TMI Blog1999 (6) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 80-O of the Income-tax Act, 1961, of Rs. 3,38,38,386 being 50 per cent. of the total foreign exchange received during the year of Rs. 6,76,76,773. The assessee had incurred an expenditure of Rs. 1,10,06,689 relatable to two projects, viz., NNPC and Petromech. In computing the deduction under section 80-O, assessee did not take into account the aforementioned expenditure of Rs. 1,10,06,689 incurred in India. It was claimed that deduction under section 80-O is allowable on the receipt of income from abroad in foreign exchange and, therefore, the expenditure incurred in India is not deductible. This claim of the assessee was not accepted by the Assessing Officer. The assessee appealed to the Commissioner of Incometax (Appeals) and the latter confirmed the view of the Assessing Officer with the following finding : 4. I have heard the arguments of learned counsel of the appellant. Iam of opinion that deduction has to be allowed on net income after deducting the expenditure incurred in India from the gross receipts received in convertible foreign exchange in India. The Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120 and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Filed on 9-3-1998 (Delhi) BMG Enterprises Ltd. Vaish Associates 13. 6701/Mum/91 Tower Ins. and Reins Service India Ltd. Shri S. R. Jha 14. 4929/Mum/94 do. do. 15. 5870/Mum/95 do. do. 16. 1508/Che/98 (Madras) SPG Projects and Consultancy Ltd. M. S. Syali and Mr. Assem Chawla 17. 7272/Mum/98 Oceaneering Express For warders Ltd. Shri Santosh Desai Shri Harshad K. Shah The appellant has filed an application for admission of the additional ground of appeal on April 8, 1996, which reads as under : The Commissioner of Income-tax (Appeals) erred in not allowing deduction under section 80-O with reference to gross convertible foreign exchange received by the appellant by way of fees. He failed to appreciate that the appellant was entitled to deduct under section 80-O with reference to gross convertible foreign exchange received by it by way of fees. It has been contended before us that the additional ground is purely legal in nature and has been raised on becoming wiser after several court decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships held that any dividend received must necessarily imply the dividends received by the assessee from Indian company. In this case the Bombay High Court held that the word received immediately follows the word dividend and it shows that the exemption is in regard to the dividend received and not in regard to the dividend as assessed or the dividend income. Reliance was also placed on the decision of the Supreme Court in the case of CIT v. South Indian Bank Ltd. [1966] 59 ITR 763 where their Lordships held that interest receivable was an unambiguous expression ; it could only mean the amount of interest calculated in accordance with the terms of the securities ; it could not mean interest receivable minus the amount spent in receiving the same. It was accordingly contended that in section 80-O the Legislature having consciously used the words the income so received connotes the gross income received in India and not the income as computed under the Act. According to learned counsel, the computation of income does not come into play in interpreting the words the income so received in section 80-O. It was reiterated that section 80-O is a stand alone section. Referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with reference to the foreign exchange remittances from the specified source. Learned counsel pointed out that section 80-O does not use the words that deduction shall be allowed from such income. Reliance was placed on the following decisions of the Tribunal in support of the contention that deduction under section 80-O is permissible with reference to foreign exchange earnings and the expenditure incurred in India is not to be deducted for the purpose of computation of the deduction. (1) M. N. Dastur and Co. Ltd. v. Deputy CIT [1992] 40 ITD 521 (Cal) ; (2) M. N. Dastur and Co. Ltd. v. Dy. CIT [1997] 62 ITD 113 (Bang) ; and (3) M. N. Dastur and Co. Ltd. v. Dy. CIT [1997] 61 ITD 167 (Cal). Reference was also invited to the decision of the Tribunal in the case of J. B. Boda and Co. (P.) Ltd. v. ITO in I. T. A. Nos. 1850 and 1851 (Bom) of 1991. Learned counsel contended that the decision of the Tribunal in the case of Tata Unisys Ltd. v. Deputy CIT [1993] 47 TTJ 8 (Bom), is not based on correct appreciation of facts. Referring to the decision of the Tribunal in the case of Tata Unisys Ltd. [1993] 47 TTJ 8 (Bom), learned counsel contended that the Bench has not decided the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that the decision of the Supreme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120 was inapplicable for interpreting section 80-O as the language was different. It was further contended that the decision of the Calcutta High Court in the case of CIT v. Darbhanga Marketing Co. Ltd. [1971] 80 ITR 72 and that of