TMI Blog1998 (4) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... see's entire income from Flourine Recovery Unit amounting to ₹ 3,04,964 was liable to tax at the rate of 40 per cent without deduction of loss of ₹ 1,68,569 suffered in the ONGC Contract. 2. The assessee is a company incorporated in Japan. During the relevant accounting period, it had two contracts in India. One was a turnkey contract with ONGC and the other was for the provision of supervision services to SPIC. The AO determined the loss from the ONGC contract at ₹ 1,68,569 and the profit from the SPIC contract at ₹ 3,04,965. The assessee had certain dividend income which amounted to ₹ 3,12,500. In the assessment made under s. 143(3), the AO applied the provisions of s. 115A which provided for a specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed against the gross income. He further relied on Expln. 2 to cl. (vii) of sub-s. (2) of s. 9 under which the words fees for technical services have been defined to mean any consideration including lumpsum consideration for the rendering of certain services. According to the CIT (A) the definition supported the stand taken by the AO that the tax should be charged on the gross amount of the receipt, without giving effect to the provisions of s. 71 or 72. In this view of the matter, he dismissed the assessee's appeal. 4. The contention of the learned counsel for the assessee before us is that s. 70 of the IT Act provides for set off of the loss from one source of income against the profits from another source of income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other hand, the learned Departmental Representative Mr. Dave submitted that s. 115A applies irrespective of any considerations emanating from the classification of the income into various heads and, therefore, any reference to s. 70 would be out of place while working out the provision. He also submitted that the section provides for taxation of a particular type of income at special rates and the whole purpose or object would be lost if the provisions of s. 70, 71, etc. are imported into s. 115A. As regards the judgments of the Supreme Court on which reliance was placed on behalf of the assessee, Mr. Dave submitted that these decisions do not touch upon the present controversy and are therefore, not relevant. According to him, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held that s. 72 was part of the provisions for computing the total income, the same principle is applicable to the provisions of s. 70 also, because both these sections appear in Chapter VI of the IT Act, under the sub-head set off, or carry forward and set off . Whereas s. 72 provides for carry forward and set off of business losses. Sec. 70 provides for the set off of loss from one source against the income from another source under the head of income for the same year. If the provisions of s. 72 have been held to form part of the provisions for computation of the total income, a fortiori, the provisions of s. 70 have to be regarded as part of the computation provisions because they provide for the set off of the loss against the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gains of the current assessment year before deduction under s. 80D is allowed. Sec. 115A also makes it a condition that the total income should include income by way of fees for technical services. Even if we proceed to consider as to what is the income that is including in the total income of the foreign company by way of fees for technical services, we should reach the conclusion that it is only the income which remains after adjusting the loss from the ONGC contract against the profits from the SPIC contract and the reason for achieving this result is again that while computing the total income, we cannot ignore the provisions of s. 70. In the present case, if we were to compute the total income of the assessee, it would be as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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