TMI Blog1979 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ins of Rs. 1,02,740 ? " The assessee, a HUF, derived capital gains of Rs. 1,02,740 in the relevant previous year for the assessment year 1973-74. There is no dispute about this figure. The assessee claimed that the capital gains should be processed under section 80T on the entire sum of Rs. 1,02,740, reduced only by the exemption of Rs. 5,000 available under the same provision. The ITO considered that this claim was not tenable and he adjusted the business loss of Rs. 41,892 against the capital gains of Rs. 1,02,740 and brought to tax a sum of Rs. 55,848 as capital gains. How this sum of Rs. 55,848 was arrived at will be clear from the following : Rs. Capital gains 1,02,740 Less : Business loss 41,892 ------------ Balance 60,848 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section extracted above. The section, if analysed, would show, (1) that there must be a gross total income of an assessee, (2) the assessee must not be a company, and (3) the gross total income should include any income chargeable under the head " Capital gains " relating to capital assets other than short-term capital assets. If these conditions are satisfied, then in computing the total income of the assessee, there has to be a deduction from such income of certain amounts as described in the provision. The point presently in dispute is whether, in computing capital gains, the loss should be adjusted first and on the balance alone the rest of the provisions of s. 80T should be applied. While the department contends that the capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. That was a case which arose under s. 80E. That decision of the Supreme Court was applied in interpreting s. 80T. In doing so, we referred also to another decision of the Karnataka High Court in Dr. T. Ramadas M. Pai v. CIT [1978] 115 ITR 883. We pointed out that though the decision of the Karnataka High Court had not noticed s. 80B(5), nor the decision of the Supreme Court, the conclusion reached was consistent with the reasoning of the Supreme Court in the said case, and we, therefore, agreed with it. When the present reference came up for consideration, while the department wanted us to apply the decision in T.C. No. 408 of 1975, learned counsel for the assessee wante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the gross total income of an assessee, not being a company includes any income chargeable under the head 'Capital gains' .........". We have to see what is the income chargeable under the head " Capital gains " under the Act. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head " Capital gains ". How this capital gain is to be computed is provided in s. 48. The language of s. 48 is : " The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration ...... the following amounts. " Having regard to the language of s. 80T and reading it along with the language emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Act. It is in the light of this provision that the question arose for the consideration of the Supreme Court as to what is the amount of which 8% was to be taken. In that case, the income from business came to Rs. 8,02,126. The eight per cent. relief available under s. 80E, if calculated on the sum of Rs. 8,02,126, would have yielded a sum of Rs. 64,170. There was unabsorbed depreciation and development rebate referable to earlier years amounting to Rs. 2,54,613. After adjustment of these amounts, the net income chargeable to tax was Rs. 4,83,343. While the assessee wanted a rebate on the total amount of the income from the business, the revenue would give the relief of eight per cent. only on the net amount after adjustment of the unabso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 80T refers to the income chargeable under the head "Capital gains". In the context of s. 80M, the Supreme Court held that it referred only to a particular category of income, viz., income by way of dividends from a domestic company and that category of income should be taken in gross and not net. Having regard to the close similarity in the language of s. 80M and s. 80T, we consider that this decision of the Supreme Court would squarely apply. In fact, the present case would even be an a fortiori case because, in the present case, we have to take the head of the income " Capital gains " and the provisions relating thereto, while in the Supreme Court decision it was the dividend income that was intended to be taken into account. Except f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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