the Madras High Court in the case of CIT v. Madras Motor and General Insurance Co. Ltd. [1975] 99 ITR 243 had not been overruled by the Supreme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120. Reliance was also placed on the decision of the Calcutta High Court in the case of Pilani Investment Corporation Ltd. v. CIT [1987] 165 ITR 138 in support of the contention that the aforementioned cases referred to in the decision of the Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 (SC) have not been overruled in Distributors (Baroda) Pvt Ltd. s case [1985] 155 ITR 120 (SC) and therefore these are still binding. It was further contended that the legislative history should be taken into account in determining the meaning of section 80-O. Learned counsel further contended that section 80AB has limited application and it app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to consider the effects or consequences which would result from it, for they often point out the real meaning of the words. There are certain objects which the Legislature is presumed not to intend and a construction which would lead to any of them is therefore to be avoided. Reference was also made to the following rule- Thus in Maxwell in many other cases where it was evident that a literal construction would have carried the operation of the Act far beyond the object with which it was enacted have been given restricted construction. Specific reference was also made to the following rule : Where a statute made it an offence in certain cases for any person to intimidate any other person, but provided that nothing in the Act should apply to seamen (to whom a special disciplinary code was applicable), it was held that the proviso only operated where the offence was committed by a seaman, and not where it was committed against a seaman . Shri Vaish representing BMG Enterprises Pvt. Ltd. could not reach Mumbai but filed written submissions which we have considered. Learned counsel has relied upon the legislative history of section 80-O and sought to support the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India is provided. Shri Chandrachood contended that the remittance from abroad is a condition for grant of deduction under section 80-O. The entire foreign exchange remitted from abroad does not qualify for deduction. It was further contended that the object of section 80-O is not only to bring in foreign exchange from specified sources. Foreign exchange can be earned by various modes. Reliance was placed on the decision of the Supreme Court in the case of Petron Engineering Construction P. Ltd. v. CBDT [1989] 175 ITR 523 in support of the contention that the object of section 80-O was to ensure and promote the spread of Indian technology to developing countries and in that process foreign exchange would also be realised. It has been pointed out that this principle has been reiterated in the case of J. B. Boda and Co. Pvt. Ltd. v. CBDT [1997] 223 ITR 271 (SC) at page 278. Learned counsel further contended that the interpretation advanced on behalf of the appellants is misconceived. The contention is not borne out by the object and purpose underlying the introduction of the provision, it was contended. Learned counsel further contended that the decision of the Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Corpn. of India Ltd. [1987] 23 ITD 49 and the decision of the Bombay Bench of the Tribunal in the case of Tata Unisys Ltd. v. Deputy CIT [1993] 47 TTJ 8 in support of the contention that deduction under section 80-O is permissible with reference to the net income included in the gross total income and that the provisions of section 80AB are applicable in respect of deduction under section 80-O. Learned counsel further contended that the legislative history in the course of judicial interpretation supports the view that the deduction under section 80-O must be based on income by way of specified sources calculated in accordance with the provisions of the Act. It was accordingly contended that the appeal of the assessee be dismissed. We have given our thoughtful consideration to the rival contentions. The issue to be resolved by this Bench is whether the quantum of deduction admissible under section 80-O of the Income-tax Act, 1961, is admissible on the gross income brought into India in convertible foreign exchange or the income computed after reducing the expenses incurred abroad as well as in India. Chapter VI-A of the Income-tax Act, 1961, provides for deduction to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange ; (ii) foreign enterprise means a person who is a non-resident ; (iii) services rendered or agreed to be rendered outside India shall include services rendered from India but shall not include services rendered in India. The various Benches of the Tribunal and some High Courts have taken divergent views in regard to the interpretation of section 80-O. The Madras High Court in the case of CIT (Addl.) v. Isthmian India Maritime P. Ltd. [1978] 113 ITR 570 held that deduction under section 80-O is permissible