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Commissioner of Income-tax Vs. Mcleod and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 173 of 1977
Judge
Reported in[1982]134ITR674(Cal)
ActsIncome Tax Act, 1961 - Sections 71, 72, 80A, 80B, 80M and 154
AppellantCommissioner of Income-tax
RespondentMcleod and Co. Ltd.
Appellant AdvocateAjit Sengupta and ;A.N. Bhattacharjee, Advs.
Respondent AdvocateSukumar Bhattacharjee, ;N.K. Poddar and ;N.N. Saha, Advs.
Cases ReferredCloth Traders (P.) Ltd. v. Addl.
Excerpt:
- .....that the deduction under section 80m of the said act should be calculated with reference to the total income and gross total income as they stood before setting off the losses under section 71 or section 72 of the act (2) whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the mistake, if any, in the allowance of relief under section 80m in the original assessment orders was not a mistake apparent from the record that could be corrected under section 154?' 2. so far as the first question is concerned in view of the ratio of the decision of this court in the case of national engineering industries ltd. v. cit : [1978]113itr252(cal) and the ratio of the decision of the supreme court in the case of cloth traders (p.) ltd. v. addl. cit :.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the I.T. Act, 1961, two questions have been referred to this court which are as follows:

' (1) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of Section 2(45), Section 80B(5) and Section 80A(2) of the Income-tax Act, 1961, the Tribunal was correct in holding that the deduction under Section 80M of the said Act should be calculated with reference to the total income and gross total income as they stood before setting off the losses under Section 71 or Section 72 of the Act

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the mistake, if any, in the allowance of relief under Section 80M in the original assessment orders was not a mistake apparent from the record that could be corrected under Section 154?'

2. So far as the first question is concerned in view of the ratio of the decision of this court in the case of National Engineering Industries Ltd. v. CIT : [1978]113ITR252(Cal) and the ratio of the decision of the Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT : [1979]118ITR243(SC) , the question is answered in the negative and in favour of the revenue.

3. So far as the second question is concerned, it is necessary for us to refer to certain facts; it may be mentioned that the facts of this case for both the years under reference are more or less identical. We can take the facts for the assessment year 1968-69. For that year, the business loss of the assessee after giving effect to the order of the AAC in the quantum appeal was Rs. 9,36,240 and the assessee's income under other heads included the income of Rs. 4,91,097 by way of dividends was Rs. 10,09,017. The business loss of Rs. 9,36,240 was set off against the income of Rs. 10,09,017 under other heads in order to arrive at the assessee's gross total income for the year. By so setting off, the gross total income of the assessee for that year came to Rs. 72,777 only. The Tribunal held that the relief under Section 80X which occurs in Chap. VIA could not, therefore, exceed Rs. 72,777which represented the gross total income. This is the subject-matter of the second controversy as regards the second question. Section 80A in Chap. VIA of the I.T. Act; 1961, provides as follows :

' 80A. Deduction to be made in computing total income.--(1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in Sections 80C to 80VW.

(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.

(3) Where, in computing the total income of a firm, association of persons or body of individuals, any deduction is admissible under Section 80G or Section 80HH or Section 80J or Section 80JJ or Section 80K or Section 80QQ or Section 805 or Section 80T or Section 80TT, no deduction under the same section shall be made in computing the total income of a partner of the firm or, as the case may be, of a member of the association of persons or body of individuals in relation to the share of such partner in the income of the firm or the share of such member in the income of the association of persons or body of individuals.'

4. This position has been clarified by the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT : [1978]113ITR84(SC) of the report, the Supreme Court has observed as follows :

' It will thus appear that the Kerala High Court has regarded Section 72 appearing in Chapter VI as a provision unconnected with the computation of the total income of an assessee and a provision which comes into operation at a 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 figure of total income, which is otherwise taxable under other provisions of the Act, cannot be arrived at withoutworking out the net result of computation under the head ' Profits andgains of business or profession'.'

5. The Calcutta High Court in the case of National Engineering Industries Ltd. v. CIT : [1978]113ITR252(Cal) also expressed the view to that effect. The Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT : [1979]118ITR243(SC) observed as follows :

' It is true that on this view the deduction in respect of the income by way of dividends from a company falling within Clause (a) of Sub-section (1) of Section 80M, may exceed the quantum of such income included in the gross total income, but that possibility is indeed contemplated and taken care of by Section 80A, Sub-section (2), which provides that the aggregate amount of the deductions shall not in any case exceed the gross total income of the assessee. '

6. Similar views in a different context were expressed by the Supreme Court in the case of Rajapalayam Milt Ltd. v. CIT : [1978]115ITR777(SC) .

7. Where, by misreading a section which is clear, a different view was taken and it was held that if a wrong view was taken and at least a wrong calculation was made then it would certainly come within the purview of Section 154 as a mistake apparent on the face of the record. See in this connection the observation of this High Court in the case of ITO v. Raleigh Investment Co. Ltd. : [1976]102ITR616(Cal) . In view of the clear provisions of Section 80A, Sub-section (1), read with Sub-section (2), in our opinion, there was a clear mistake apparent from the record and, therefore, the Tribunal was not right on this aspect of the matter and in the view it took.

8. In the premises, question No. 2 is answered in the negative and infavour of the revenue.

9. Each party to pay and bear its awn costs.

Sudhindra Mohan Guha, J.

10. I agree.


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