TMI Blog1978 (11) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... the net figure after setting off the capital loss for the previous years against the capital gains of the assessment year. It was the assessee's contention that for the purpose of working out the relief under s. 80T, the amount of capital gains should be taken at the very same figure before setting off the loss of the previous assessment years. On appeal by the assessee, the AAC agreed with the assessee's contention and allowed the appeal. On appeal by the revenue, the Tribunal found against the assessee and allowed the department's appeal. It followed the principle of the unreported judgment of a Division Bench of this court I.T.R. No. 17 of 1972 (Emeete Sons (Travancore) P. Ltd. v. CIT interpreting s. 80M of the Act, which, according to the Tribunal, was analogous to s 80T in its phraseology as well as in its scope. At the instance of the assessee, the question of law has been referred. Section 80T of the Act reads : " 80T. Where the gross total income of an assessee not being a company includes any income chargeable under the head 'Capital gains' relating to capital assets other than short-term capital assets (such income being, hereinafter, referred to as long-term capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the section, is supported by the principle of the decision of the unreported Division Bench ruling of this court in I.T.R. No. 17 of 1972 (Emeete Sons (Travancore) P. Ltd. v. CIT . The question referred) for decision of this court was: " Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee-company is eligible for deduction only of Rs. 15,885, that being 60 per cent. of the net dividend of Rs. 26,475 under section 80M of the Income-tax Act, 1961, and not to deduction of 60 per cent. of Rs. 65,507 under the aforesaid section ? " Section 80M of the Act with respect to which the question had to be answered as it stood at the relevant time read: " 80M. (1) Where the gross total income of an assessee being a company includes any income by way of dividends received by it from domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to (a) where the assessee is a foreign company (i) in respect of such income by way of 80 per cent. of such income; divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of the dividend after giving effect to the deductions mentioned by s. 57 of the Act. The principle of the decision strikes us as apposite to the present context. But counsel for the assessee invited our attention to the decision of a Division Bench of this court in Indian Transformers Ltd. v. CIT [1972] 86 ITR 192. That was rendered with respect to the provisions of s. 80E (subsequently renumbered as s. 80-I). The section dealt with in the decision reads as follows: "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. (2) This section applies to (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and gains from specified activities of a particular period. The figure arrived at after setting off the losses under section 72 is certainly not the total income arising from the profits and gains attributable to the activities in the year. We, therefore, answer the question referred to us in the negative, that is, in favour of the assessee and against the department. There will be no order as to costs." The attention of the learned judges was not drawn to the unreported judgment in I.T.R. No.. 17 of 1972 (Emeete Sons (Travancore) P. Ltd. v. CIT) . That apart, the reasoning in the above judgment came in for consideration at the hands of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. We may extract the relevant portion of the observations of the Supreme Court (pp 96, 97, 98): " In our opinion, the view taken in Indian Transformer's case [1972] 86 ITR 192 (Ker) and L. M. Van Moppes' case [1977] 107 ITR 386 (Mad), in regard to the non-deductibility of unabsorbed losses of the earlier years in the context of computing the deduction under s. 80E of the Act is open to grave doubts. In the first place, such a view runs counter to the legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation at stage subsequent to the computation of the total income arising from business done in accordance with sections 30 to 43A occurring in Chapter IV of the Act and, therefore, the unabsorbed losses cannot be set off before calculating the deduction under section 80E. It is not possible to accept the view that section 72 has no bearing on, or is unconnected with, the computation of the total income of an assessee under the head ' Profits and gains of business or profession'. Actually, section 72(1) provides that where the net result of computation under the head 'Profits and gains of business or profession' is a loss and such loss cannot be or is not wholly set off against the income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off , subject to the other provisions of the Chapter, shall be carried forward to the following assessment year and shall be set off against the profits and gains, if any, of any business or profession for that assessment year. Therefore, section 72(1) has a direct impact upon the computation under the head ' Profits and gains of business or profession '. In other words, the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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