1979 (7) TMI 65 - HC - Income Tax

Summary

Issues: Interpretation of relief under section 80-I of the Income-tax Act, 1961 for assessment years 1970-71 and 1971-72.

Analysis:
For the assessment year 1970-71, the Income Tax Officer (ITO) negated the claim for relief under section 80-I as the company's total income was considered nil after factoring in losses from earlier years. The Appellate Assistant Commissioner (AAC) directed that relief under section 80-I should be granted before deducting business losses brought forward from earlier years but after deducting unabsorbed depreciation of prior years. The Tribunal upheld the AAC's decision. However, the High Court found the question framed for this year erroneous. Following the Supreme Court's ruling in Cambay Electric Supply Industrial Co. v. CIT, it was held that relief under section 80-I should be granted only on income after adjusting carried forward losses of earlier years.

Moving to the assessment year 1971-72, the ITO restricted the relief under section 80-I to profits after setting off losses and deficiencies under section 80J from earlier years. The AAC accepted the assessee's argument that relief under section 80-I should be computed based on profits before setting off losses and deficiencies under section 80J. The Tribunal agreed with the AAC's decision. The High Court analyzed the definition of gross total income under section 80B(5) and concluded that relief under section 80J cannot be adjusted before calculating income for section 80-I. Therefore, for the assessment year 1971-72, the assessee is entitled to relief under section 80-I on the gross total income after adjusting carried forward losses but before adjusting deficiencies under section 80J.