TMI Blog2007 (2) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... fter allowing intra-head set-off u/s 70 and inter-head set-off u/s 71 of the Act. It is settled principle governing interpretation of statutes that marginal notes to the sections, or headings cannot control the construction of the statute. The title given to a chapter cannot legitimately be used to restrict the plain terms of an enactment or to construe a section thereunder. These are internal aids to construction. However, such internal or external aids to construction can be roped in provided the section under the statute is either not clear or ambiguous. The interpretation has to be based on the section itself and even the intention of legislature can be best found as recorded in the section itself and only in case the language of section is not clear or ambiguous such internal or external aids to interpretation of statutes can be brought into. The Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO [ 1981 (9) TMI 1 - SUPREME COURT] observed that the marginal notes to a section cannot be referred to for the purpose of construing the section but it can be relied upon as indicating the drift of the section and to show what the section is dealing with. It cannot cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, on the ground that the declaration as required under Section 10A(8) of the Act for not claiming the benefit of Section 10A of the Act had not been filed by the assessee. The action of the AO in denying set-off of loss of the undertaking eligible for deduction under Section 10A of the Act has been sustained by the CIT(A) holding that (i) income of an undertaking eligible for deduction under Section 10A of the Act will not form part of the total income of the applicant even under the amended provisions applicable w.e.f. the asst. yr. 2001-02; (ii) in absence of any provision under the scheme of Section 10A of the Act, set-off of losses of the eligible undertaking against the profits of other units was not permissible and (iii) under the provisions of Section 10A(6) of the Act the eligible undertaking is entitled to carry forward its business loss and unabsorbed depreciation relating to asst. yr. 2001-02 to asst. yr. 2009-10 and adjust the same against profits and gains relating to asst. yr. 2010-11 and subsequent years. 3. The learned Counsel for the assessee Shri Ajay Vohra submitted that the CIT(A) erred in not appreciating that the provision of Section 10A of the Act as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, be classified under the various heads of income, as specified in that section. Sections 66 to 80 of the Act contain provisions relating to aggregation of income computed under the various heads of income and set-off of intra/inter-head losses and carry forward of unabsorbed losses/allowances. Section 80B(5) of the Act defines 'gross total income' to mean the total income computed in accordance with the provisions of the Act, before making any deduction under Chapter VI-A of the Act. The scheme of the Act as to the manner of computation of total income, as gathered from the perusal of the aforesaid provisions is as follows: (a) First, compute the income under the various heads of income, as per the provisions pertaining to the same. The aggregate of the same, after adjustment of intra/inter-head and brought forward losses would be the 'gross total income'. (b) From the gross total income so arrived at, deduct the reliefs admissible under Sections 80C to 80U (i.e., Chapter VI-A deductions), which cannot exceed the gross total income. The resultant figure is the 'total income', with reference to which the tax is payable under the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in respect thereof while computing the income under the head 'Profits and gains of business and profession'. In other words, the deduction in respect of the profits eligible under Section 10A of the Act is required to be made at the stage of computing the income under the head 'Profits and gains of business or profession'. The aforesaid also finds support from the IT return form for companies, i.e., Form No. 1 of IT Rules, 1962, substituted by the IT (Nineteenth Amendment) Rules, 2001, w.e.f. 17th Aug., 2001. As per the manner of computation of income from business or profession, as provided in the aforesaid form, the net profit and loss as per the consolidated P L a/c is the starting point and therefrom deduction is to be made, inter alia, in respect of amount claimed deductible under Section 10A/10B of the Act. The aforesaid reasoning is reinforced by the definition of the term 'gross total income' in Section 80B(5) of the Act, as per which the same refers to total income computed in accordance with all provisions of the Act (including Section 10B) except Chapter VI-A, implying thereby that the allowance of deductions under the said chapter is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the new provisions of Section 10A of the Act, provided for deduction in respect of profits derived from export of computer software, being the profits of the business, which bear the same turnover, remaining profit/loss of the undertaking is to be set-off as per the provisions of Sections 70, 71 and 72(1) of the Act. It is emphasized that there was never any restriction in the scheme of deduction under Section 10A of the Act as substituted by the Finance Act, 2003 w.e.f. 1st April, 2001 on application of provisions of Section 70 of the Act providing for set-off of loss from one source against income from other source under the same head of income in any assessment year. Pursuant to the aforesaid amendment, the anomaly that existed in the new scheme of deduction under Section 10A of the Act with respect to carry forward of loss and unabsorbed depreciation under Sections 72(1) and 32(1) of the Act, has been corrected. The aforesaid supports the contention that the application of provisions of Section 70 of the Act is not precluded in the scheme of deduction under Section 10A of the Act. The Third Member Bench of Bombay Tribunal in the case of Naveen Bharat Industrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the fact that Section 10A is included in Chapter III of the IT Act which is titled as Incomes which do not form part of total income . He is, therefore, of the opinion that since under Section 10A income is not to form part of total income, even the losses in such unit eligible for deduction under Section 10A are to be ignored and not to be set-off as per Section 70 and Section 71 of the Act. In our opinion, the learned CIT(A) has misread the provision of Section 10A and has misinterpreted the same. By Finance Act, 2000 w.e.f. 1st April, 2001 the provision of Section 10A has been substantially amended. As per Section 10A(1) deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software shall be allowed from the total income of the assessee. Thus though Section 70 and 7110A is part of Chapter III, still as per Section 10A(1) only deduction of profits derived by an undertaking is to be allowed to the assessee from the total income of the assessee. Thus the prerequisite is that the total income of the assessee is to be computed. The total income can be computed only after allowing intra-head set-off under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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