TMI Blog1987 (12) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income, he included dividend income of Rs. 4,15,523 along with an item of income from other sources amounting to Rs. 3,90,000 to arrive at a figure of Rs. 8,05,525 which along with income from interest on securities (Rs. 9) he adjusted against business loss which he determined at Rs. 8,43,992. The balance of the loss of Rs. 38,460 was carried forward by him. 3. The assessee took the matter in appeal before the AAC. On several grounds one of which read as under : "That the ITO has incorrectly assessed in our hands the dividend from M/s. Devidayal Tube Industries Ltd. which is a new industrial undertaking and as such the said dividend amount being exempt under section 85 read with section 84 of the Income-tax Act, 1961." The Appellate Asst. Commr. (Central), Range-I, dealt with this appeal as well as the appeal for the assessment year 1966-67 in a joint order dated 23-3-1972. In this order, he set aside the assessments, for both the years an the main ground of appeal challenging addition on account of unexplained hundi loans. The assessment was re-framed by the ITO in consequence of the appellate order dated 23-3-1972. The assessee apparently pressed its claim for relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the IAC gave the following finding : "Hence the deduction under section 85 would amount to Rs. 4,15,523. However, the assessee is not actually entitled to the benefit of this deduction on account of the set off of the business loss against the dividend income under section 71 and the absence of any provision for carry forward of such deficiency under section 85." Against this finding, yet another appeal was filed to the CIT (A) by the assessee on 3-3-1982. The question raised before the CIT (A) was whether deductions under sections 84 and 85 as they stood at the relevant time should be allowed to be carried forward if they cannot be absorbed against current year's tax liability. The CIT (Appeals) held that the provisions of sections 84 and 85 do not provide for any deduction from the total income but provide that income-tax shall not be payable by the assessee on certain part of the profits and gains from an industrial undertaking or on certain types of dividend. From this, he deduced that the question of allowing any rebate of income-tax can arise only if there is any positive income. Against this finding of the CIT (Appeals), an appeal was filed to the Tribunal and the J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of the Income-tax Act. The first public ground is that the learned CIT (Appeals) referred to the claim under section 84 in his order, while really the Tribunal has remanded back the case to determine the claim under section 85 and then the quantum of loss. In support of this ground, Shri Kirit Mehta, the learned representative for the assessee, pointed out that an additional ground was raised on 9-12-1971 before the AAC (page 10-D of the compilation) in which it was claimed that the ITO had incorrectly assessed in their hands dividends from M/s. Devidayal Tube Industries Ltd., which is a new industrial undertaking and the said.dividend was exempt under section 85 read with section 84 of the IT Act, 1961. It was pointed out that the reference to section 80M made by the ITO in the body of the order was wrongly mentioned. However, a claim for relief under section 80K was made by the assessee in its letter dated 28-7-1978 at item 6 of the various reliefs claimed. In the course of arguments, the assessee's representative tended to expand the scope of the claim for relief not only to section 80K but also to section 80M, although initially his claim was restricted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme of this and several other such sections under Chapter VII was that a rebate from tax liability was to be given in respect of certain types of income. Section 84 provided that income-tax shall not be payable by an assessee on so much of the profits and gains derived from industrial undertaking or business of a hotel, etc., to which this section applies as does not exceed 6 per cent per annum on the capital employed in such undertaking. The computation of capital employed for this purpose was prescribed under the rules. The relief available in respect of income from new industrial undertaking under section 84 was in the form of a rebate from tax. Such rebate from tax was calculated by applying the average rate of tax payable by an assessee to that portion of the tax liability which related to the income of such industrial undertaking. The income-tax rebate contemplated in section 85 was a consequential relief provided to the shareholders or owners of shares who derived income from dividend, a portion of which came out of profits of a company or an industrial undertaking to which the provisions of section 84 applied. The rationale behind this section was that if the tax rebat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted by the Finance (No. 2) Act, 1967 with effect from 1-4-1968. The present Chapter VI-A was substituted by the same Finance (No. 2) Act, 1967. The main scheme of this Chapter was that it provided for straight deductions in respect of certain types of income or items of expenditure as specified in section 80C to section 80VV. Thus, the scheme of tax rebates which existed till 1968 was replaced by a scheme of straight deductions in respect of items on which the Govt. wanted to give relief to assessee. These deductions were in respect of payments as in sections 80C to 80GG or in respect of incomes as in section 80H to section 80T. Section 80K was inserted in place of section 85 with effect from 1-4-1968. In broad terms, it provided that where the gross total income of an assessee who is an owner of shares of a company and who is chargeable to tax on income by way of dividend on shares includes any income by way of dividend, there shall be allowed in computing his total income a deduction from such income by way of dividend an amount equal to such part thereof as it attributable to the profits and gains derived by the company from an industrial undertaking or ship on which no tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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