with reference to the gross receipts without deducting the expenditure incurred in India. The same High Court in the case of CIT (Addl.) v. Crompton Engineering Co. (Madras) Ltd. [1979] 119 ITR 921 while interpreting section 85C held that deduction was permissible with reference to the gross amount of royalty, etc. (These cases were decided before the decision of the Supreme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120). The Calcutta Bench of the Tribunal in the case of M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islation and produce a wholly unreasonable result, the court must do some violence to the words and so achieve that obvious intention and produce a rational construction. This rule is based on the decision of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535 at page 542. A judicial interpretation should be so geared as to fairly serve the legislative intent. This rule is based on the decision of the Bombay High Court in the case of Eastman Consultants Pvt. Ltd. v. CBDT [1981] 132 ITR 637, 640. In the case of CIT v. B. N. Bhattacharjee [1979] 118 ITR 461, at page 480, their Lordships of the Supreme Court quoted the following by Per Denning L.J. (Seaford Court Estates Ltd. v. Asher [1949] 2 All ER 155, 164 (CA)) : It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament .. A judge should ask himself the question if the makers of the Act had themselves come across this ruck in the texture of it, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words contained in an enactment (especially general words), and sometimes to depart, not only from their primary and literal meaning, but also from the rules of grammatical construction in cases where it seems highly improbable that the words in their wide primary or grammatical meaning actually express the real intention of the Legislature. It is regarded as more reasonable to hold that the Legislature expressed its intention in a slovenly manner, than that a meaning should be given to them which could not have been intended. (See Maxwell on the Interpretation of Statutes, Twelfth edition, page 105) Per Megarry J. in Simpson v. Jones (H. M. Inspector of Taxes) [1968] 44 TC 599, 608 (Ch D) : In thickets so dense and statute-laden as the law of income tax, common sense, is I suppose, a frail guide. Certainly it cannot become the master, for then it would usurp the function of the statute book. But in territory which remains unoccupied by either statute law or case law, I do not see why common sense should be abjured . Courts not to make the law In the case of Crawford v. Spooner [1846] 4 MIA 179 (PC), the Judicial Committee said (Page 187) : We cannot aid the Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot just one-to-one relation. We will not consider any provision out of the frame-work of the statute. We will not view the provisions as abstract principles separated from the motive force behind. We will consider the provisions in the circumstances to which they owe their origin. We will consider the provisions to ensure coherence and consistency within the law as a whole and to avoid undesirable consequences . It is established from the rules of interpretation that the expositors of laws are duty bound to examine the words of the statute and expound the words in the natural and ordinary sense of the words. Since there is a difference of opinion amongst various Benches of the Tribunal, it cannot be presumed that the language of section 80-O is free from doubt. In case of doubtful meaning of a provision it becomes the paramount duty of the court to put upon language a rational meaning. It becomes our duty to examine every word, every section and every provision of the Act to be examined as a whole. The necessity which gave rise to the incorporation of the provision, the mischief which the Legislature intended to redress are to be taken into account. The provision is also not to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxpayers to develop technical know-how and make it available to foreign Governments and foreign companies so as to augment our foreign exchange resources. The Mumbai High Court in the case of Gannon Dunkerley and Co. Ltd. v. CBDT [1986] 159 ITR 162 at page 165 held as under : The object of section 80-O of the Act, as indicated by the Board itself under its circular dated December 27, 1975 (exhibit C), is to encourage the export of Indian technical know-how and augmentation of foreign exchange resources of the country. The objective of section 80-O is encouraging the export of Indian technical know-how and augmenting foreign exchange resources of the country also emerges from the decision of the Supreme Court in the case of Petron Engineering Construction P. Ltd. v. CBDT [1989] 175 ITR 523. We quote from the above decision at page 532 : Although there is no indication in section 80-O regarding the supply of technical know-how or rendering technical services to newly developing countries, yet it may be reasonable to infer from the said speech of the Finance Minister that at the time when section 85C was