H.H. SIR RAMA VARMA (DEAD) BY L.RS. vs. COMMISSIONER OF INCOME-TAX, KERALA

CIVIL APPEAL No. 1489/1979Supreme Court1993 INSC 35502 November 1993Bench: 2 JudgesAuthor: B.P. JEEVAN REDDY, S.P. BHARUCHA A B9 pages
AI SummaryDismissed

What were the facts?

For the assessment year 1970-71, the assessee reported long-term capital gains and sought to set off a brought-forward long-term capital loss. The assessee claimed a deduction under Section 80T of the Income Tax Act, 1961, based on the capital gains before the set-off of the loss. The Income Tax Officer allowed the deduction based on the capital gains after the set-off. The Appellate Assistant Commissioner ruled in favour of the assessee. The Revenue appealed to the Income Tax Appellate Tribunal, which allowed the appeal. The High Court, on reference, answered the question in favour of the Revenue. The assessee then appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court dismissed the appeal. It held that Section 80T of the Income Tax Act, 1961, opens with the words 'Where the gross total income of an assessee... includes any income chargeable under the head "Capital gains"...'. This indicates that the gross total income must be determined before Section 80T can be applied. Section 80A states that in computing the total income, deductions specified in Section 80T are allowed from the gross total income. Therefore, where the gross total income includes long-term capital gains, a deduction under Section 80T is permissible from 'such income', meaning the assessee's long-term capital gains. The Court affirmed the High Court's decision and the reasoning of various High Courts, including the Gujarat High Court's interpretation in C.I.T., Gujarat v. Gautam Sarabhai. The Court also referred to its judgment in Distributors (Baroda) P. Ltd. v. Union of India & Ors., 155 I.T.R. 120, concerning Section 80M, which has similar phraseology, supporting the interpretation that the deduction is from the computed capital gains after set-off. The Court noted that Section 80T was deleted from April 1, 1981, with provisions substantially incorporated into Section 48, and expressed no opinion on the position thereafter.

What were the issues?

1. Whether the deduction under Section 80T of the Income Tax Act, 1961, is to be given only for the amount of capital gains after the set-off of capital loss (mixed question of law and fact, concerning Section 80T). Assessee's contention: The words "such income" in Section 80T refer only to the capital gains received in the relevant accounting year. The capital loss carried forward should be set off only after the chargeable capital gains have been assessed as reduced by the deduction under Section 80T. Revenue's contention: The view taken by the Kerala High Court is correct. This view has been affirmed by the Gujarat High Court in C.I.T., Gujarat v. Gautam Sarabhai, 129 I.T.R. 166, the Madras High Court in C.I.T. v. Seshasayee, 129 I.T.R. 166, the Bombay High Court in C.I.T. v. Vimla P. Kapadia, 181 I.T.R. 394, and the Calcutta High Court in Gouri Prasad Goenka and others v. C.I.T., 190 I.T.R. 81. The Supreme Court in C.I.T. v. V. Venkatachalam, 201 I.T.R. 737, held that "such income" in Section 80T refers to capital gains, not total income.

Which sections of the Income-tax Act were involved?

Section 80T,Section 80A,Section 45,Section 48,Section 74,Section 80M,Section 80AA,Section 80AB

AI-generated summary — verify with the full judgment below

j A B c H.H. SIR RAMA VARMA (DEAD) BY L.RS. v. COMMISSIONER OF INCOME-TAX, KERALA NOVEMBER 2, 1993. [B.P. JEEVAN REDDY AND S.P. BHARUCHA, JJ.] Income Tax Act, 1961: Section BOT-Capital gains-Capital loss-Set- off-Deduction-Whether to be given only for the amount of capital gains after set-o!f-"Expression "such income''-Meanings of. .

Words & Phrases : "Such income" in the context of S.BOT of Income Tax Act.· 1961-Meanings of.

During the accounting year relevant to the assessment year 1970-71, the appellant-assessee made long-term capital gains, brought forward a · D long-term capital loss from previous year to be set-off against the capital gains and claimed a deduction u/s. SOT of the Income Tax, 1961, . of an amount as it stood before the set-off. The Income Tax Officer rejected bis claim and allowed deduction of the amount after set-off. Assessee preferred an appeal which was allowed by the Appellate Assistant Com- E missioner. Revenue pre_ferred an appeal to the Tribunal and which al- lowed the same and referred to the High Court the question whether deduction under S.SOT was to be given only for the amount of capital gains after the capital loss was set of

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