Section 2(45)

Section 2(45) — the law in short

What the courts have decided on section 2(45), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Yokogawa India Ltd Supreme CourtHelps taxpayer
  Must my 10A unit's profits be reduced by other units' losses before the deduction?
  No. After the Finance Act 2000 the relief is a deduction rather than an exemption, but it is worked out while computing the profits of the eligible undertaking, before the setting off and aggregation that produces total income. Losses of other units and brought-forward losses therefore do not eat into it.
• ACIT v A.R. Enterprises Supreme CourtHelps department
  I paid advance tax for the year but had not filed my return when the search took place. Can the department still call that income undisclosed?
  Yes. The Supreme Court held that payment of advance tax is not disclosure of income. Advance tax is paid on an estimate of current income; disclosure of total income happens only in a return. Where the due date under section 139(1) had passed and no return had been filed by the date of search, section 158BB(1)(c) requires the returned income to be taken as nil, and the officer was right to conclude the assessee would not have disclosed the income. Tax deducted at source is no different, being computed on the same estimated basis. The Revenue's six appeals were allowed with costs.
• CIT v. Willamson Financial Services (Supreme Court) — a Chapter VI-A deduction on a tea company's composite income is allowed AFTER the Rule 8(1) sixty-forty apportionment, not against the whole composite income Supreme CourtHelps department
  Our tea company exports. Should the section 80HHC deduction be worked out on the whole composite income before Rule 8 splits it sixty-forty, or only on the forty per cent that is taxable?
  Only on the forty per cent. The Supreme Court held that the deduction under section 80HHC is required to be allowed AFTER the apportionment of income under Rule 8(1), and answered the issue in favour of the Department. The legal fiction in Rule 8(1) is confined to that rule: it assigns chargeability and computability only to the non-agricultural forty per cent, and it cannot be extended into section 80HHC(3)(a), because deductions under Chapter VI-A are made from gross total income and are not part of the computation of income under the head "Profits and gains of business".
• CIT v Programme for Community Organisation Supreme CourtHelps taxpayer
  We spent most of our donations on our objects in the same year. The officer now says our 15 per cent accumulation is worked out on what was left over after that spending. Is it worked out on the receipts or on the balance?
  On the receipts. The Supreme Court dismissed the Revenue's appeal and left standing the Kerala High Court's answer: on the plain language of s.11(1)(a) the accumulation a trust is allowed is a percentage of its income derived from property held under trust, and the donations the trust received are that property. It is not a percentage of what survives after part of the income has been applied. The trust had received Rs 2,57,376 and applied Rs 1,70,369, leaving Rs 87,010. The Court held it could accumulate 25 per cent of Rs 2,57,376 and said it was unclear on what basis the Revenue contended for 25 per cent of Rs 87,010. The percentage is now 15, not 25.
• Commissioner of Income-tax v. Justice R.M. Datta (Calcutta High Court, 4 July 1989) — section 176(4) deems the receipt to be income but creates no further fiction bringing it under 'Profits and gains of business, profession or vocation', so arrears received after the profession ceased escape the charge High CourtHelps taxpayer
  I was an advocate on cash basis and stopped practising when I was appointed to the Bench. Fees for old work are still coming in. The Assessing Officer says section 176(4) makes them taxable. Is there an answer?
  There is, and this is it. The Calcutta High Court held that section 176(4) creates only two fictions — that the sum received after discontinuance is deemed to be the income of the recipient, and that it is charged to tax in the year of receipt — and does not create a third fiction deeming the receipt to be income of a business or profession carried on by the assessee in that year. Because the receipt is the fruit of professional activity it falls under the head 'Profits and gains of business, profession or vocation' and cannot be taken to the residuary head; and because the assessee carried on no profession in any part of the relevant previous year, it cannot be computed under sections 28 to 43A. The question referred was answered in the affirmative and in favour of the assessee.
• M/s DFE Pharma India LLP v DCIT — AMT is charged on total income, so brought-forward losses are set off first ITATHelps taxpayerNo later treatment found
  The Assessing Officer accepted nil income under the normal computation after setting off brought-forward losses, but then charged AMT at 18.5 per cent on the net profit without allowing that set-off. Can he compute total income one way for the normal provisions and another way for AMT?
  No. Section 115JC charges the minimum tax on adjusted total income, and adjusted total income starts from the total income, which by s.2(45) is computed after giving effect to the provisions of the Act — including the set-off of brought-forward losses under s.72. The Assessing Officer's contrary interpretation, treating total income as net profit for AMT purposes only, was rejected.
• ITO v Kuldeep Jain ITATHelps departmentSuperseded by amendment
  When my three minor children's income is clubbed with mine under s.64(1A), can I claim the Chapter VI-A deduction separately for each child's income as well as for my own?
  No. The Chapter VI-A deduction is available to the assessee, and once s.64(1A) operates the only assessee is the parent, so there is no separate computation of total income for each minor. The Tribunal held that the deduction in issue (then s.80L) was admissible once, to the parent, and not again for each minor whose income was clubbed.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.