TMI Blog1994 (10) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... at year was computed at Rs. 57,882 before setting off the past business loss and unabsorbed depreciation; if these items are set off, the income of the assessee in that year would become "nil". The Income-tax Officer, however, did not grant any relief under section 80HH of the Act. On appeal, the Appellate Commissioner of Income-tax confirmed the assessment. The assessee then carried the matter to the Income-tax Appellate Tribunal. On October 14, 1982, the Tribunal allowed the appeal taking the view that having regard to the judgment of the Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, relief should be given under section 80HH of the Act; it further held that, since section 80AB has come into force with effect from April 1, 1981, it would not come in the way of the assessee getting the relief as that section was applicable from the assessment year 1981-82. Out of the said order of the Tribunal, the above question of law arises. Sri S. R. Ashok, learned standing counsel for the Revenue, contends that on a proper construction of section 80HH of the Act, the irresistible conclusion is that the relief granted thereunder has to be calculated on the net inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these terms though that has been the bone of contention before the Tribunal. The expression " gross total income " is defined in clause (5) of section 80B of the Act, to mean, the total income computed in accordance with the provisions of the Act before making any deduction under this Chapter. It may be pointed out that section 14 of the Act classifies all income, for purposes of charge of income-tax and computation of total income into six heads of income. Head "D" relates to "Profits and gains of business or profession". The "profits and gains of business or profession", as computed in accordance with the provisions of the Act, form part of income both for charge of income-tax as well as for computation of total income. Learned counsel for the assessee argues that on the language of section 80HH, what is relevant is "the profits and gains" but not the income from the profits and gains of business or profession. In our view, the distinction sought to be made by the learned counsel lacks substance. The expression "profits and gains" connotes income from business or profession computed in accordance with the provisions of the Act. For purposes of arriving at the income under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t analysed section 80E and pointed out the steps that must be kept in mind before the special deduction, permissible under section 80E, was allowed. They are as follows (at page 91): "On reading sub-section (1), it will become clear that three important steps are required to be taken before the special deduction permissible thereunder is allowed and the net total income exigible to tax is determined. First, compute the total income of the concerned assessee in accordance with the other provisions of the Act, i.e., in accordance with all the provisions except section 80E; secondly, ascertain what part of the total income so computed represents the profits and gains attributable to the business of the specified industry (here generation and distribution of electricity); and thirdly, if there be profits and gains so attributable, deduct eight per cent. thereof from such profits and gains and then arrive at the net total income exigible to tax." From the pronouncement of the Supreme Court in the said case, it follows that in arriving at the profits and gains attributable to business, income has to be calculated in accordance with the provisions of the Act. That judgment was appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be first set-off against the long-term capital gains of the current assessment year before the deduction contemplated under section 80T of the Act could be allowed. With reference to section 80AB, it was held that on a parity of reasoning, it must be held that section 80AB was enacted to declare the law as it always stood in relation to the deductions to be made in respect of the income specified under the head "C" of Chapter VI-A and the manner of deduction as specified under that section was in accordance with the interpretation that was placed on section 80T, read independently. The decisions of the Supreme Court, referred to above, would conclude the issue before us. However, learned counsel for the assessee relied on the following judgments to persuade us to come to the conclusion that the basis of allowing deduction is not the net income but the gross income from profits and gains of business. In CIT v. Canara Workshops P. Ltd. [1986] 161 ITR 320 (SC), the assessee was carrying on two industries-one in respect of which special deduction under section 80E was allowed and another to which that provision had no application. The question that fell for consideration of the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. The judgment in this case, in our view, does not help the assessee. In CIT v. Tarun Udyog [1991] 191 ITR 688 (Orissa), the Income-tax Officer first determined the profits of the industrial undertaking before deducting investment allowance; he then deducted investment allowance and thus reduced the income and on the income so determined granted relief under section 80HH. The Tribunal held that for granting relief under section 80HH, investment allowance ought not to have been deducted. On a reference, the Division Bench of the Orissa High Court held that the relief under section 80HH was to be allowed on the profits of the industrial undertakings before deducting the investment allowance under section 32A and that according to the provisions of the Income-tax Act, income was different from profits though the former included the latter and though an industrial undertaking might earn profit, its gross total income might be substantially less than the profit and the taxable income might, in some cases, become nil. Therefore, the gross total income computed in accordance with the provisions contained in sections 30 to 43A, would not be relevant for the purpose of the deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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