1998 (2) TMI 17 - HC - Income Tax

Summary

Issues involved: Interpretation of deduction under section 80QQ on gross income before setting off business loss.

Summary:
The High Court of Madras addressed the issue of whether the deduction under section 80QQ should be allowed on the gross income before setting off business loss or on the net income for the assessment years 1975-76 and 1976-77. The assessee-company, engaged in printing, publishing, and trading, maintained separate accounts for these activities. The Assessing Officer initially set off the trading loss against the profit from printing and publishing before allowing the deduction under section 80QQ. The assessee contended that the trading loss should not be set off against the printing and publishing profit for calculating the deduction. The Commissioner and Tribunal sided with the assessee, leading to a reference to the High Court.

The court considered the applicability of section 80AB of the Income Tax Act, which governs deductions under Chapter VI-A. It was noted that section 80AB applies to deductions under all sections in Chapter VI-A, including section 80QQ. The court emphasized that the gross total income calculation is guided by provisions such as section 70, allowing set-off of losses from one source against income from another under the same head. In this case, the trading loss needed to be set off against the profit from printing and publishing to determine the gross total income under the "Business" head for claiming the deduction under section 80QQ.

Referring to relevant legal precedents, including the case of H. H. Sir Rama Varma v. CIT, the court held that section 80AB is declaratory of the law as it always stood regarding deductions under Chapter VI-A. The court also cited the Distributors (Baroda) P. Ltd. v. Union of India case, affirming the declaratory nature of section 80AA since April 1, 1968. Consequently, the court answered the question in favor of the Revenue, allowing the deduction on the gross total income after setting off the trading loss against the profit from printing and publishing. The Revenue was awarded costs of Rs. 1,000.