1978 (12) TMI 40 - HC - Income Tax

Accounting Year, Attributable To Priority Industry, Deduction From Profits And Gains, Income Tax Act

Summary

Issues:
Interpretation of Section 80-I of the Income-tax Act, 1961 regarding deduction for profits and gains from priority industries for a company not in existence during the accounting year.

Analysis:
The case involved a limited company that was doing business under a specific name until the Kerala State Electricity Board took over its undertaking. The company estimated receipts from electricity sales until the takeover at Rs. 3,77,308 for accounting purposes. The Income-tax Appellate Tribunal was asked to determine if the company was entitled to relief under section 80-I of the Income-tax Act for the assessment year 1972-73, despite not being operational during the accounting year.

The Tribunal held that it was not necessary for the company to function during the entire accounting year to claim the deduction under section 80-I. It emphasized the importance of showing a nexus between the amount claimed for deduction and the priority industry. The Tribunal's interpretation was based on the dictionary meaning of the term "attributable."

Section 80-I of the Income-tax Act allows for a deduction in respect of profits and gains from priority industries for certain companies. The section does not explicitly require the priority industry to have conducted business during the accounting year. The definition of "priority industry" under section 80-B includes various business activities such as generation or distribution of electricity.

The court rejected the revenue's argument that the priority industry must have actually carried on business during the accounting year, stating that such a requirement would go against the clear language and intent of section 80-I. The court emphasized that profits can be attributable to a priority industry even if the industry did not carry on business at a specific point in time. Drawing analogies from other sections of the Income-tax Act, like section 28, was deemed irrelevant in interpreting section 80-I.

In conclusion, the court upheld the Tribunal's decision, ruling in favor of the assessee and against the revenue. The judgment clarified that the requirement for claiming a deduction under section 80-I is to show that the profits and gains are attributable to a priority industry, regardless of whether the industry was operational during the accounting year.