1981 (3) TMI 54 - HC - Income Tax

High Court rules on Income-tax Act interpretation: Deduction under section 80M, correction under section 154.

The High Court ruled in favor of the revenue in a case concerning the interpretation of sections 2(45), 80B(5), and 80A(2) of the Income-tax Act, 1961 ... Intercorporate Dividends Issues: Interpretation of sections 2(45), 80B(5), and 80A(2) of the Income-tax Act, 1961 regarding deduction under section 80M, and correction of relief under section 80M under section 154.Analysis:Issue 1: Interpretation of Deduction under Section 80MThe High Court considered the interpretation of section 2(45), section 80B(5), and section 80A(2) of the Income-tax Act, 1961 in relation to the deduction under section 80M. Referring to the decisions in National Engineering Industries Ltd. v. CIT and Cloth Traders (P.) Ltd. v. Addl. CIT, the court held that the deduction under section 80M should be calculated with reference to the total income and gross total income before setting off losses under section 71 or section 72 of the Act. The court answered this question in the negative and in favor of the revenue.Issue 2: Correction of Relief under Section 80MThe second issue revolved around the correction of relief under section 80M in the original assessment orders under section 154. The court examined the facts of the case for the assessment year 1968-69, where the gross total income was determined after setting off business losses against income from other heads. The court referred to section 80A of the Income-tax Act, which limits deductions under Chapter VIA to not exceed the gross total income. Citing the Supreme Court's decision in Cambay Electric Supply Industrial Co. Ltd. v. CIT, the court emphasized the interconnectedness of section 72 with the computation of total income. The court also referred to the views expressed in National Engineering Industries Ltd. v. CIT and Cloth Traders (P.) Ltd. v. Addl. CIT to support its interpretation. Ultimately, the court held that there was a clear mistake apparent from the record in the Tribunal's view and ruled in favor of the revenue on this aspect.In conclusion, the High Court answered both questions in the negative and in favor of the revenue, emphasizing the correct interpretation of relevant sections of the Income-tax Act, 1961 and the interconnectedness of provisions related to deductions and computation of total income. Each party was ordered to pay its own costs, and both judges agreed on the judgment.