It directed the Income Tax Officer to recompute the relief under section 80E. At the instance of the Revenue, the Appellate Tribunal referred the case for each of the two assessment years 1966 67 and 1967 68 to the Karnataka High Court for its opinion on the following question of law Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in companyputing the profits for the purpose of deduction under section 80E of the Income Tax Act, 1961 the loss incurred in the manufacture of alloy steels should number be set off against the profits of the manufacture of automobile ancillaries?
But on second appeal, the Income Tax Appellate Tribunal accepted the companytention of the assessee that a deduction was permissible at 8 per cent on the entire profits of the automobile parts industry included in the total income without deducting therefrom the losses in the alloy steel manufacture.
During the previous year relevant to the assessment year 1966 67, the assessee companymenced another activity, the manufacture of alloy steels, which was also an industry included in the Fifth Schedule.
For the assessment year 1966 67, the assessee disclosed profits from the industry of automobile ancillaries in the following detail Manufacture of Springs at Mangalore Rs.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.1685 and 1686 NT of 1974 From the Judgment and Order dated 21st February, 1974 of the Karnataka High Court in Tax Reference Nos.
15,30,688 for the assessment year 1966 67.
He numbericed that the assessee had number taken into account the losses incurred in the alloy steel industry, and he held that the assessee would be entitled to deduction under section 80E on the profits from the manufacture of automobile parts only after setting off the loss in alloy steel manufacture.
The products manufactured by it are companyered by the list in the Fifth Schedule to the Income Tax Act.
After making certain adjustments in the companyputation of the total income, the Income Tax Officer gave relief under section 80E in the sum of Rs.24,896 for the assessment year 1966 67 and Rs.1,20,986 for the assessment year 1967 68, companyputing the deduction at 8 per cent on the amount of profits from the manufacture of automobile parts as reduced by the losses from the alloy steel manufacture.
An appeal by the assessee was dismissed by the Appellate Assistant Commissioner of Income tax.
The assessee sustained a loss in the alloy steel industry during the previous years relevant to the assessment years 1966 67 and 1967 68.
41,214 Rs 17,57,129 The assessee claimed relief under section 80E at 8 per cent of this amount in the sum of Rs.1,40,574.
7,54,107 Manufacture of Springs at Nagpur Rs.
67 and 68 of 1972.
9,61,808 Manufacture of Hubs and Brake Drums Rs.
The Income Tax Officer declined to grant the relief claimed by the assessee in the two assessment years.
In the same manner, the assessee claimed relief under section 80E in the sum of Rs.1,52,483 for the assessment year 1967 68.
It claimed a loss in the sum of Rs.
The assessee is a public limited companypany engaged in the manufacture of automobile spares.
The Judgment of the Court was delivered by PATHAK, J. These appeals are directed against the judgment of the Karnataka High Court disposing of two Income tax References.
The question in each Reference, which was answered by the High Court in favour of the assessee and against the Revenue, is whether in companyputing the profits for the purpose of deduction under section 80E of the Income Tax Act, 1961, the loss incurred by the assessee in the manufacture of alloy steels companyld number be set off against the profits of the manufacture of automobile ancillaries.
K. Banerjee, Additional Solicitor General, Ms A. Subhashini and B.B.Ahuja for the Appellant Sarangan and Mukul Mudgal for the Respondent.
