1992 (2) TMI 124 - AT - Income Tax

Summary

Issues:
- Claim for relief under section 32(1)(iii) on assets taken over by the Government of Yemen
- Deduction in respect of cash and bank balances aggregating to Rs. 3,73,405
- Entitlement to file a return under section 139(5) during reassessment proceedings
- Interpretation of 'sale' under section 32(1)(iii) regarding compulsory acquisition

Analysis:
The appeal before the Appellate Tribunal ITAT BOMBAY-B raised the issue of the Commissioner (Appeals) not granting relief under section 32(1)(iii) on assets taken over by the Government of Yemen and denying a deduction for cash and bank balances totaling Rs. 3,73,405. The original assessment was based on the return filed by the assessee, who operated a business in Aden before it was nationalized by the Government of Yemen. The Commissioner set aside the assessment for the relevant year and directed the Income Tax Officer to redo the assessment in accordance with the law. The assessee then filed a revised return, including claims for deduction of stock-in-trade, depreciation under section 32(1)(iii), and cash and bank balances. However, the Income Tax Officer denied these deductions, leading to an appeal by the assessee.

The Appellate Tribunal considered the contention of the assessee that it had the right to claim deductions not included in the revision petition filed before the Commissioner under section 264. The Tribunal rejected this argument, emphasizing that the jurisdiction of the Commissioner under section 264 is limited, and the assessee cannot claim deductions not raised before the Income Tax Officer during reassessment proceedings. The Tribunal upheld the Commissioner's decision to refuse the deduction of cash and bank balances, stating that the order setting aside the assessment did not allow for new deductions to be claimed.

Regarding the deduction under section 32(1)(iii) for assets taken over by the Government of Yemen, the Tribunal analyzed the definition of 'sale' in the context of compulsory acquisition. The Tribunal concluded that 'any law for the time being in force' in section 32(1)(iii) refers to domestic laws, not foreign laws. The Tribunal highlighted that 'compulsory acquisition' typically refers to acquisition under domestic laws like the Land Acquisition Act, and the provision must be strictly construed. Since there was no compulsory acquisition under domestic law, the Tribunal held that the claim for deduction under section 32(1)(iii) was not admissible, and the loss should be treated as a capital loss. Therefore, the appeal was dismissed by the Appellate Tribunal ITAT BOMBAY-B.