Benefit of deduction u/.s 80 K. - Income Tax - 247/CBDT

INSTRUCTION NO. 247/CBDT Dated: December 11, 1970 Section(s) Referred: 80K Statute: Income - Tax Act, 1961 Reference is invited to the boards Instructions No.227 F.NO.15/15/59-IT(AI) dated 6-10-70. The board in consultation with the ministry of law have reconsidered the question of allowability of the benefit u/.s 80 K of the I.T.Act in the hands of the shareholders where the company does not possess adequate profits to get a deduction of the full amount mentioned in sec.80 J(1). The board have decided that the shareholder would be entitled to the benefit u/s.80 K of the Act only if the company has obtained the deduction u/s.80 J and only to the extent of the actual deduction obtained by the company. The shareholders will not therefore be entitled to the deduction u/s.80 K when the company has failed to obtain the deduction u/s.80J(1) in view of the paucity of the profits. The position in this respect obtaining before the amendment of the relevant provisions by Finance Act(2) 1967 stands upheld by the Supreme Court in the case of CIT vs. S. Sivan pillai and the amendments made by the above noted Finance Act do not materially alter this situation. No doubt, Kanga and Palkhivala at p.592 of their latest commentary of I.T.Act have expressed the view that the profits in the amended version may not be taken as assessed profits but Aiyar in his notes on Finance Bill 2 of 1967 vide 65 ITR page XXII has not taken note of any such changed position. There was also no such intention vide paragraph 46 of boards circular no.F.I.(408)67-TPL-51 dated the 9th OCTOBER 1967 which mentions profits as after set-off deficiency. 2. The boards Instruction No.227 dated the 6th October 1970 is accordingly hereby withdrawn. The board desire that the above instructions should be brought to the notice of all officers in your charge. The board also desire that wherever deductions have been given to the shareholders u/s.80 K of the I.T.Act for assessment years 1968-69 onwards even in cases where the companies have not obtained the actual deduction u/s.80(j) immediate remedial action may be taken to withdraw such benefit by taking action u/s.147(b) or section 263 of the I.T.Act,1961.