9911796707
TMI Blog1987 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on March 31, 1974. The assessee, a public limited company, formerly known as Cochin State Power and Light Corporation Ltd., was carrying on the business of distribution of electricity in Ernakulam. On December 2, 1970, the undertaking was taken over by the Kerala State Electricity Board. Subsequent to, the nationalisation, the assessee-company changed its name from Cochin State Power and Light Corporation Ltd. to M/s. Kar Valves Ltd. and with a view to start a new business of manufacturing automobile engine valves, chalked out a programme. During that period, the assessee had to retain some of its staff and a mini office for purposes like realisation of the compensation amount from the Government, recovery of amounts due from consumer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. However, we cannot on that ground alone conclude that nothing could have been spent. The assessee has to recover substantial amount from the Kerala Electricity Board. We think that a portion of the expenses could be held to be attributable to the electricity business. After considering the facts of the case, we are of the opinion that Rs. 20,000 could be treated as referable to the business as well as the interest and dividend income. The Income-tax Officer is directed to allow a deduction of Rs. 20,000." The question of law arises from the above order of the Appellate Tribunal. Certain facts are admitted and they are : The business of distribution of electricity in Ernakulam carried on by the assessee was taken over by the Kerala S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at since the business of distribution and supply of electricity must be deemed to have existed during the relevant year by virtue of the provisions contained in section 41(2), the expenses attributable to the electricity distribution business is an allowable deduction. Accordingly, a sum of Rs. 20,000 was allowed to be deducted from the income. It should in this connection be remembered that " a legal fiction is to be limited to the purpose for which it has been created and cannot be extended beyond that legitimate frame ". (See Akola Electric Supply Co. Pvt. Ltd. v. CIT [1978] 113 ITR 265 (Bom)). The receipts which were deemed to be income under the head " Business or profession " would not have been assessed but for the deeming provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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