TaxTMI 
TaxTMI 
1972 (8) TMI 24
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....hown below : Rs. Rs. Profit from valves division... 11,27,000 Loss from : Equipment division 3,43,534 Transistor " 2,86,000 Capacitor " 2,90,000 ---------------- 9,19,534 ----------------- Net income 2,07,466 ----------------- Six per cent. of the capital employed in the valves division amounted to Rs. 4,19,040. Since the income was less than six per cent. of the capital employed in the valves division, the Income-tax Officer determined the tax payable at "Nil". The assessee by letter dated October 15, 1965, claimed that there was a loss of Rs. 2,11,574 and the same should be carried forward and required the Income-tax Officer to amend his order passed under section 155. The assessee's claim was based on the following figures : Rs. Rs. Loss in three divisions of equipment, transistor and capacitors ... 9,19,534 Profit in valve division ... 11,27,000 Exempt income u/s. 84 ... 4,19,040 ---------------- 7,07,960 ----------------- Net loss to be carried forward 2,11,574 ----------------- The Income-fax Officer rejected the assessee's claim relying on the ratio of the decision in Commissioner of Income-tax v. Nation....
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....be carried forward. In support of his contention, he cited the following decisions : Ambica Silk Mills Co. Ltd. v. Commissioner of Income-tax, Commissioner of Income-tax v. C. S. Sastri and Seth Jamnadas Daga v. Commissioner of Income-tax. In our opinion, the above decisions are of no assistance for answering the question referred. In Jamnadas Daga's case, the assessee was a partner in two registered firms and an unregistered firm. During the relevant period the registered firms incurred losses and the unregistered firm showed profit which was taxed on the firm in accordance with section 23(5)(b) of the 1922 Act. The share of the assessee in the profit of the unregistered firm amounted to Rs. 26,110 and his share of the losses in the registered firms amounted to Rs. 13,167. The assessee had a small income of Rs. 262 which had to be taxed at the rate applicable to his total income. The assessee contended that his share of the profit in the unregistered firm should be ignored entirely in ascertaining his total income and that he was entitled to carry forward the loss of Rs. 13,167 to the succeeding year under section 24(2) of the 1922 Act. It was held that the assessee's sha....
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....on 15C of the Income-tax Act ?" Shah J. (as he then was) stated : " . . . . by enacting section 15C, the legislature has not prescribed for the exclusion of a percentage from the head of profits of a new industrial undertaking in the computation of total income but has merely provided a partial exermption from payment of tax by newly established undertakings and, in the natural sequence of computation of tax, the amount of losses carried forward is liable to be deducted out of the income of the year of account and it is only after the question of tax is ascertained, exemption from payment to the prescribed extent will be given by the taxing authorities....The exemption is, in terms, payment of tax and it is not an exclusion of income in the computation of the total income . . . . . .The exemption from payment of tax under section 15C and the privilege of carrying forward losses are, however, not benefits of the same category and become allowable to the assessee at different stages of assessment....The absence of an express provision postponing the exemption from tax under section 15C to a set-off for losses of previous years carried forward does not, therefore, justify the view ....
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....20(10) as follows : " 'average rate of income-tax' means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income." In other words, section 110 provides for allowing rebate on income on which no income-tax is payable. Where the total income includes income on which no tax is payable, as under section 84, the mode of calculation of tax is as under section 110 by working out the tax payable as well as the rebate to be given on the exempted income. Section 84 was deleted by the Finance Act of 1967 and substituted by section 80J with effect from April 1, 1968. In section 80J, the legislature has expressly provided for deduction of six per cent. on the capital employed in the newly established industrial undertakings from the profits and gains of such undertakings. Sub-section (3) of the said section has provided that where such amount of profits and gains falls short of the relevant amount of capital employed during the previous year, the amount of such shortfall or where there are no such profits and gains, an amount equal to the relevant amount of capital employed during the previous year shall be carried forward and set o....