Income Tax Appellate Tribunal - Madras
K.R. Ramachandran vs Income-Tax Officer on 26 November, 1987
Equivalent citations: [1988]27ITD389(MAD)
ORDER
--Allowing deduction under section 80T computed on gross amount of capital gain. Ratio & Held:
Assessing Officer's order allowing deduction under section 80T, calculated on gross amount of capital gains and not on the net amount arrived at after setting off losses on property and business could not be said as erroneous and prejudicial.
Application :
Not to current assessment years.
Income Tax Act 1961 s.80T Income Tax Act 1961 s.263 Revision under s. 263--ERRONEOUS AND PREJUDICIAL ORDER--Deduction under s. 80T allowed on gross amount of capital gains.
Ratio & Held:
Where deduction under section 80T allowed on gross amount of capital gains and not on the net amount arrived at after setting off losses on property and business, order not erroneous and could not be revised.
Application:
Not to current assessment years.
Income Tax Act 1961 s.80K Income Tax Act 1961 s.263 ORDER T.N.C. Rangarajan, Judicial Member
1. This appeal is directed against the order made under Section 263 of the Income-tax Act, 1961. The assessee is an individual. For the assessment year 1981-82, corresponding to the previous year ended 31-3-1981, the total income was computed as an aggregation of the income under the following heads:
Rs. Rs. 1. Salary income 20,600 2. Capital gains 2,77,431 Less: Relief under Section 80T 73,108 2,04,323 3. Other sources 256 2,25,179 Less: Loss in property 3,568 ,, Loss in business 1,06,512 1,10,080 1,15,099 or 1,15,100
2. The assessee is in appeal and it was contended that there was no justification for this view of the Commissioner because the provisions of Section 80T did not warrant the setting off any other loss against the capital gains computed for the purpose of granting the deduction under that section. The Revenue found it difficult to support the order of the Commissioner because it was contrary to the specific provisions of the Act.
3. Section 80T says that where the gross total income of the assessee includes income chargeable under the head "Capital gains" there shall be allowed a deduction from such income in the amount prescribed. As we have seen from the computation of the total income in the assessment order set out above the income chargeable under the head 'Capital gains' was the amount of Rs. 2,77,431. The section talks only of the income chargeable under the head 'Capital gains'. Section 48 provides for the mode of computation of capital gains and it does not require the setting off of any other loss in computing the capital gains. It is only while computing the total income that the loss under one head of income is to be set off against the income from another head of income, as can be seen from the provisions of Section 71 which follows Section 66 which prescribes the computation of the total income of the assessee and finds a place in the Chapter VI relating to aggregation of income. The order of the Commissioner is obviously based on a confusion between, the concept of a total income where the income under one head is set off against loss under another head and the computation of the income under a particular head. The Revenue is unable to point out to any provision in the Act which says that in computing the income chargeable under the head 'Capital gains' losses from other heads should be set off. The cases referred to in the order of the Commissioner relate to a situation where a total income itself is a loss when even under the provisions of Section 80A(2) the aggregate amount of the deductions under Chapter VI shall not exceed the gross total income of the assessee and has nothing to do with the computation of the income chargeable under the head 'Capital gains' as such. In such computation there is no question of gross or net and what we have to see is the amount chargeable under that head which finds a place in the computation of the total income. There can be no doubt about that figure because the assessment order itself shows the amount to be Rs. 2,77,431. If at all there is an error in the order of the ITO, it is in the sequence of deductions, for the deduction under Section 80T has to come after totalling the incomes under the various heads as given below since Section 80A requires the deductions to be given out of the gross total income:
Rs. Rs. Salary 20,600 Capital gains 2,77,431 Other sources 256 2,98,287 Less: Property loss 3,568 Business loss 1,06,512 1,10,080 Gross total income 1,88,207 Deduction under Section 80T 73,108 Total income 1,15,099
It follows that the assessee was entitled to the relief under section 80T in respect of that amount of capital gains which is a component of the total income and the assessment made by the ITO was quite correct and did not require any interference. The order of the Commissioner was, therefore, unwarranted both on facts and on a pain reading of the provisions of the Act and we have no hesitation in cancelling it.
4. The appeal is allowed.