Law:

Section:

Section 33(2), read with section 71(2)(ii), of the income-tax act, 1961-development rebate-carry forward and set off-whether, even where assessee has exercised option under section 71(2) to decline to set off his long-term capital gains, such capital gains have to be taken into account in computation of his total income for purposes of section 33(2) and development rebate must, before it is allowed to be carried forward, be set off thereagainst-held, yes. Words and phrases-expression 'total income of the assessee assessable for the assessment year' occurring in section 33(2) of the income-tax act, 1961. Facts For the relevant assessment year 1967-68, the assessee-company had, in addition to income from business, certain income from property, dividends and long-term capital gains. Certain development rebate was also allowable to the assessee for the said assessment year. The ITO set off the assessee's income from business against the development rebate and reduced the income from business to nil. The unabsorbed development rebate was set off against the income from property and dividends. The yet unabsorbed development rebate was then set off against the long-term capital gains and the balance of the capital gains was determined to be taxable. On appeal, the AAC upheld the order of the ITO. On further appeal, the Tribunal held that the yet unabsorbed amount of development rebate could not be set off against the capital gains, but was to be carried forward. On reference, the assessee contended, inter alia, (i) that the phrase 'total income' in section 33(2) had to be construed to mean such income as was available for set off against development rebate, and (ii) that since the assessee had exercised its option under section 71(2)07), its long-term capital gains were not available for set off against the development rebate and its total income would not include income from capital gains. Held It is implicit in section 33(2) that the development rebate, which is unabsorbed by the business income, must be set off against the balance of the total income. The total income of the assessee assessable for the assessment year must mean his income from whatever source…

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