CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. versus THE COMMISSIONER OF INCOME TAX, GUJARAT-II AHMEDABAD (AND VICE VERSA)

CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. versus THE COMMISSIONER OF INCOME TAX, GUJARAT-II AHMEDABAD (AND VICE VERSA)

In computing the 8% deduction under Section 80E(1), the balancing charge under Section 41(2) (deemed income from sale of machinery/buildings) must be included as profits attributable to the business, but unabsorbed depreciation and development rebate must be deducted from the total business profits before computing the deduction. All three steps outlined in Section 80E(1), including compliance with other provisions of the Act, must be followed. The High Court's view that unabsorbed depreciation and development rebate are to be deducted before arriving at the figure for 8% deduction is affirmed.

Parties
Appellant / Assessee: Cambay Electric Supply Industrial Co. Ltd.; Respondent / Revenue: The Commissioner of Income Tax, Gujarat-II Ahmedabad
Jurisdiction
India
Judgment Date
11 April 1978
Procedural Posture
Civil Appeal / Supreme Court Appeals by Special Leave Against Judgment and Order Dated 11/24 12 1975 of the Gujarat High Court in Income Tax Reference No. 115 of 1974
Outcome
Appeals dismissed.
Legal Topics
Income Tax Deduction, Computation of Profits, Set Off of Losses, Unabsorbed Depreciation, Development Rebate, Special Deductions, Section 80 E, Income Tax Act
Tax Law Income Tax Deduction Computation of Profits Set Off of Losses Unabsorbed Depreciation Development Rebate Special Deductions Section 80 E, Income Tax Act

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Legal principles 3 Authorities cited 7 Party arguments 2 Amounts and remedies 6
Sign in to unlock

Parties

Cambay Electric Supply Industrial Co. Ltd.

Appellant / Assessee

The Commissioner of Income Tax, Gujarat-II Ahmedabad

Respondent / Revenue

Procedural Posture

Civil Appeal / Supreme Court Appeals by Special Leave Against Judgment and Order Dated 11/24 12 1975 of the Gujarat High Court in Income Tax Reference No. 115 of 1974

Legal Issues

  1. 1 Whether the balancing charge (deemed profits under Section 41(2)) is to be included while computing the 8% deduction under Section 80E(1) of the Income Tax Act, 1961.
  2. 2 Whether unabsorbed depreciation and unabsorbed development rebate of earlier years are to be deducted before arriving at the figure on which 8% deduction under Section 80E(1) is to be allowed.

Ratio Decidendi

In computing the 8% deduction under Section 80E(1), the balancing charge under Section 41(2) (deemed income from sale of machinery/buildings) must be included as profits attributable to the business, but unabsorbed depreciation and development rebate must be deducted from the total business profits before computing the deduction. All three steps outlined in Section 80E(1), including compliance with other provisions of the Act, must be followed. The High Court's view that unabsorbed depreciation and development rebate are to be deducted before arriving at the figure for 8% deduction is affirmed.

Court Disposition

Appeals dismissed.

Orders

  • No order as to costs in both appeals.