TMI Blog1993 (3) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 3,04,734 carried forward to the assessment year 1972-73 ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that the assessee was entitled to claim full deduction under sections 80K and 80L of the Income-tax Act, 1961, before taking into account the net business loss? (4) Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that there was no mistake as such in the order for the assessment year 1972-73 as made by the Income-tax Officer which could be revised by the Commissioner as the mistake, if any, was in the order for the assessment year 1971-72 alone ?" The assessee is a company. For the assessment year 1971-72, the assessment of the income of the assessee was made under section 143(3) of the Income-tax Act, 1961 ("the Act"), by the Income-tax Officer on November 27, 1973, whereby the total income of the assessee was determined at Rs. 1,58,467. This figure was arrived at by reducing from the gross dividend of Rs. 4,65,000, the permissible deductions under sections 80K and 80L of the Act and to this was added, inter alia, technical assistance fees of Rs. 1,56,777 on accrual basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, for the assessment year 1971-72, the Income-tax Officer should have first set off the business loss against the gross income from other sources and then he should have reduced the balance to nil by giving relief to the extent permissible under sections 80K and 80L. As a consequence, in his opinion, no business loss was available for being carried forward to the subsequent year and no question could, therefore, arise of setting Off any business loss in the subsequent year. He issued a show-cause notice to the assessee and, on consideration of the cause shown, rejected the assessee's claim that the order passed by the Income-tax Officer was correct in law. The assessee's contention before the Commissioner of Income-tax was that the assessee was entitled under section 71 to claim set off of the loss in the year in which it occurred or in the subsequent year or partly in one year and partly in the other year according to his choice. The Commissioner of Income-tax did not accept this contention of the assessee and, by his revisional order for the assessment year 1971-72, held that, because of the definition of "gross total income" as contained in section 80B(5) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention was also repelled by the Tribunal on the ground that the error in the order for the assessment year 1972-73 was apparent in view of the order of the Commissioner of Income-tax in connection with the assessment year 1971-72. The assessee's contention dealing with its right to claim set off and carry forward of loss in any year at its option was also turned down by the Tribunal on the ground that the set off of loss under one head of income against income under another head of income was governed by section 71(1) of the Income-tax Act and that being so, the assessee had no option in the matter. In that view of the matter, the contention of the assessee that he was entitled to claim full deduction under section 80L of the Income-tax Act after taking into account the net business loss was also turned down by the Tribunal. Hence, this reference at the instance of the assessee. We have heard learned counsel for the assessee at length. So far as the first question is concerned, counsel for the assessee submits that the order of assessment passed by the Income-tax Officer got merged in the order of the Appellate Assistant Commissioner and, as such, the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of this case, the Commissioner was fully competent to exercise his revisional powers under section 263 of the Act and the plea of merger is not available to the assessee. The first question is, therefore, answered in the negative, i.e., against the assessee and in favour of the Revenue. As regards the second question, we find that there is a latest decision of this court dated January 22, 1993, in Income-tax Reference No. 513 of 1977 (CIT v. British Insulated Calender's Ltd. [1993] 202 ITR 354), wherein a question had arisen as to whether it was open to the assessee not to claim a set off of its business loss against its dividend income in the same year but to claim a carry forward of the same in order that it might be set off against the business income of the subsequent year or years. This court, on consideration of sections 70, 71 and 72 of the Act, came to definite conclusion that no such option was available to the assessee. It was observed by this court (at page 359): " On a careful reading of section 71 of the Act, it is very much apparent that the assessee has no option of exercising setting off of business loss against income under any other head oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. The issue in that case related to a claim for depreciation. The provisions relating to depreciation are completely different from the provisions regarding carry forward and set off of loss. So also, the nature of depreciation. The subject of carry forward and set off of loss is governed by different sections of the Act which have been interpreted by this court in CIT v. British Insulated Calender's Ltd. [1993] 202 ITR 354 (Income-tax Reference No. 513 of 1977). In that view of the matter, we are of the clear opinion that the above decision in CIT v. British Insulated Calender's Ltd. [1993] 202 ITR 354 (Income-tax Reference No. 513 of 1977) clearly covers the second question. Counsel also stated that, because the respondent was not present in that case and the case had to be heard ex parte, the judgment will have no binding effect. This submission, in our opinion, is misconceived and we reject the same. Following the same, we answer the question in the negative, i.e., against the assessee and in favour of the Revenue. So far as the third question is concerned, we find that the decision of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in the various clauses of subsection (1), there shall be allowed in computing the total income of the assessee a deduction specified thereunder. On a plain reading of this section, it is clear that this section also speaks of allowance of deduction in computing the total income of the assessee, not in computing the income under a particular head. Similar is the position under section 80K. In the light of the above provisions of law, we are of the clear opinion that the assessee is entitled to claim deduction under sections 80K and 80L only from the gross total income and not from the income before taking into account the net business loss. The third question is, therefore, also answered in the negative, i.e., against the assessee and in favour of the Revenue. So far as the fourth question is concerned, we do not find any difficulty in answering the same. The Commissioner of Income-tax in this case initiated proceedings for revision of the orders passed by the Income-tax Officer. For both the years 1971-72 and 1972-73, the initiation of the proceedings was on the basis that the Income-tax Officer, while giving effect to the appellate order, committed a mistake in calculati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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