introduced in the Act, one of the objectives was to supply technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be achieved in one hand and section 80-O on the other hand ignoring the other rules of interpretation a blurred picture may appear in favour of the interpretation advanced on behalf of the taxpayers. However, as already pointed out, it is not permissible under the rules of interpretation to ignore the scheme of the Act, the intention of Parliament and the other relevant provisions of the Act. In the case of Kehar Singh, AIR 1988 SC 1883, the golden rule of interpretation laid down by the Supreme Court has been quoted by us elsewhere in our order which gives the direction in which the expositors of the law have to proceed in the event of any doubt in the meaning of a provision of the Act. It is provided that in the event of doubtful meaning of a provision beneficial interpretation in favour of the assessee should be adopted. However, it is to be borne in mind that such interpretation is to be adopted only when the intention of the Legislature is not available. The rules permitting the interpretation which will advance the object of a provision is also applicable when the intention of the Legislature is not explicit. When the object is to encourage export of Indian technical kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Legislature is key to the process of interpretation. The intention of Legislature can be ascertained by various modes. The legislative history is one of the modes. The legislative history is an eligible aid to the construction of any provision of law. If an authority is required we quote one in the case of Rajendra Kumar Sethia v. CWT [1992] 194 ITR 218 (Cal). We, therefore, give hereunder the legislative history of section 80-O : Legislative history : The benefit in respect of income from royalty, commission, fees, etc., arising out of use of Indian technical know-how abroad was first introduced in the form of section 85C of the Act by the Finance Act, 1966 with effect from April 1, 1966. At the time of its introduction, this section provided for tax at the rate of 25 per cent. of such income. Section 80-O of the Act was introduced for the first time by the Finance (No. 2) Act, 1967 to replace section 85C as it stood then. The new section 80-O allowed deduction of 60 per cent. of income by way of royalties, commission, fees, etc. received by an Indian company from a foreign company in consideration for its supply of technical know-how or technical services under ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign exchange, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction of the whole of the income so received in, or brought into, India . The notes on clauses to the Finance Bill, 1974 ([1974] 93 ITR (St.) 117) at p. 122, stated that the deduction under section 80-O will be allowed only to the extent such income is received in or is brought into India in accordance with the law for regulating payments and dealings in foreign exchange . The memo, explaining the provisions in the Finance Bill, 1974-[1974] 93 ITR (St.) 145 while explaining the scope of the amendment under section 80-O of the Act stated as follows : The main objective of this tax concession is to encourage Indian companies and resident non-corporate taxpayers to develop technical know-how and make it available to foreign governments and foreign companies so as to augment our foreign exchange resources. The Bill seeks to make the following two changes in this provision : (a) As one of the main objects of the aforesaid tax concession is to augment our foreign exchange resources, it is proposed to specifically provide that the deduction under this provision will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be allowed by the Commissioner of Income-tax after taking into account the difficulties of the assessee in not getting the amount remitted to India within the stipulated period. . . . While explaining the provisions of the Finance Act, 1987, the CBDT Circular No. 495, dated 22nd September, 1987, explained the modification in the provisions of section 80-O at para. 33.1 ([1987] 168 ITR (St.) 87, 108) as under : The basic purpose of this incentive provision is to earn foreign exchange for the country. This can be done effectively only by ensuring inward remittance of foreign exchange within a reasonable period. Therefore, Explanation II to section 80-O as it stood earlier has been deleted and a third proviso has been inserted in section 80-O, laying down that a deduction will be allowed under that section only in respect of income which is received in India in convertible foreign exchange or has been brought into India within a period of six months. However, where the Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is unable to do so within the time specified above, because of reasons beyond his control, he may allow such further time as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective of this tax concession is to encourage Indian companies and resident non-corporate taxpayers to develop