TMI Blog2017 (4) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... hen brings income of other persons, which are to be included in the total income of an Assessee and this is contained in section 60 to 65 of the Act. Chapter-VI (containing sec. 66 to 80) then lays down provisions regarding aggregation of income and set off or carry forward of loss. It is thus clear that carried forward loss has to be deducted to arrive at the total income. Sec.36(1)(viia) ( c) of the Act uses the expression total income and therefore total income as understood and defined in the Act has to be adopted. We do not think that the issue is debatable as contended by the learned counsel for the Assessee. An issue to become debatable should have a possibility of another view on the plain language of the statutory provisions referred to above, we do not think there can be any dispute or debate on the proposition that effect to Sec.72 has to be given before allowing deduction u/s.36(1)(viia) ( c) of the Act. Alternative contention raised by the Assessee is concerned, we are of the view that the claim for deduction under the provisio to Sec.36(1)(viia)( c) of the act, though made for the first time before the Tribunal, deserves examination. After all the purpose of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer observed as under: In the assessment order the provision had been allowed before working out of total income as per the Act. The section provides that 5% of total income as worked out, before giving credit of deduction under clause 36(1)(viia)(c) and any deduction under Chapter-VIA of the Act, is to be allowed as deduction. Total income of the assessee for the year should have been worked out after adjustment of brought forward of loss, whereas in the order deduction had been allowed before such adjustment. This is a mistake apparent from record. In the written statement the AR opposed the proposed rectification, arguing that total income for the year is to be taken as per sec.2(45) read with sec.5 of the Act, whereas income from various heads of income of the year is to be clubbed and there is no scope of adjustment of brought forward loss of other years as per the definition. The assessee s AR argument is not accepted. Sec.2(45) provides that total income means the total amount of income referred to in sec.5 computed in the manner laid down in this Act. Current year s income from a particular source/head of income is finally determined only after proper aggregat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant that for purpose of finding true scope of total income, one should consider only the income and expenses relating to the concerned year, therefore, does not appear to be correct. Once the term 'total income' has been defined under the LT. Act, one has to take the meaning of the term as given in the said definition. The position is further clarified by the fact that the provision of section 36(1)(viia)(c) of the IT Act, 1961, reference is made to the total income computed before making any deduction under the said clause and Chapter VI-A. It clearly means that other than the aforesaid deductions, effect to all the provisions of the Act is to be duly given. Reference to Chapter VI-A is also significant for the reason that Chapter VIA comes after section 72 and deduction under Chapter VIA is allowed after setting off of brought forward losses under the scheme of the Act. The appellant has, without citing any authority, tried to interpret the meaning of the term 'total income' as per its own convenience. However, it is well settled that once the meaning of the words used in the statute is clear and unambiguous, question of making any different interpretation do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be considered before setting off of brought forward loss. The Ld. CIT(A) has erred in confirming the action of the AO in withdrawing the deduction earlier allowed through an order of rectification u/s.154 of the Act. The Ld. AR submitted that the issue under consideration is debatable in nature, therefore, rectification order passed u/s.154 does not have any force i.e the issue under consideration of total income for the purpose of deduction u/s.36(1)(viia)(c) of the Act is debatable in nature, therefore, rectification order passed u/s.154 had been bad in law. The Ld. AR for the assessee had vehemently submitted before us that to determine the income the provision for bad debts should be allowed first and thereafter the carry forward loss should be adjusted. To support his plea, ld. AR drew our attention towards the provisions of Section 2(45) of the Income Tax Act, 1961, which reads as under :- Total income means the total amount of income referred in Section 5, computed in the manner laid down in this Act. Ld. AR for the assessee also drew our attention towards the provisions of Section 5-Scope of total income, which reads as under: 5. Scope of total income (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by the RBI i.e. the assessee may claim 10% of the amount of such assets shown in the books of account as provision for doubtful debts. The Ld. AR has requested the bench that the assessee has expressed his desire to compute and claim the provision for doubtful debts as per proviso of clause (c ) of Section 36(1)(viia) of the Act, which entitles the assessee to claim the deduction @10% in respect of provision for doubtful debts, and, therefore, the assessee can lawfully claim it. But the assessee has not claimed the deduction of provision for doubtful debts @10% in its return of income filed by it, therefore, the AO could not allow the deduction @10%. The Ld. AR further pointed out that assessee s appeal under consideration is for assessment year 2004-05 and, therefore, he is eligible to claim the benefit of the said proviso of clause (c ) of Section 36(1)(viia) of the Act. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 46,74,09,830 Less: Provision allowed u/s.36(1)(viia) ( c)-restricted to 5% of total income ₹ 2,33,70,492 ₹ 42,40,39,338 Less: Business Loss brought forward ₹ 42,40,39,338 Total Income Nil The AO later on noticed that the computation of deduction u/s.36(1)(viia)(c) of the Act done by him in the as aforesaid in the order of assessment dated 17.11.2006 was erroneous, because deduction to be allowed said section was 5% of total income before making deduction under clause (c) of Sec.36(1)(viia) of the Act. The brought forward loss of the Assessee was more than ₹ 46,74,09,830 and as per Sec.72 of the Act, the brought forward loss had to be set off to arrive at the total income. If brought forward loss is so set off than the total income would be nil and consequently the deduction allowable u/s.36(1)(viia) (c ) would also be nil and not ₹ 2,33,70,492 as allowed by the AO in the order of Assessment. The AO therefore issued a notice u/s.154 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y- (a) . (b) (c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) : Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. Clause( c) to Sec.36(1)(viiia) was Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992 and the proviso to Clause ( c) to Sec.36(1)(viia) was Inserted by the Finance Act, 2002, w.e.f. 1-4-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n before allowing deduction u/s.36(1)(viia) ( c) of the Act. 10. As far as the alternative contention raised by the Assessee is concerned, we are of the view that the claim for deduction under the provisio to Sec.36(1)(viia)( c) of the act, though made for the first time before the Tribunal, deserves examination. After all the purpose of tax proceedings is to determine the correct tax liability in accordance with law. If an option is available to an Assessee to claim deduction u/s.36(1)(viia)(c) proviso of the Act, then that option when exercised at any stage of the proceedings should be examined and if found correct allowed. The fact that the Assessee did not make a claim before the revenue authorities cannot stand in the way. The tax liability of a taxpayer has to be determined in accordance with law and cannot arise by reason of default. We therefore set aside the order of the CIT(A) and remand the issue to the AO. The Assessee will put forth its claim for deduction in the alternative under the proviso to Sec.36(1)(viia) ( c) of the Act and the AO will consider the same in accordance with law. 11. In the result, the appeal filed by the assessee is allowed for statistical p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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