When there is no change in tax rate, does it matter as long as deduction is allowable?
In yesterday's DDT, a judgement by Delhi High Court in a case where the revenue was in appeal on a dispute about the year in which the deduction has to be allowed was reported. The High Court referred to Bombay High Court order rendered about 50 years ago, wherein it was observed that "in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department'.
The above item attracted the attention of a revenue officer, not from income tax, but from Central Excise. R Raghavendra Rao, Superintendent of Central Excise, who has no tall claims about his knowledge in Income tax matters sent us this mail:
I don't know much about Income Tax Act, but let us take the case where the assessee incurred loss in 2006-07 and made profit in 2007-08. Now, though the tax rates are same for both the years, allowing deduction pertaining to the year 2006-07 in the year 2007-08 results in revenue loss as it may reduce/ wipe off the profit made in 2007-08. So the year in which the deduction is allowed is very important issue which has a bearing on the revenue. I feel the department failed to explain this to the Hon'ble HC and this continues for the last 50 years!!!!!!!!!!!!