1997 (2) TMI 81 - HC - Income Tax

Assessing Officer, Assessment Order, Assessment Year, Business Expenditure, Company Surtax, Development Allowance, Insurance Business, Law Applicable, Weighted Deduction

Summary

Issues:
1. Applicability of section 144B of the Income-tax Act, 1961 for assessment year 1974-75.
2. Applicability of Explanation 1(iv) of section 153(3) for assessment year 1974-75.
3. Allowability of weighted deduction under section 35B for freight and insurance for assessment year 1974-75.
4. Allowability of surtax as a deduction in computing business income for assessment year 1974-75.
5. Entitlement to weighted deduction under section 35B for outward carriage, clearing agent's charges, and insurance charges for assessment years 1976-77 and 1977-78.
6. Allowability of surtax assessed under the Companies (Profits) Surtax Act, 1964, as a deduction for assessment years 1976-77 and 1977-78.

Analysis:

1. For the assessment year 1974-75, the court held that the provisions of section 144B of the Income-tax Act, 1961, were applicable. The court referred to a previous decision stating that these provisions apply even to assessments before January 1, 1976, if not completed. The period of limitation for invoking section 144B starts from the date of forwarding the draft assessment order to the Inspecting Assistant Commissioner. Thus, questions 1 and 2 were answered in favor of the Revenue.

2. Regarding the weighted deduction under section 35B for freight and insurance for the same assessment year, the court relied on a previous decision. It was held that expenditure on distribution outside India, excluding certain types of expenses, is allowable. Therefore, the assessee was not entitled to the weighted deduction, and question 3 was answered in favor of the Revenue.

3. Concerning the surtax deduction for the assessment year 1974-75, the court cited a Supreme Court decision and a previous court ruling. It was established that surtax cannot be allowed as a deduction while computing business income under the Income-tax Act. Thus, question 4 was answered in favor of the Revenue.

4. For the assessment years 1976-77 and 1977-78, the court addressed the entitlement to weighted deduction under section 35B for outward carriage, clearing agent's charges, and insurance charges. The court ruled against the assessee, stating that the deduction was not allowable, answering question 1 in favor of the Revenue.

5. Similarly, the court considered the surtax assessed under the Companies (Profits) Surtax Act, 1964, as a deduction for the assessment years 1976-77 and 1977-78. Referring to previous decisions, the court held that the surtax cannot be allowed as a deduction in computing the total income of the assessee for those years. Therefore, question 2 was answered in favor of the Revenue.