TMI Blog1993 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... exported tea in the accounting year. It was entitled to deduction under section 80HHC in respect of the export. It also sold in India tea grown and manufactured by it. In the assessment, the ITO first computed the income from business at Rs. 16,31,26,552. As per rule 8(1) of the Income-tax Rules, only 40 per cent of the income from tea is to be taxed under the Income-tax Act and the balance of 60% is to be treated as agricultural income exempt from income-tax under section 10(1) of the Income-tax Act. Accordingly, the ITO brought to tax 40% of Rs. 16,31,24,552, i.e., Rs. 6,52,50,620 as income taxable under the Income-tax Act. After including the income from "other sources", the gross total income was arrived at Rs. 8,41,07,231. From this, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following decisions: 1. Karimtharuvi Tea Estates Ltd. v. State of Kerala [1963] 48 ITR 83 (SC). 2. Tata Tea Ltd. v. State of West Bengal [1988] 173 ITR 18 (SC). 3. CAIT v. Periakaramalai Tea Produce Co. Ltd. [1972] 84 ITR 643 (Mad.). 4. Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC). He also points out that the decision relied upon by the revenue is inapplicable since it was concerned with section 80G which is unconnected with the business income. According to him, the CIT(A)'s view has to be upheld. 7. On a careful consideration of the rival contentions, we are of the view that the ground of the revenue is well-taken and requires to be accepted. 8. The assessee derives income from sale of tea gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring on the computation of business income. But that ratio in our view is not applicable to the present case. That section (section 72) provides for the business loss, not fully set-off against the other heads of income under section 71, to be carried forward and set-off against the profits of the same business in the following year. Inter-head and intra-head adjustments and carry-forward are without doubt part of the computation provisions. But we are concerned not with the type of the provision - section 72 - discussed by the Supreme Court, but with a provision which appears in Chapter VI-A of the Income-tax Act, under sub-head "C-Deductions in respect of certain incomes". Section 80A provides that the deductions specified in Chapter VI- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in Karimtharuvi Tea Estates Ltd.'s case, the Supreme Court has referred only to the provisions of section 10 of the 1922 Act and to the deductions available thereunder as being deductible while computing the composite income. The observations of the Supreme Court in Tata Tea Ltd.'s case heavily relied upon by Dr. Pal do not support the contention taken by him. The Supreme Court refers only to "the deductions allowable under the Act of 1961 in respect of income derived from business". There is no reference to the deductions under Chapter VI-A. which, in our opinion, are deductions not from a particular head of income but from the gross total income. 9. The contention of the assessee cannot be accepted for one more reason. Rule 8( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 80HHC even with reference to income that is wholly exempt under section 10(1) of the Act as agricultural income. Such a result cannot be countenanced and would be opposed to the basic scheme underlying the Act. 10. The decision of the Madras High Court cited by Dr. Pal arose under the Madras Agricultural Income-tax Act. Even in that case, the facts would show that the ITO, while making the assessment under the Income-tax Act, 1961, ascertained the composite income at Rs. 39,24,434 apportioned 40% thereof as per rule 8(1) as income taxable under the Act and thereafter deducted 8%, being the relief under section 80-I of the Act as it stood then. This procedure which is similar to the procedure adopted by the ITO in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of the decision is that the deduction can be given from only the assessable income under the Income-tax Act and "the part of the income which is not taxable will not be taken into account for the purpose of giving any relief under section 80G". Criticising the procedure prescribed by the Tribunal for allowing deduction under section 80G in the case of composite income, it was held by the High Court that if such method was followed, "in that event, before any income is ascertained which is assessable under the Income-tax Act, the deduction will be made. But, it is not the intention of the section". It was further clarified that only from the income computed under the Income-tax Act for the purpose of assessment can deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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