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2019 (3) TMI 171 - SC - Income TaxDeduction u/s 80HH - computation of deduction - whether it is to be available out of ‘income’ as computed under the Act or out of ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’? - HELD THAT:- Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act. Correctly pointed out by Division Bench in the reference order that in Motilal Pesticides case, the Court followed the judgment rendered in the M/s. Cloth Traders (P) Ltd. which was a case under Section 80M of the Act, on the premise that language of Section 80HH and Section 80M is the same. This basis is clearly incorrect as the language of two provisions is materially different. We are, therefore, of the considered opinion that judgment of Motilal Pesticides [2000 (2) TMI 9 - SUPREME COURT] is erroneous. We, therefore, overrule this judgment. Unable to subscribe to Revenue that Section 80AB, which was inserted by Finance (No. 2) Act, 1980 with effect from 1st April, 1981 is clarificatory in nature. It is a provision made with prospective effect as the very Amendment Act says so. Therefore, it cannot apply to the Assessment Years 1979-80 and 1980-81, when Section 80AB was brought on the statute book after these assessment years. This position becomes clear from the reading of Circular No. 281 dated September 22, 1980 issued by the Central Board of Direct Taxes itself. This circular inter alia describes the reasons for adding new Sections 80AA and 80AB. It is, thus, clear that change in legal position is brought about only, with the insertion of Section 80AB and made applicable from AY 1981-82. In view thereof, judgments in the case of M/s. Cloth Traders [1979 (5) TMI 2 - SUPREME COURT] relied by the Revenue will be of no relevance
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