technical know-how and make it available to foreign governments and foreign companies so as to augment our foreign exchange resources. The Bill seeks to make the following two changes in this provision : (a) As one of the main objects of the aforesaid tax concession is to augment our foreign exchange resources, it is proposed to specifically provide that the deduction under this provision will be allowed only to the extent the income by way of royalty, commission, etc., is received in or is brought into India by the taxpayer in accordance with the law regulating payments and dealings in foreign exchange. The existing provision in the law is being amended, retrospectively, from April 1, 1972, i.e., the date from which the relevant provision, as it stands at present, was brought into force. . . The comparison of the provisions of section 80-O with effect from April 1, 1972, before the amendment by the Finance Act of 1974, and section 80-O after the amendment by the Finance Act of 1974, would be extremely useful in appreciating the intention of the Legislature : Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing the total income of the assessee. It is observed from the above comparison that before the amendment in 1974 the deduction under section 80-O was permissible in respect of the whole of income from the specified sources. The income undisputedly is the income as computed under the Act, i.e., after reducing the expenses incurred abroad as well as in India. The purpose of amendment in 1974, as has been brought out above in the memo explaining the provisions of the Finance Bill, 1974 (see para 50 (page 69) of this order), was to provide that the deduction under section 80-O will be allowed only to the extent of the income by way of specified sources is received in or is brought into India by the taxpayer. When we interpret section 80-O in granting deduction with reference to the gross receipts received in or brought into India from the specified sources, we are clearly interpreting the law in a manner which is not intended by Parliament. Such a construction of a statutory provision is not permissible. We may also refer to the amendment made by the Finance Act of 1984 (see para 48 (pages 65 to 68) of this order) (which reduced the quantum of deduction to fifty per cent. of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, it has been held that by granting a deduction to the assessee with reference to the net income the twin objectives of this section 80-O would be defeated. We are unable, with due respects to the Bench, to subscribe to this view. As held by their Lordships of the Supreme Court in the case of Petron Engineering Construction (P.) Ltd [1989] 175 ITR 523, the foreign exchange resources can be augmented by various other modes. Moreover, encouraging the export of Indian technical know-how and augmenting the foreign exchange resources need not necessarily be achieved by granting deductions with reference to the gross foreign exchange earnings. The objectives could be achieved by providing some incentive. It is for the Legislature to decide the manner in which the objectives can be achieved. In this case we have seen from the legislative history, as also the scheme of the Act below, that the Legislature always intended to give deduction under section 80-O with reference to the net income included in the gross total income. Scheme of the Act : We have found the object of section 80-O. We have also ascertained the intention of the Legislature in regard to the quantum of deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in third part of section 80-O means the net income derived from the specified source subject to the condition that the income is received in India in convertible foreign exchange. It may be pertinent to mention that several provisions of Chapter VI-A have come up for consideration before various courts as well as in the Supreme Court and the trend of the decisions supports the view that deductions under Chapter VI-A are permissible with reference to the net income as computed under the statute. Their Lordships of the Bombay High Court in the case of Industrial Consulting Bureau (P.) Ltd. [1991] 189 ITR 346 have held that deduction under section 80MM is allowable with reference to the net income and not with reference to the actual amount of income by way of consulting fees received. The Supreme Court in the case of CIT v. P. K. Jhaveri [1990] 181 ITR 79 held that deduction under section 80K was allowable on the amount of dividend after deduction of interest on money borrowed for such investment and that the deduction was not permissible with reference to the gross amount received. In this case the Tribunal had relied upon the decisions of the Bombay High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 58) of this order. It can conveniently be divided into three parts : (1) Where the gross total income of an assessee, being an Indian company or a person other than company who is resident in India, includes any income by way of royalty, commission, fees or any similar payment