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Issues Involved:
1. Whether a valid revised return completely effaces and obliterates the original return for the purpose of making the assessment. 2. Whether for purposes of allowing entertainment expenses u/s 37(2A) of the Income-tax Act, the profits and gains of the business should be taken as income without setting off brought forward losses and unabsorbed depreciation of earlier years. Summary: Issue 1: Valid Revised Return vs. Original Return The court addressed whether a valid revised return filed by the assessee completely effaces and obliterates the original return. The Appellate Tribunal held that once a revised return is filed, the original return stands obliterated and should not be referred to for assessment purposes. The court affirmed this view, stating that the earlier return would be effaced or obliterated for all purposes under the Act once a valid revised return is filed. Thus, the answer to the first question is in the affirmative and against the Revenue. Issue 2: Computation of Profits and Gains for Entertainment Expenses u/s 37(2A) The court examined whether the profits and gains of the business for allowing entertainment expenses u/s 37(2A) should be considered without setting off brought forward losses and unabsorbed depreciation. The Appellate Tribunal had ruled in favor of the assessee, stating that the statutory allowances should not be deducted before arriving at the profits and gains of the business. The Tribunal emphasized that the taxing statute should be strictly construed and any ambiguity should benefit the assessee. The Revenue contended that all deductible allowances, including unabsorbed depreciation, should be considered before computing the profits and gains of the business. The court analyzed the relevant sections, including section 32(2) and section 72(1), and concluded that the carried forward depreciation allowance should not be treated as part of the current year's depreciation for computing the current year's gains from business or profession. The unabsorbed depreciation allowance should be deducted only after setting off the carried forward business loss. Therefore, the Income-tax Officer cannot thrust the carried forward depreciation allowance upon the assessee without considering these statutory provisions. The court referred to precedents, including CIT v. Jaipuria China Clay Mines (P.) Ltd. and CIT v. Mother India Refrigeration Industries (P.) Ltd., to support its interpretation. It concluded that the unabsorbed depreciation allowance should wait in the queue and be deducted only after the carried forward business loss is accounted for. Thus, the answer to the second question is also in the affirmative and against the Revenue. Conclusion: Both questions were answered in the affirmative and against the Revenue. The revised return obliterates the original return, and the profits and gains for entertainment expenses u/s 37(2A) should be computed without setting off brought forward losses and unabsorbed depreciation.
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