Meaning of “Chargeable”

The meaning of chargeable under section 70 to 79, 32 of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble Income Tax Appellate Tribunal tried to explain the meaning of chargeable.

Meaning of chargeable defined by court

The phrase ‘chargeable‘ used in section 70 to 79 of the Income Tax Act came up before various high courts as detailed under :

1. Hon’ble ITAT-Mumbai explained the meaning of ‘ chargeable’ while delivering judgment in Yucca Finvest (P.) Ltd. vs. Dy. CIT [2006] 101 ITD 403/103 TTJ 180 (Mum. – Trib.) as under :

Meaning : The word ‘chargeable’ used in explanation to section 73 does not mean ‘charged’. The word ‘chargeable’ used in explanation to section 73 would refer to chargeability to tax under the act. This would only mean that loss may not be charged to tax directly in the current year. But by adjustment against other business income in that year or in following years, it reduces the other income on which tax is levied. Hence, negative income i.E., Loss, is equally chargeable to tax as positive income.

2. Hon’ble ITAT-Hyderabad explained the meaning of ‘ chargeable’ while delivering judgment in Pennar Steels Ltd. vs. Dy. CIT [1997] 60 ITD 1 (Hyd. – Trib.) as under :

Meaning : An income is charged to tax only when it is chargeable to tax. Whenever an income is assessed or charged to tax, it is a pre-requisite that it is included in the term ‘income chargeable’. The 30 per cent of book profit is charged and assessed to tax as total income. The term ‘chargeable’ is a larger concept than ‘charged to tax’ and includes the latter in its ambit.

Various incomes chargeable are computed under respective heads. To charge or assess the income, the chargeable income so computed under each head is aggregated, the set-off under chapter vi, the deductions under chapter vi-a and the rebates and reliefs under chapter viii are allowed thereagainst, and the balance is assessed to tax.

Section 70 to 79 of the Income Tax Act

Set off of loss from one source against income from another source under the same head of income.

70. (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than “Capital gains”, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.

(2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.

(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.

In this article, you can get guidance from high courts on the meaning of chargeable under section 70 to 79, 32 of the Income Tax Act.

Updated up to Finance Act 2021