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Issues:
- Interpretation of deduction under section 80MM of the Income-tax Act, 1961. - Whether deduction under section 80MM should be allowed from gross receipts or after set off of brought forward losses and unabsorbed depreciation. Analysis: 1. The case involved the interpretation of deduction under section 80MM of the Income-tax Act, 1961. The assessee, engaged in consultancy services, claimed a deduction at 40% on a specific amount, which was contested by the Income Tax Officer (ITO) based on the inclusion of earlier years' losses and unabsorbed depreciation in the calculation. 2. The key argument presented was whether the deduction under section 80MM should be allowed from the gross receipts of royalty, commission, or fees, or after set off of carry forward losses and unabsorbed depreciation. The counsel for the assessee relied on various legal precedents, including decisions from the Supreme Court and High Courts, to support the contention that the deduction should be based on the gross total income without deductions for losses or depreciation. 3. The departmental representative supported the ITO's decision, emphasizing that deductions for carry forward losses and depreciation should be made before allowing the deduction under section 80MM. Reference was made to the Supreme Court decision in Combay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 to support this argument. 4. The Tribunal considered the conflicting arguments and focused on the language of section 80MM, which specifies that the deduction is allowable from income by way of royalty, commission, or fees. It was clarified that the deduction should be based on the gross receipts of such income, without deductions for carry forward losses or unabsorbed depreciation. 5. The Tribunal drew parallels between sections 80M and 80MM, highlighting that both sections refer to "gross total income." Legal precedents, including the decision in Cloth Traders (P.) Ltd., were cited to support the interpretation that deductions under section 80MM should be based on the entire income received by the assessee, without adjustments for deductions provided under the Act. 6. The Tribunal also referred to other cases, such as Addl. CIT v. Isthmian India Maritime (P.) Ltd. and CIT v. Katpadi Co-operative Timber Works Ltd., where similar principles were applied in determining deductions under different sections of the Act. The consistent interpretation was that deductions should be calculated based on gross total income without adjustments for losses or depreciation. 7. Ultimately, the Tribunal held that the assessee was entitled to a deduction under section 80MM on the gross receipts of royalty, commission, or fees, without considering the set off of brought forward losses and unabsorbed depreciation. The decision was based on a thorough analysis of relevant legal provisions and precedents, ensuring that the deduction was applied correctly based on the statutory language and legislative intent.
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