TMI Blog2010 (10) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... ting deduction under section 35(2) of the Act, deduction under Section 35(2) has to be first allowed in the computation of business income as a whole and thereafter deduction under Section 80HH and Section 80-I have to be granted only from the net income attributable to the eligible industrial unit, appeals allowed by reversing the orders of the Tribunal and that of the first appellate authority and direct the Assessing Officer to revise the assessment as stated above. - IT APPEAL NOS. 774, 776, 862, 1453 AND 1567 OF 2009 - - - Dated:- 19-10-2010 - C.N. RAMACHANDRAN NAIR, K. SURENDRA MOHAN, JJ. P.K.R. Menon and Jose Joseph for the Appellant. Joseph Kodianthara for the Respondent. JUDGMENT C.N. Ramachandran Nair, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital expenditure incurred for scientific research in one of the industrial units. However, controversy that arises for consideration, which is in a narrow campus, is as to whether deduction under Section 35(l)(iv) read with Section 35(2) has to be allowed first and the other deductions falling under Chapter VI-A namely, Section 80HH and Section 80-I should be granted thereafter with reference to net income so obtained after first granting deduction under Section 35(1)(iv) read with Section 35(2) of the Act or whether Chapter VI-A deductions provided under the above two Sections should be granted on the gross total income before making deduction under Section 35(1)(iv) read with Section 35(2) of the Act. Even though the Assessing Officer a ..... 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 relied on by the Revenue has no application because unlike in the said decision wherein assessee had carried forward loss, the assessee in this case had no business loss carried forward to be set off against business income. 5. After hearing both sides and after going through the judgment of the Supreme Court, we find that even though the facts are not the same, the principle relied on by the Supreme Court squarely applies to the facts of this case. The definition of "gross total income" contained in Section 80B(5) extracted herein below itself will prove the scheme or the method of computation to be followed to arrive at the total income by granting deductions under Chapter VI-A including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any backward area; 80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a shop or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof.'' What is clear from the above is to first determine the gross total income and work out therefrom the profit attributable to the eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HH and 80-I has to be allowed. (iii) Even though various deductions under Chapter VI-A have to be granted from the gross total income which is the combined income computed under the provisions of the Act under all heads of income, deduction eligible under Section 80HH and Section 80-I are specific percentage of profit attributable to the eligible industry which is new and located in backward area. 6. In view of our findings above, we hold that the Tribunal went wrong in allowing (deduction under section 80HH and Section 80-I from the gross total income before granting deduction under section 35(2) of the Act. As already held by us, deduction under Section 35(2) has to be first allowed in the computation of business income as a whole ..... X X X X Extracts X X X X X X X X Extracts X X X X
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