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TMI Blog1987 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-79 and 1979-80 aggregating to Rs. 1,28,846. In the regular assessment, the deduction under s. 80MM had been granted before setting off the unabsorbed losses. The ITO was of the view that this was a mistake apparent from the record and that relief under s. 80MM could be granted only after setting off the carried forward of the unabsorbed losses from the total income of this year. He, therefore, noticed the assessee, extended an opportunity of being heard and passed the impugned order whereby he held that the unabsorbed losses for 1978-79 and 1979-80 should be first set off from the current year's income. After such set off, it was found that the gross total income was nil and the unadjusted carried forward loss got reduced to Rs. 11,860. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectifiable acting under s. 154. 5. Sri Thomas, arguing for the revenue, contended that relief under s. 80MM should be given on the gross total income of the assessee and that "gross total income" is defined in s. 80B(5) which means the total income computed in accordance with the provisions of the Income-tax Act before making any deductions under this Chapter (Chapter VIA) and, as such, there is absolutely no room for any doubt or debate. It was further argued that the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. further supports this view. It was his argument that the view expressed in Cambay Electric Supply Industrial Co.'s case has been subsequently approved by the Court In Distributors (Baroda) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t means applying all the provisions (except the provisions in Chapter VIA, and section 280-O) and this includes section 72. Therefore, if there is any brought forward losses of the previous years, it has to be set off under section 72 to find out the gross total income. If s. 72 is to be excluded, it is not a gross total income computed in accordance with the provision of the Act. Thus, it will be seen that on a plain reading of section 80B(5) and section 80MM it will appear that the unabsorbed losses of the previous years should be first set off before relief under s. 80MM is given and the ITO had committed a mistake in this regard when he completed the original assessment. The mistake is so apparent that rectification under sec. 154 is em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before calculating the deduction under section 80E. It is not possible to accept the view that section 72 has no bearing on, or is unconnected with, the computation of the total income of an assessee under the head 'Profits and gains of business or profession' is a loss and such loss cannot be or is not wholly set off against the income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off, subject to the other provisions of the Chapter, shall be carried forward to the following assessment year and shall be set off against the profits and gains, if any, of any business or profession for that assessment year. Therefore, section 72(1) has a direct impact upon the computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by Sri Shah, the decision of the Madras High Court reported In Katpadi Co-operative Timber Works Ltd.'s case was a case where the relief under s. 80P was under consideration. Their Lordships followed and applied the decision of the Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 to hold that deduction under s. 80P should be given before setting off unabsorbed losses and unabsorbed depreciation of earlier years. The decision in the case of Cloth Traders (P.) Ltd.'s has been laterally overruled by the Supreme Court in Distributors (Baroda) (P.) Ltd.'s case and the earlier decision in the case of Cambay Electric Supply Industrial Co. has been affirmed. The basis on which Katpadi Co-operative Timber Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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