Law: Income Tax Act, 1922

Section: 10,10(2)(vii)

Income-tax Act (XI of 1922)---Ss. 10(2)(vii), second proviso & 12(4)-Whether when income assessed under S. 12 and benefit of depreciation given under its subsection (4), should the amount received on sale of properties, in excess of the written down value, be brought to tax under second proviso to cl. (vii) of subsection (2) of S. 10. Subsection (4) of section 12 of the Income-tax Act, as also sub­section (3), provide that the assessee "shall be entitled to allowances in accordance with the provisions of clauses (iv), (v), (vi) and (vii) of sub­section (2) of section 10 . . . . " The two material words are "entitled" and "allowances". The word "allowance" is an ordinary word of the English language and means rebate, deduction or discount. We have to construe the, word "allowances" in the context in which it has been used in the Income-tax Act, 1922. Subsection (2) of section 10 provides that the profits and gains of business, profession or vocation shall be computed after making allowances enumerated in clause (i) to clause (xviii). The clear meaning of these words is that in the computation of income, profits and gains under section 10, rebate or deduction should be given or made as provided in the various clauses of subsection (2). The other material word in subsection (4) as well as in subsection (3) of section 12 is "entitled". The second proviso to clause (vii) of subsection (2) of section 10 creates liabilities to tax of certain amounts. When the word "entitled" is used in subsection (4), as also in subsection (3) of section 12, what is intended is that the assessee should be given benefit of rebates or deduc­tions, not that he should be subjected to any liability. No one can be said to be "entitled" to liability. The word "entitled" cannot, in the context of the provisions of section 12, go with liability to tax. Of course, the case may have been different if subsection (4), or even subsection (3) of section 12 had been framed in such language as is used in subsection (2) of section 10, when it provides that profits or gains shall be computed after making the allowances enumerated in clauses (i) to (xviii). If sub­sections (3) and (4) had merely said…

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