1993 (3) TMI 44 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner of Income-tax to revise the order of the Income-tax Officer.
2. Entitlement to carry forward business loss to the subsequent assessment year.
3. Entitlement to claim full deduction under sections 80K and 80L before accounting for net business loss.
4. Mistake in the order for the assessment year 1972-73 and its revisability by the Commissioner.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner of Income-tax to revise the order of the Income-tax Officer:
The Tribunal held that the Commissioner of Income-tax was competent to revise the orders of the Income-tax Officer giving effect to the Appellate Assistant Commissioner's orders. The Tribunal observed that the matters addressed by the Commissioner arose from the orders passed by the Income-tax Officer subsequent to the appellate orders, and thus, there was no question of merger involved. The High Court agreed, stating that the issue of set off and carry forward of loss and the question of deduction under sections 80K and 80L arose only after the appellate order was given effect. Hence, there could be no merger of this part of the order, and the Commissioner had the jurisdiction to revise it under section 263 of the Act. The first question was answered in the negative, i.e., against the assessee and in favour of the Revenue.

2. Entitlement to carry forward business loss to the subsequent assessment year:
The High Court referred to its decision in CIT v. British Insulated Calender's Ltd., which concluded that the assessee had no option to set off business loss in a year of their choice but must set it off in the year it occurred. The Tribunal's interpretation that section 71(1) allowed the assessee an option was incorrect. The High Court dismissed the assessee's contention that the British Insulated Calender's Ltd. judgment was per incuriam and found no conflict with the earlier decision in CWT v. Padampat Singhania. The second question was answered in the negative, i.e., against the assessee and in favour of the Revenue.

3. Entitlement to claim full deduction under sections 80K and 80L before accounting for net business loss:
The High Court cited the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT, which clarified that deductions under Chapter VI-A must be made from the gross total income, as defined in section 80B(5). The deductions specified in sections 80K and 80L are to be allowed from the gross total income and not before computing the total income under a particular head. The High Court found that the assessee was entitled to claim deduction under sections 80K and 80L only from the gross total income and not from the income before accounting for the net business loss. The third question was answered in the negative, i.e., against the assessee and in favour of the Revenue.

4. Mistake in the order for the assessment year 1972-73 and its revisability by the Commissioner:
The High Court noted that the Commissioner initiated proceedings for both assessment years 1971-72 and 1972-73 based on the mistake in calculating the income for 1971-72, which resulted in an erroneous carry forward of loss to 1972-73. The Tribunal upheld the Commissioner's action, and the High Court agreed, stating that the Commissioner was justified in revising the order for 1972-73 as the loss carried forward was not there in the assessment year 1971-72. The fourth question was answered in the negative, i.e., against the assessee and in favour of the Revenue.

Conclusion:
All four questions were answered in the negative, against the assessee and in favour of the Revenue. The High Court upheld the Commissioner's jurisdiction to revise the orders and clarified the application of sections 71, 80K, and 80L. No order as to costs was made.