Taxing provision interpretation: second proviso to section 10(2)(vii) did not apply to section 12 computations.

Section 12 of the Indian Income-tax Act, 1922 was held to allow only the allowances specifically provided under section 10(2), and the second proviso to section 10(2)(vii) did not extend into that computation. The proviso was treated as a charging fiction for assessment under section 10, deeming certain excess sale proceeds to be profits, but not as a restriction on the allowance itself. Because section 12 contained no express provision adopting that fiction, it was not applied to income, profits and gains computed under section 12. The construction of the taxing provision was governed by its language alone, without importing intendment.

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Issues: Whether the second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922 applied while computing income, profits and gains under section 12 when allowances were granted under section 10(2)(vii).

Analysis: The language of section 12(3) and 12(4) entitled the assessee only to allowances under the relevant clauses of section 10(2). The second proviso to section 10(2)(vii) was treated as a charging provision creating a legal fiction that deemed certain excess sale proceeds to be profits for assessment under section 10; it did not operate as a condition restricting or qualifying the grant of the allowance itself. The scheme of section 12 also showed that where the legislature intended fictional profits to be brought into computation, it made express provision, and the absence of a similar express provision for the second proviso to section 10(2)(vii) indicated that it was not intended to apply to assessments under section 12. In construing the taxing provision, the language alone governed and no intendment could be imported.

Conclusion: The second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922 did not apply in computing income, profits and gains under section 12, and the answer was against the Revenue.

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