TMI Blog1976 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... e company had also received interest on securities amounting to Rs. 350 for the accounting year relevant to the assessment year in question, namely, 1967-68. The company had incurred losses in the earlier years and there was also unabsorbed depreciation of the earlier years. The Income-tax Officer set off the business losses of the earlier years and the unabsorbed depreciation of the earlier years and arrived at the assessable income as " nil ". In view of this action of the Income-tax Officer, the assessee's claim for a deduction from the total sum of Rs. 2,45,431, rebate of 8% as provided for under section 80E of the Act was negatived. In the view of the Income-tax Officer, as there was no positive income available for assessment to tax, a deduction under section 80E of the Act was not contemplated. The assessee-company preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that it was not the residuary or the total income, but the entire income from the priority industries which had gone into the computation of the total income that would be the criterion for determining the rebate admissible. Accordingly, he held that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 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) an Indian company ; or (b) any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, but does not apply to any Indian company referred to in clause (a), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in section 108 and its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees. " The language of this section makes it clear that so long as the total income, as computed in accordance with the other provisions of the Act includes any profits and gains attributable to the priority industries, the assessee would be entitled to a rebate of 8 per cent. on the said profits and gains attributable to the priority industries. Simply as a matter of construction, we are of the opinion that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to charge, namely, Rs. 1,18,214, before setting off the loss in plastic business was correct. Before the Mysore High Court reliance was placed on a circular issued by the Central Board of Direct Taxes and the relevant portion (para. 27) of the circular is as follows : See [1974] 93 ITR 115, 121 (Mys) : " 27. It will be observed that the deduction under section 80E referred to above is allowable in computing the profits and gains from the specified priority industries INCLUDED IN THE TOTAL INCOME 'AS COMPUTED IN ACCORDANCE WITH THE OTHER PROVISIONS' of the Income-tax Act. The effect of this provision is that the deduction under section 80E will be allowed from the profits from the specified priority industries, as computed AFTER allowing all the deductions admissible in computing the business income under sections 30 to 43 of the Income-tax Act, and also after giving effect to the relevant provisions for set-off or carry-forward of loss, contained in Chapter VI of that Act. The business income of a company may consist of profits from the specified priority industries, as well as profits from other business activities, and the company may also have a loss in the same previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculated is erroneous and is not borne out by the language of section 80E of the Act. As a matter of fact, the setting off of the loss is only in section 72 of the Act and a reading of section 72 will clearly show that the computation of the profits and gains of the business had preceded, in other words, had already taken place, before one went to the stage of setting off the loss under section 72. Section 72(1) of the Act, so far as is relevant, states : " 72. (1) Where for any assessment year, the net result of the computation under the head 'Profits and gains of business or profession' is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against 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 or, where the assessee has income only under the head 'Capital gains', relating to capital assets other than short-term capital assets, and has exercised the option under sub-section (2) of that section or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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