1979 (7) TMI 74 - HC - Income Tax

Summary

Issues involved: Interpretation of relief under section 80T of the Income-tax Act, 1961 for assessment year 1973-74.

Summary:
The High Court of Madras considered a reference under section 256(1) of the Income-tax Act, 1961 regarding the entitlement of the assessee to relief under section 80T for the assessment year 1973-74. The assessee, a Hindu Undivided Family (HUF), had capital gains of Rs. 1,02,740, and the dispute arose over the computation of relief under section 80T. The Income Tax Officer (ITO) adjusted a business loss against the capital gains, resulting in a taxable amount of Rs. 55,848. The assessee contended that relief under section 80T should be allowed on the gross capital gains without deducting the business loss. The Appellate Assistant Commissioner (AAC) accepted this argument, leading to an appeal by the department to the Tribunal. The Tribunal upheld the AAC's decision, prompting the department's appeal to the High Court.

The key contention revolved around whether the capital gains should be adjusted for losses before applying the provisions of section 80T. The department argued for adjusting the capital gains by losses before applying the relief, while the assessee maintained that only the gross amount of capital gains should be considered for relief calculation. The High Court analyzed the relevant provisions of section 80T, along with sections 45 and 48 concerning the computation of capital gains, to determine that the relief under section 80T should be based on the entire amount of capital gains without adjusting for losses.

The Court referred to previous judgments and decisions, including Addl. CIT v. K. AL. KR. Ramaswami Chettiar and CIT v. M. Seshasayee, to support its interpretation. It also compared the case at hand with the Supreme Court decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT to establish the correct application of relief provisions. Ultimately, the Court held that the capital gains amounting to Rs. 1,02,740, subject to a deduction of Rs. 5,000, should be considered for relief under section 80T. The judgment favored the assessee, and the question was answered in their favor, entitling them to costs amounting to Rs. 500.

In conclusion, the High Court of Madras clarified the interpretation of relief under section 80T of the Income-tax Act, 1961, emphasizing that the gross amount of capital gains should be considered for relief calculation without adjusting for losses, as per the relevant statutory provisions and judicial precedents.