COMMISSIONER OF INCOME TAX TAMIL NADU-V MADRAS versus KOTAGIRI INDUSTRIAL CO-OPERATIVE TEA FACTORY LTD., KOTAGIRI

Citation: [1997] 2 S.C.R. 738 · Decided: 05-03-1997 · Supreme Court of India · Bench: S.C. AGRAWAL, G.B. PATTANAIK · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
COMMISSIONER OF INCOME TAX 
TAMIL NADU-V MADRAS 
v. 
KOTAGIRI INDUSTRIAL CO-OPERATIVE 
TEA FACTORY LTD., KOTAGIRI 
MARCH 5, 1997 
[S.C. AGRAWAL AND G.B. PATTANAIK, JJ.] 
Income Tax Act, 1961 : Sections 72, BOP and BOB(S}-Cooperative 
C Society-Carried forward losses-Deduction claimed under sec.BOP-Los- . 
ses-Set-off--Losses in excess of income-Deduction claimed not allowed by 
Income Tax Officer, but allowed by the Appellate Assistant Commissioner 
and Tribunal-On appeal, held : Income Tax Officer rightly set off carried 
forward losses of earlier year-Justified in not allowing deduction as losses 
D exceeded income. 
E 
Interpretation of statutes : 
Statut01y Construction-Principle-Applicability of 
Words & Phrases : 
"Gross total income"--Meaning of in the context of sec. BO-P and 
80-B(S) of ihe Income Tax Act, 1961. 
The respondent Co-operative Society was engaged in manufacture 
F and sale of tea. In the previous year there were certain losses which had 
been carried forward to the relevant assessment year. The assessee claimed 
deduction under sec. 80P(2) of the Income Tax Act, 1961 from the total 
income earned. The Income-Tax Officer first set off the losses of previous 
years that had been carried forward against the income and since the 
losses were in excess of the income, he held that no deduction was permis-
G sible under section 80-P of the Income Tax Act, 1961. The view of the 
Income Tax Officer was not accepted by the Appellate Assistant Commis-
sioner who held that deduction under section 80-P should first be made 
out of the income and thereafter the losses of the previous years were to 
be set off. It was affirmed in appeal by the Income Tax Appellate Tribunal. 
H On reference, High Court held against the Revenue. Hence this appeal. 
... 
738 
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C.I.T. v. KOTAGIRIINDL. CO-OP. TEAFACTORYLTD. 
739 
The contention of the appellant Revenue was that the High Court A 
was in error in proceeding on the basis that the deduction under section 
80-P must be made before the adjustment of the losses of the previous year 
under section 72 of the Act. 
The contention of the respondent-assessee on the other hand was 
that since the matter relates to a co-operative society and it was the policy B 
of the legislature to encourage the co- operative movement the provisions 
of section 80-P must be liberally construed in favour of the assessee. 
Allowing this appeal, this Court 
HELD : 1. Before considering the matter of deduction under section C 
80-P(2) of the Income Tax Act, 1961, the Income Tax Officer had rightly 
set off the carried forward losses of the earlier years in accordance with 
section 72 of the ~ct and on finding that the said losses exceeded the 
income, he rightly did not allow any deduction under section 80-P(2) and 
the Appellate Assistant Commissioner as well as the Tribunal and the D 
High Court were in error in taking a contrary view. [744-G] 
Distributors (Baroda) Pvt. Ltd. v. UOI of India & Ors., 155 ITR 120 
and H.N. Sir Rama Vanna v. Commissioner of Income Tax, (1994) 205, ITR 
433, relied on. 
2. Section 80-P(l) read with definition of the expression "gross total 
income" contained in section 80B(S), indicates that for the purpose of 
making deduction under section 80-P it is necessary to first determine the 
gross total income in accordance with the other provisions of the Act. 
Accordingly for the purposes of the present case, the gross total income 
must be determined by setting off against the income the business losses 
of the earlier years as required under section 72 of the Act. [742-E] 
E 
F 
3. The principle of statutory construction has no application in 
construing the expression "gross total income" in sub-section (1) of section 
80-P. In view of the express provision defining the said provision in section G 
80-B(S) for the purpose of Chapter VI-A, there is no scope for construing 
the said expression differently in section 80-P. [744-H, 74S•A] 
Cloth Traders (P) Ltd. v. Additional Commissioner of Income Tax, 
(1979) 118 ITR 243 and Commissioner of Income Tax v. Venkatachalam, 
(1971) ITR 688, held inapplicable. 
H 
740 
SUPREME COURT REPORTS 
(1997] 2 S.C.R. 
A 
Cambay Elect1ic Supply Industrial v. Commissioner of Income Tax, 
(1978) 113 ITR 84, referred to .. 
Broach Distt. Co-opertive Cotton Sales "Ginning and Pressing Society 
Ltd. v. Commissioner of Income Tax, Ahmedabad, (1989) 177 ITR 418, cited. 
B 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5912 of 
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