received by the assessee from the Government of a foreign State or a foreign enterprise in consideration for the use outside India of any patent, invention, model, design, secret formula or process, or similar property right or information concerning industrial, commercial or scientific knowledge experience or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee. (2) Such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1, 1972, has given rise to the present dispute. Then we come to the third part of the section. This part of the section is crucial as it refers to the quantum of deduction. The foundation of the claim on behalf of the taxpayers revolves on this part of section 80-O. As per the law applicable for the assessment year 1992-93, a deduction of 50 per cent. of the income so received is provided. Going by the grammatic expressions, the income so received in the third part of section 80-O must, necessarily refer to the income referred to in the second part of section 80-O. Therefore, the income so received in third part of section 80-O must also necessarily mean the income included in the gross total income and received in convertible foreign exchange. The receipt in foreign exchange is not the basis for deduction but a condition precedent for grant of deduction. We may now consider some of the contentions advanced on behalf of the appellants. It was pointed that the Calcutta Bench in the case M. N. Dastur and Co. Ltd. (supra) has relied upon the decision of the Calcutta High Court in the case of CIT v. Darbhanga Marketing Co. Ltd. [1971] 80 ITR 72 and the decision of the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 84 and Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 the question was to be decided against the assessee and in favour of the Revenue. It has further been pointed out by the Supreme Court that the statutory provisions have been modified with effect from April 1, 1981, by insertion of section 80AB. In view of the decision of the Supreme Court referred to above, the contention advanced on behalf of the assessee is liable to be rejected. It may also be pertinent to mention that section 99(1)(iv) differs in language as well as in structure with the provisions of section 80-O. Reference may also be made to the decision of the Bombay High Court in the case of Industrial Consulting Bureau Pvt. Ltd. v. CIT [1991] 189 ITR 346 where it was held that deduction under section 80MM was allowable with reference to the net income and not on the gross income. The afore mentioned decision of the Bombay High Court is in regard to a deduction allowable under a provision of the Act contained in Chapter VI-A. There may be similarities in the provisions of section 80MM and section 80-O to a great extent. Section 80-O is also part of Chapter VI-A. The two sections are part of the same structure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in Chapter VI-A Part C is not related to income and therefore, it must be held that the deduction under section 80-O is with regard to gross receipts and not relating to income. It is true that deductions under various provisions in Part C, Chapter VI-A, such as sections 80CCA, 80CCB, 80CCC, 80D, 80DD, 80DDA, 80DDB, 80G, 80GG, 80GGA may not be with reference to income but the fact of the matter is that section 80-O belongs to family of sections providing deduction related to income. The dispute in this case is whether the deduction is on gross income or net income. We have found that the deduction is with reference to the net income. Therefore, the contention raised does not advance the case of the assessee. Our attention was also drawn to the circular of the Board No. 281, dated September 22, 1980-[1981] 131 ITR (St.) 4 at page 20, containing explanatory notes on provisions of the Finance (No. 2) Act, 1980, by which section 80AB was inserted in the statute. In this circular it was clarified that the deduction specified in the aforesaid section will be calculated with reference to the net income as computed in accordance with the provisions of the Act (before making any dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for considering the provisions of the Act as they existed prior to April 1, 1985. However, we consider it necessary as the words the income so received in the third part of section 80-O existed even as per the law applicable prior to April 1, 1985. It has also been clarified by the CBDT that from April 1, 1985, the quantum of deduction has been reduced to 50 per cent. Therefore the only change is with regard to the quantum of deduction having been restricted. We are, therefore, considering the provisions of section 80-O as applicable for assessment years prior to April 1, 1985. The assessee has earned foreign exchange of Rs. 8,52,59,173 out of which an expenditure of Rs. 1,32,10,173 has been incurred abroad. A sum of Rs. 6,76,76,773 had been received in India in foreign exchange out of which Rs. 1,10,06,689 have been spent in India, leaving the net income of Rs. 5,66,70,084. If the deduction to be allowed to the assessee is with regard