2001 (7) TMI 27 - HC - Income Tax

Summary

Issues:
Interpretation of provisions of section 80AB and section 80L of the Income-tax Act, 1961 for deduction of interest income from compulsory deposits under Chapter VI-A.

Analysis:
The case involved a question of law regarding the entitlement of the assessee to a deduction under section 80L of the Income-tax Act, 1961, in respect of interest income from compulsory deposits for the assessment years 1982-83 and 1983-84, disregarding the provisions of section 80AB of the Act. The Income-tax Officer disallowed the claim, leading to appeals before the Appellate Assistant Commissioner and ultimately the Tribunal, which upheld the claim of the assessee.

The Revenue contended that there was no positive income under the head "Other sources," thus no deduction should be permitted under section 80L. It was argued that only net income included in the gross total income would be entitled to deduction under Chapter VI-A, as per section 80AB. The Tribunal, however, allowed the deduction based on the provisions of the Act.

The court analyzed the scheme for computation of total income, emphasizing the necessity for the income to be included in the gross total income and computed in accordance with the Act before claiming deductions under Chapter VI-A. The court clarified that section 80AB comes into play when deductions are made in computing the total income.

Regarding the contention to set off one income against another under the head "Income from other sources," the court found no provision in section 57 of the Act. It concluded that the emphasis on section 80AB for such exercises was unwarranted, as it applies only after the total income has been computed as per the Act.

After a detailed analysis of the provisions of the Act and the legal position, the court found no infirmity in the Tribunal's reasoning and upheld the assessee's entitlement to deduction under section 80L for the interest income received on compulsory deposits for the relevant years. The question was answered in favor of the assessee, and the reference was disposed of accordingly with no costs.