Law:

Section:

Section 139(5) of the Income-tax Act, 1961 - Return of income - Revised return - Assessment year 1979-80 - Whether once a valid revised return is filed by assessee, it completely effaces and obliterates original return and, therefore, it is only revised return that has to be taken into account for purpose of making assessment - Held, yes Section 37(2A), read with sections 32(2) and 72, of the Income-tax Act, 1961 - Entertainment expenditure - Assessment year 1979-80 - Whether for purpose of allowing entertainment expenses under section 37(2A) profits and gains should be taken to be income without setting off brought forward losses and unabsorbed depreciation of earlier years - Held, yes Section 32(2) of the Income-tax Act, 1961 - Depreciation - Set off of unabsorbed depreciation - Whether unabsorbed depreciation allowance is part of computing current year's gain from business along with current year's depreciation allowance - Held, no - Whether unabsorbed depreciation has to be given recognition only after deduction is given to carried forward business loss - Held, yes FACTS For the assessment year 1979-80, the assessee claimed entertainment allowance under section 37(2A) in the original tax return but later it filed a revised return and therein it omitted to claim the entertainment allowance. The ITO, however, held that the carried forward depreciation allowance of the previous year will have to be set off along with other allowances before arriving at the income under the head 'Profits and gains of the business and profession' for the purpose of entertainment allowance. The Tribunal held that the ITO should not have referred to the original return at all since the assessee had filed a revised return and the original return stood obliterated. Regarding the interpretation of sub-clause (i) of section 37(2A), the Tribunal observed that if it were the intention of the Legislature that the profits and gains of business or professon over which the entertainment expenditure is allowable should be the figure after allowing the brought forward losses and carried, forward depreciation then it would have stated so in section 37(2A) itself. Accordingly, the Tribunal…

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