TMI Blog1997 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... te, is directed against the judgment of the Madras High Court dated January 22, 1982, in Tax Case No. 407 of 1977. The Kotagiri Industrial Co-operative Tea Factory Ltd., the respondent (hereinafter referred to as "the assessee") is a co-operative society. It carries on business in manufacture and sale of tea from bought tea leaves and the purchase and supply of agricultural manure to members. It is also deriving income from dividend from investments with other co-operative societies. In the previous year relevant to the assessment year 1972-73, the assessee earned a total income of Rs. 85,150. The losses of the earlier year which had been carried forward to the said assessment year were Rs. 1,82,744. The assessee claimed a deduction of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be eligible for the deduction and it is only if there is any amount left thereafter that could be the subject of consideration for set off of carried forward losses. The High Court followed the decision of this court in Cloth Traders (P) Ltd. v. Addl. CIT [1979] 118 ITR 243, as well as its own decision in CIT v. V. Venkatachalam, [1979] 120 ITR 688. Dr. V. Gaurishankar, learned senior counsel appearing for the Revenue, has submitted that the High Court was in error in proceeding on the basis that the deduction under section 80P must be made before the adjustment of the losses of the previous year under section 72 of the Act. Learned counsel has placed reliance on the definition of the expression "gross total income" contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of this section, the sum specified in sub-section (2), in computing the total income of the assessee." For the purposes of Chapter VI-A, the expression "gross total income" is defined in clause (5) of section 80B in the following terms : "'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter." If section 80P(1) is read with the definition of the expression "gross total income" contained in section 80B(5), it has to be held that for the purpose of making deduction under section 80P, it is necessary to first determine the gross total income in accordance with the other provisions of the Act. This means that for the purposes of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in accordance with all the provisions except section 80E. The decision in Cloth Traders Pvt. Ltd.'s case [1979] 118 ITR 243 (SC), has been overruled by the Constitution Bench in Distributors (Baroda) Pvt. Ltd.'s case [1985] 155 ITR 120 (SC), wherein it has been observed : "The opening words describe the condition which must be fulfilled in order to attract the applicability of the provision contained in sub-section (1) of section 80M. The condition is that the gross total income of the assessee must include income by way of dividends from a domestic company. 'Gross total income' is defined in section 80B, clause (5), to mean the 'total income computed in accordance with the provisions of the Act before making any deduction under Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be pointed out that while considering the provisions of section 80T of the Act, this court has followed the decision in Distributors (Baroda) Pvt. Ltd.'s case [1985] 155 ITR 120 (SC), in H. H. Sir Rama Varma v. CIT [1994] 205 ITR 433. In that case it has been held that a long-term capital loss brought forward from earlier assessment years had to be first set off against the long-term capital gains of the current assessment year before the deduction contemplated by section 80T of the Act is allowed and the relief under section 80T is to be given only for the amount of long-term capital gains of the current assessment year after the long-term capital loss of the earlier years brought forward is set off. It is no doubt true that the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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