INDIAN TRANSFORMERS LTD Vs. CIT ERNAKULAM

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench has referred the following question at the instance of. the assessee under S.256(1) of the Income Tax Act, 1961.

(2.) Counsel for the assessee contended that the view taken by the Tribunal is not justified by the section. According to him, the computation of the total income of profits and gains arising from the business does not involve the application of S.72 of the 1961 Act providing for set off. Counsel for the Revenue however urged that the set off permissible under S.72 is part of the computation of the total income.

(3.) Chap.4 of the Income Tax Act, 1961, deals with the computation of income falling under the various heads mentioned in S.14 of the 1961 Act and Chap.6 in which S.72 occurs deals with the aggregation of income, and set off or carry forward of loss. S.80E in Chap.6A deals with deductions to be made in computing total income. The definition of the term 'total income' in S.2(45) of the 1961 Act merely states that the total income means the total of the amount of income referred to in S.5 computed in the manner laid down in the Act. Computation as such is used only in the heading in Chap.4. S.66 also provides that in computing the total income of an assessee there shall be included all income on which no income tax is payable under Chap.7 etc. What is provided in S.66 is also relating to computation. Similarly the same words are used in S.67. But there are no such words in S.72. S.72 speaks of the net result of the computation under the head 'Profits and gains of business or profession'. We consider that the set off permitted under S.72 is from an amount arrived at after applying the provisions of Chap.4V along with other sections of the Act such as S.66 and 67 etc. dealing with computation of income and after permitting the deductions under S.80E. Counsel for the Revenue submits that the process must be reversed and before the deduction under S.80E is made the set off under S.72 must be allowed.