act' and when this definition has been furnished by the Act itself the expression as appearing in section 80E(1) must, in the absence of anything in the context suggesting to the contrary, be construed in accordance with such definition. Since the words in parenthesis occurring in sub-section (1) lay down the manner in which the total income of the concerned assessee is to be computed there would be no scope for excluding items like unabsorbed depreciation and unabsorbed develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illing Trading Company Private Ltd. is totally misconceived. Section 71(1), interalia, provides that where in respect of any assessment year the net result of the computation under any head of income, other than Capital gains is a loss and the assessee has no income under the head Capital gains , he is entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head. Therefore, the Tribunal rightly arrived at the conclusion that irrespective of adjustments under sections 70, 71 and 72(1) income from all sources accruing to the assessee in the year had necessarily to go into the calculation of total income. The Tribunal further rightly observed that section 72 provided for carried forward loss only when such loss cannot be set off against income under any other head and the present case of the assessee is not covered by such provision. For calculating the total income of the assessee, profits and losses from different sources of income are required to be taken into consideration. Under the Act, there is no provision which gives an option to the assessee to show the profit as income from one source and carry ..... X X X X Extracts X X X X X X X X Extracts X X X X
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