1984 (9) TMI 118 - AT - Income Tax

Summary

Issues Involved:
1. Exemption under Section 10(26) of the IT Act, 1961.
2. Deletion of interest under Section 139(8).
3. Carry forward of loss.

Detailed Analysis:

1. Exemption under Section 10(26) of the IT Act, 1961:

The primary issue was whether the income of the assessee, a member of the Scheduled Tribes residing in Shillong, is exempt under Section 10(26) of the IT Act, 1961. The Income Tax Officer (ITO) contended that the assessee's income from taxi business was taxable as it accrued in areas not specified under the Sixth Schedule of the Constitution. However, the Appellate Tribunal clarified that the benefit under Section 10(26) cannot be abridged or abrogated by any notification excluding certain areas. The Tribunal emphasized that the income of a member of Scheduled Tribes residing in any area specified in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule shall be exempt if the source of income is also in that area. The Tribunal supported its decision by referencing previous cases, including H.O. Unger and Shri Tura Singh, which upheld similar exemptions.

For the assessment years 1964-65 to 1974-75, the Tribunal found that the assessee's income from taxi business arose within the specified area of Shillong, hence fulfilling the conditions for exemption under Section 10(26). However, for the assessment years 1975-76 to 1978-79, the Tribunal noted that the assessee's taxi plied between Shillong and Gauhati, thus part of the income arose outside the specified area. Since the assessee could not bifurcate the income, the ITO's decision to tax 50% of the income was upheld.

2. Deletion of interest under Section 139(8):

The second issue pertained to the deletion of interest under Section 139(8) for the assessment year 1964-65. The Tribunal deemed this issue academic since it had already ruled in favor of the assessee regarding the exemption under Section 10(26). Therefore, it did not delve further into this controversy.

3. Carry forward of loss:

The assessee contended that the loss computed by the ITO should be carried forward. The Tribunal examined the returns filed for various assessment years and the inclusion of losses from different firms in the assessments. It was argued that once a loss is computed, it must be carried forward, even in cases of assessments under Section 148. The Tribunal agreed, citing a previous decision in the case of K.C. Bezbarua, which supported the carry forward of computed losses.

For the assessment year 1969-70, the Tribunal directed the ITO to verify whether the appellate order resulted in a computed loss and, if so, to carry it forward. Similarly, for the assessment year 1967-68, the Tribunal instructed the ITO to include the share of loss from the firm M/s Sheva Travel, Gauhati, in the assessment and carry it forward.

Conclusion:

The appeals filed by the Department for the assessment years 1975-76 to 1978-79 were allowed in part, restoring the ITO's orders regarding the income from the taxi business. The Departmental appeals for the assessment years 1964-65 to 1974-75 were dismissed. The cross objections for the assessment years 1964-65 to 1969-70 were allowed, and the cross objection for the assessment year 1977-78 was partly allowed. The cross objections for the remaining assessment years were dismissed as withdrawn.