1976 (10) TMI 4 - HC - Income Tax

Court rules cold storage profits must be included in total income, rejects revenue's argument on section 80J.

The court ruled in favor of the assessee, holding that profits from the cold storage business should be included in total income for all purposes, ... Industrial Undertaking, Profits And Gains Issues:- Interpretation of deduction under section 80J of the Income-tax Act, 1961- Treatment of profits and losses from different businesses within a private limited company for tax purposesAnalysis:The judgment revolves around the interpretation of the deduction under section 80J of the Income-tax Act, 1961, and the treatment of profits and losses from various businesses within a private limited company for tax purposes. The case involved an assessee, a private limited company, which operated a cold storage business along with other businesses. The company did not make a profit in the cold storage business during certain assessment years, although it was profitable in other ventures. The losses, unabsorbed depreciation, and unabsorbed development rebate from the cold storage business were adjusted against profits from other businesses for specific assessment years. However, in the assessment year 1970-71, the cold storage business showed a profit of Rs. 1,51,011, and the assessee sought to adjust this profit against previous losses under section 80J of the Income-tax Act.The revenue contended that the losses, depreciation, and development rebate from earlier years related to the cold storage business should be readjusted against the profits of the cold storage business for the assessment year 1970-71. The revenue's argument was that for the purpose of section 80J, the profits and gains of the cold storage business should be treated as a loss to prevent the assessee from claiming the benefit of the 'deficiency' under section 80J. The Tribunal, however, rejected the revenue's contention, emphasizing that there was no provision in section 80J to support the revenue's argument. The court highlighted that the revenue's position was contrary to the language and intent of section 80J. The court also noted that the Supreme Court decisions cited by the revenue were not applicable to the current scenario as they did not involve the re-adjustment of losses, depreciation, and development rebate as sought by the revenue in this case.In conclusion, the court ruled in favor of the assessee, affirming that the profits and gains from the cold storage business should be considered as included in the total income for all purposes, including the application of section 80J. The judgment clarified that the revenue's attempt to treat the profits as losses solely for the purpose of section 80J was not supported by the law. The court answered the reference question in the affirmative, rejecting the revenue's contentions and awarding no costs in the matter.