TMI Blog2003 (3) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as part of capital employed for the purposes of section 80J of the Income-tax Act, 1961, and secondly, whether deduction under section 80-O should be calculated on the gross fees received by the assessee. These were the two questions referred to the Division Bench. Question No. 1 was answered in favour of the assessee in view of the judgment of the Supreme Court in the case of CIT v. Alcock Ashdown and Co. Ltd. [1997] 224 ITR 353. Question No. 2, which related to section 80-O was also answered in favour of the assessee on the following concession made by learned senior counsel appearing for the Department in the following terms: "At the final hearing of this reference, Mr. Desai, learned counsel appearing on behalf of the Revenue, fairly stated that the bare reading of section 80-O of the Income-tax Act makes it clear that gross income is to be taken into account and not the net income for the purpose of calculation of deduction under section 80-O of the Income-tax Act. In this view of the matter, question No. 2 is answered in the affirmative and in favour of the assessee." By this review petition, the Department now states that the above concession made by learned seni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controversy involved in this case is settled by the judgment of the Calcutta High Court in the case of CIT v. M.N. Dastur and Co. (P.) Ltd. [2000] 243 ITR 10. He submitted that in that case, income was received by way of convertible foreign exchange and it was held by the Calcutta High Court that such income was to be computed in accordance with the provisions of the Income-tax Act and then only the net income, after computation, constituted the amount of income derived or received by the assessee for the purposes of deduction under section 80-O. He also relied upon the judgment of the Delhi High Court in the case of CIT v. Chemical and Metallurgical Design Co. Ltd. [2001] 247 ITR 749 [FB], the ratio of which is identical to the judgment of the Calcutta High Court in the case of M.N. Dastur and Co. [2000] 243 ITR 10. Mr. Mistry, learned counsel appearing on behalf of the assessee, on the other hand, argued that in this case, we are concerned with the assessment year 1979-80. He contended that the section, as it stood at the material time, inter alia, stated that where the gross total income includes income by way of royalty, commission, fees and such income stood received in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire amount of dividend was exempt continued to remain in force and was applicable even during the assessment year in question. Mr. Mistry contended that we are concerned with the assessment year 1979-80 and the assessment year 1980-81 when section 80A was very much in force and, therefore, in the present case, this court was right in accepting the concession made by learned counsel for the Department that section 80-O deduction was to be computed on the basis of gross receipt during the assessment year in question. Mr. Mistry submitted that it is true that subsequently, the Legislature has introduced section 80AA by the Finance (No. 2) Act, 1980 with retrospective effect from April 1, 1968. He contended that in this case we are concerned with the assessment year 1979-80, by which time, section 80AA was already in force. He submitted that notwithstanding the provisions of sections 80A, 80AA and 80B(5), the view of the Bombay High Court in New Great Insurance Co. Ltd.'s case [1973] 90 ITR 348 was approved by the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. [1985] 155 ITR 120 and, therefore, there was no need to change the order under review. Mr. Mistry further con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 99(1) and that they were dealing with section 80M of the Act, which was different in all respects from section 99(1). Lastly, we may point out that section 80AB of the Act did not come for interpretation when the Bombay High Court decided the case of CIT v. New Great Insurance Co. Ltd. [1973] 90 ITR 348. Therefore, that judgment of the Bombay; High Court will not apply to this case. For the above reasons, we allow the review petition in terms of prayer clause (a). Consequently, question No. 2, quoted hereinbelow, is answered accordingly: Question No. 2 Answer Whether the Tribunal was justified In the negative, i.e., in favour of in law in holding that deduction under the Department and against the assessee. section 80-O should be calculated on the gross fees received by the amssee ? Conclusion: Mr. Mistry, learned counsel appearing on behalf of the assessee, expressed an apprehension that our above answer to question No. 2 may involve the assessee completely losing the matter before the Department. In this connection, he submitted that in this case, the fees were earne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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