to the foreign exchange received in India, then the assessee would get a deduction of Rs. 6,76,76,773 out of the income of Rs. 5,66,70,084 which is included in the gross total income. Considering the fact that section 80-O is a provision p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of deduction. As per section 80-O the income from the specified source should be included in the gross total income out of which deduction would be permissible at 50 per cent. of the income received in convertible foreign exchange out of the income included in the gross total income. Keeping in view the above findings the inescapable conclusion that emerges is as under : That deduction under section 80-O is not admissible on the gross foreign exchange receipts but on the income computed after deducting the expenses incurred abroad as well as in India out of foreign exchange receipts from specified source(s). We find support for our view from the decision of the Delhi High Court in the case of CIT v. Marketing Research Corporation [1987] 61 CTR 204. The Delhi High Court has held that deduction under section 80-O is permissible with reference to the net income as computed under the provisions of the Act. The decision of the Supreme Court in the case of Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 has been relied upon. It was contended before us that the decision of the Delhi High Court related to the assessment year 1968-69 and that the language of section 80-O as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income. It was contended before us that section 80-O is a stand alone section and, therefore, section 80AB is not applicable. In order to examine this contention advanced on behalf of the assessees, it would be useful to refer to certain relevant rules of interpretation. The office of a good expositor of an Act of Parliament , is to make construction on all parts together, and not of one part only by itself-Nemo enim aliquam partem recte intelligere potest antequam totum iterwn arque iterum perlegerit . It is the most natural and genuine exposition of a statute to construe one part of a statute by another part of the same statute, for that best expresses the meaning of the makers. . . . . and this exposition is exvisceribus actus. But this rule of construction is never allowed to alter the meaning of what is of itself, clear and explicit ; it is only when any part of an Act of Parliament is penned obscurely and when other passages can elucidate that obscurity, that recourse ought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interpretation it becomes abundantly clear that it is the duty of the expositors of laws to consider the entire provisions of the statute as a whole. Applying the above rules of interpretation, we are of the considered view that section 80-O cannot be considered in isolation. Every section contained in Chapter VI-A has an independent role in regard to deductions referred to in respect to provisions of the Act. Nevertheless, these provisions cannot be isolated from other provisions of the Act. Section 80AB has been specifically incorporated in Chapter VI-A and it cannot be overlooked in interpreting a provision of the statute contained in the same Chapter. Section 80-O provides a deduction from the gross total income. The deduction is with reference to the income. Therefore, section 80AB clearly applies to section 80-O. Reverting back to the language of section 80AB the first part of section 80AB provides that whenever any deduction is required to be made or allowed under any section included in this Chapter under the heading CDeductions in respect of certain incomes in respect of any income of the nature specified in that section which is included in gross total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer disallowing deduction under section 80-O of the Income-tax Act, 1961, with reference to the gross convertible foreign exchange received by the assessee by way of fees for technical and consultancy services rendered by it to the parties abroad. In view of our above decision the additional ground of appeal raised by the assessee becomes infructuous. The same is accordingly dismissed. The appeals of the interveners are to be decided by the respective Benches in the light of this decision and in accordance with law. M. V. R. Prasad (Accountant Member).-I have perused the order of my learned Brother with which I am in general agreement. I would only like to add that, while the object of section 80-O is to encourage the bringing in of foreign exchange into India through exports of technical know-how, etc., the quantum of incentive granted has to be considered in the light of the provisions of section 80AB read with section 80-O. To my mind, there is no reason to think that the Legislature desired to give incentive to the activity mentioned in section 80-O to such an extent that an amount higher than the income included in the gross total income from the activities speci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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