TMI Blog1998 (10) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not quantified the deductions under section 80HHC of the Income-tax Act, because of the loss admitted by the company. Subsequently, it has filed a revised return claiming deduction of Rs. 34,14,814 under section 80HHC of the Income-tax Act from the current year's income and requested that the unabsorbed business loss of Rs. 20,45,751 and the unabsorbed depreciation of Rs. 21,16,890 be carried forward to the subsequent years. While processing the return of income, no deduction under section 80HHC was allowed as after the setting off of the unabsorbed business loss of Rs. 20,45,751 and the unabsorbed depreciation of Rs. 13,81,611 from the total income of Rs. 34,27,372, the gross total income was nil. Aggrieved by the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d losses and unabsorbed depreciation would have to be deducted before arriving at the figures that would be exigible for the purpose of deduction under section 80HH of the Act. On the other hand, the Orissa High Court in CIT v. Tarun Udyog [1991] 191 ITR 688, held that gross total income computed in accordance with the provisions contained in sections 30 to 43A would not be relevant for the purpose of deduction under section 80HH and that the relief under section 80HH was to be allowed on the profits of the industrial undertaking before deducting the investment allowance allowed under section 32A. At the outset, we would like to point out that the Gujarat High Court and the Orissa High Court were dealing with the deductions under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 80B. It says : " ' gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter." Therefore, the deductions permissible under section 80HH are from the gross total income which are to be arrived at by computing the total income in accordance with the provisions of the Act. In other words, income has to be computed in accordance with the other provisions of the Act and arrive at the gross total income and from that gross total income, the deductions permissible under section 80HH are to be allowed. Whereas, the language used in section 80HHC is entirely different. It says : "80HHC. (1) Where an assessee, being an Indian company or a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the total income of the assessee, the deduction of profits shall be in accordance with and subject to the provisions of section 80HHC thereby meaning that from out of the income declared, the deductions under section 80HHC are to be allowed first. Therefore, the deductions under section 80HHC are to be allowed first as we have to give a meaning to the language used in the section, viz., "in accordance with and subject to the provisions of this section". Learned counsel appearing for the Revenue relying on Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC), wherein while interpreting section 80E(1), the Supreme Court held that : "On reading sub-section (1) it will become clear that three important steps are req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese two steps together, therefore, it is obvious that in computing the total income of the concerned assessee the balancing charge arising as a result of the sale of old machinery and buildings and worked out as per section 41(2), irrespective of its real character, will have to be taken into account and included as income of the business. In other words, the balancing charge as worked out under section 41(2) will have to be taken into account before computing the deduction of 8 per cent. under the third step. . ." contended that from the total income of the assessee, the unabsorbed loss and the unabsorbed depreciation of the previous year is to be worked out and thereafter the deduction under section 80HHC is to be allowed. The content ..... X X X X Extracts X X X X X X X X Extracts X X X X
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