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Commissioner of Income-tax Vs. M. Seshasayee - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 408 of 1975 (Reference No. 305 of 1975)
Judge
Reported in(1979)12CTR(Mad)360; [1981]129ITR166(Mad)
ActsIncome Tax Act, 1961 - Sections 74, 80B(5), 80E, 80T, 256(1) and 280O
AppellantCommissioner of Income-tax
RespondentM. Seshasayee
Excerpt:
- .....order of the tribunal.section 80t; in so far as it is material, is as follows : ' 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 capital gains), there shall be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to,--(a) in a case where the gross total income does not exceed ten thousand rupees or where the long-term capital gains do not exceed five thousand rupees, the whole of such long-term capital gains : (b) in any other case, five thousand rupees as increased by a sum equal to- (i) thirty five per cent. of the amount by which the.....
Judgment:

Sethuraman, J.

1. The following question of law has been referred by the Appellate Tribunal under Section 256(1) of the I.T. Act, 1961:

' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee was entitled to relief under Section 80T on the gross amount of capital gains and not on the net amount after set off of carried forward capital loss of earlier years?'

2. The assessee, who is an individual, was assessed for the assessment year 1973-74. She had a sum of Rs. 38,780 as long-term capital gains. In computing the relief due to the assessee under the provisions of Section 80T, the assessee took capital gains at Rs. 38,780 and after deduction of the exemption of Rs. 5,000, under Section 80T, there was a balance of Rs. 33,780, and, according to the assessee, the fifty per cent. rebate that is provided under Section 80T should be on this sum of Rs. 33,780. The ITO did not agree with this submission. He accepted the figure of capital gains as Rs. 38,780, but adjusted as against it a sum of Rs. 11,395 determined as capital loss in an earlier year and available for adjustment in this year. He further deducted the sum of Rs. 5,000, which was the exemption available under Section 80T. This left a balance of Rs. 22,385 as capital gains and the 50 per cent. deduction available under Section 80T(b) was thus computed to be Rs. 11,192.

3. The AAC, on appeal, accepted the assessee's submission and directed the computation of the capital gains in accordance with the assessee'sworking. The Tribunal, on further appeal by the department, confirmed the order of the AAC. The question set out earlier is the one that arises out of this order of the Tribunal.Section 80T; in so far as it is material, is as follows : ' 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 capital gains), there shall be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to,--

(a) in a case where the gross total income does not exceed ten thousand rupees or where the long-term capital gains do not exceed five thousand rupees, the whole of such long-term capital gains :

(b) in any other case, five thousand rupees as increased by a sum equal to-

(i) thirty five per cent. of the amount by which the long-term capital gains relating to capital assets, being buildings or lands, or any rights in buildings or lands, exceed five thousand rupees ;

(ii) fifty per cent. of the amount by which the long-term capitalgains relating to any other capital assets exceed five thousand rupees : ....'

4. It is unnecessary to reproduce the rest of the provisions. The expression 'gross total income' occurring in the above provision is defined under Section 80B(5) as follows :

' ' Gross total income ' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under Section 280.'

5. The contention for the department is that the ' gross total income ' has to be computed in accordance with the provisions of the Act and that if we do so, then the capital loss would get adjusted as against the capital gains under Section 74 and that the balance alone would represent the capital gains, which would be included in the total income. This submission is also fortified by the decision of the Supreme Court in Cambay Electric Supply Industrial Co, Ltd. v. CIT : [1978]113ITR84(SC) . In that case the Supreme Court had to deal with the provisions of Section 80E. Under that provision the assessee was eligible for relief in respect of profits and gains from specified industries. The provision construed by the Supreme Court, to the extent material, ran as follows (p. 90):

'' 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 con-struction, 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......''

6. In construing this provision, the Supreme Court held that in computing the profits of the assessee for the purpose of the special deduction provided under the above provision, items of unabsorbed depreciation and unabsorbed development rebate carried forward from earlier years will have to be deducted before arriving at the figure from which the 8 per cent. contemplated by the above provision is to be deducted. The Supreme Court did not approve of a decision of this court in CIT v. L.M. Van Moppes Diamond Tools (India] Ltd. : [1977]107ITR386(Mad) .

7. The only difference between Section 80E considered by the Supreme Court and Section 80T now under consideration, is that in Section 80E itself the definition, which is now provided in Section 80B(5), was incorporated. In other words, the expression ' as computed in accordance with the other provisions of this Act' found in brackets in Section 80E is now to be found in Section 80B(5). The reasoning of the Supreme Court would thus directly apply to the present provision.

8. There is, however, an earlier decision of this court construing Section 80T itself rendered in Addl. CIT v. K.A.L.KR. Ramaswami Chettiar (T.C. 410 of 1974) (since reported as Appendix in : [1979]120ITR694(Mad) , the decision having been rendered on February 17, 1978. When that judgment was rendered, the decision of the Supreme Court was not available and, therefore, it could not be noticed. In the said decision the decision in CIT v. L M. Van Moppes Diamond Tools (India) Ltd. : [1977]107ITR386(Mad) was followed.

9. The learned counsel for the assessee drew our attention to a decision of the Karnataka High Court in Dr. T. Ramadas M. Pai v. CIT (No. 2) : [1978]115ITR883(KAR) . That was a case in which the court was concerned with Section 80L. Though substantially the wording of the said provision is the same as in Section 80T, still, in view of the decision of the Supreme Court, the Karnataka High Court decision may not be correct law. We may also add that the Karnataka High Court does not appear to have noticed the definition provision in Section 80B(5) and the Supreme Court decision also was not noticed, obviously because it was not available when they rendered the judgment.

10. The result is that the question referred to this court is answered in the negative and in favour of the revenue. There will be no order as to costs.


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