Commissioner of Income Tax vs South India Flour Mills (P.) Ltd.

A. Subbulakshmi, J.—The following question of law at the instance of the Revenue has been referred to us :

"Whether, the Appellate Tribunal was correct in law on the facts and in the circumstances of the case in holding that, in working" out the quan tum of relief allowance u/s 80J, the gross amount of profits and gains from a new industrial undertaking included in the total income should be taken and not the net amount arrived at after setting off unabsorbed development rebate, business loss, etc.?"

The assessment years are. 1968-69 and 1974-75. For the assessment year 1968-69, the Income Tax Officer held that the deduction due to the assessee u/s 80J was Rs. 2,03,720. However, since the business income after set off of unabsorbed development rebate worked out to only Rs. 79,887 the Income Tax Officer restricted the relief to this figure. He negatived the assessee''s claim that the gross total income of Rs. 1,66,184 included the entire profit of the new industrial undertaking which was to the extent of Rs. 2,18,815 without deducting loss from the old plant to the extent of Rs. 1,38,978. On appeal, the Commissioner came to the conclusion that the gross total income included the entire income from the new industrial undertaking that is before the set off of deficit amounts brought forward. The Commissioner held that the relief due would be Rs. 1,66,184, and not Rs. 79,837. On further appeal, the Tribunal upheld the findings of the Commissioner of Income Tax (Appeals). For the assessment year 1974-75, the Income Tax Officer did not allow any deduction u/s 80J. But, the Commissioner allowed it to the extent of the full amount and the Tribunal upheld the finding of the Commissioner.

The Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, , held that relief in respect of dividends received from a domestic company is available only with respect to the net amount as computed for the purpose of assessment to tax and not the actual amount received. Following the decision of the Supreme Court and for the reasons stated therein, we hold that the net amount is available for deduction and we answer the question in favour of the Revenue and against the assessee.