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Issues involved:
Interpretation of deduction under section 80-1 of the Income-tax Act, 1961 for a public limited company for the assessment year 1970-71. Judgment Summary: The High Court of Madras addressed a case where a public limited company claimed relief under section 80-1 of the Income-tax Act, 1961 for the assessment year 1970-71. The company sought relief at 8% on Rs. 60,43,669, but the Income-tax Officer allowed a deduction of 8% only on Rs. 50,02,346, excluding profit on sale of assets and interest on deposits. The Tribunal held that these items could not be considered as manufacturing profits and thus not eligible for deduction under section 80-1. The court was asked to determine whether the interest on deposits and profit on sale of assets should be included in the profits for computing the deduction under section 80-1. The court referred to a Supreme Court decision regarding a similar deduction under section 80E, emphasizing that certain receipts must be considered before computing the deduction. The court concluded that profit on sale of assets should be included in the deduction calculation under section 80-1. Regarding the interest on deposits, the court differentiated between interest from banks and other sources. It held that interest from bank deposits is not attributable to the priority industry, following a previous court ruling. However, interest from other sources, such as suppliers and security deposits, was deemed attributable to the priority industry and thus permissible for deduction under section 80-1. The court directed an inquiry by the Tribunal to determine the amount of interest received from banks to exclude it from the total interest amount for deduction calculation. In conclusion, the court ruled that profit on sale of assets and interest received by the assessee, excluding interest from bank deposits, should be included in the profits for computing the deduction under section 80-1 of the Income-tax Act, 1961. The court ordered the revenue to pay the costs of the assessee.
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