9911796707
TMI Blog1999 (6) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 1992, the assessee had claimed deduction under section 80-O of the Income-tax Act, 1961, of Rs. 3,38,38,386 being 50 per cent. of the total foreign exchange received during the year of Rs. 6,76,76,773. The assessee had incurred an expenditure of Rs. 1,10,06,689 relatable to two projects, viz., NNPC and Petromech. In computing the deduction under section 80-O, assessee did not take into account the aforementioned expenditure of Rs. 1,10,06,689 incurred in India. It was claimed that deduction under section 80-O is allowable on the receipt of income from abroad in foreign exchange and, therefore, the expenditure incurred in India is not deductible. This claim of the assessee was not accepted by the Assessing Officer. The assessee appealed to the Commissioner of Incometax (Appeals) and the latter confirmed the view of the Assessing Officer with the following finding : "4. I have heard the arguments of learned counsel of the appellant. Iam of opinion that deduction has to be allowed on net income after deducting the expenditure incurred in India from the gross receipts received in convertible foreign exchange in India. The Supreme Court in the case of Distributors (Baroda) (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mum/98 Oceaneering Express For warders Ltd. Shri Santosh Desai & Shri Harshad K. Shah The appellant has filed an application for admission of the additional ground of appeal on April 8, 1996, which reads as under : "The Commissioner of Income-tax (Appeals) erred in not allowing deduction under section 80-O with reference to gross convertible foreign exchange received by the appellant by way of fees. He failed to appreciate that the appellant was entitled to deduct under section 80-O with reference to gross convertible foreign exchange received by it by way of fees." It has been contended before us that the additional ground is purely legal in nature and has been raised on becoming wiser after several court decisions. As is evident from the ground raised, the assessee is now claiming that deduction under section 80-O is permissible in respect of the entire foreign exchange earnings without deducting any expenditure incurred even in the foreign country. Learned counsel for the assessee, Shri S. E. Dastur contended that section 80-O provides for deduction with reference to the payment received in foreign exchange. It was contended that the Legislature has deliberately used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1966] 59 ITR 763 where their Lordships held that interest receivable was an unambiguous expression ; it could only mean the amount of interest calculated in accordance with the terms of the securities ; it could not mean interest receivable minus the amount spent in receiving the same. It was accordingly contended that in section 80-O the Legislature having consciously used the words "the income so received" connotes the gross income received in India and not the income as computed under the Act. According to learned counsel, the computation of income does not come into play in interpreting the words "the income so received" in section 80-O. It was reiterated that section 80-O is a stand alone section. Referring to the decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120 learned counsel contended that in section 80M the words "such income" appears three times as against which the section 80-O uses the expression the income received in India in convertible foreign exchange. It was contended that section 80-O is different in structure than section 80M. It was accordingly contended that the decision of the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deduction. (1) M. N. Dastur and Co. Ltd. v. Deputy CIT [1992] 40 ITD 521 (Cal) ; (2) M. N. Dastur and Co. Ltd. v. Dy. CIT [1997] 62 ITD 113 (Bang) ; and (3) M. N. Dastur and Co. Ltd. v. Dy. CIT [1997] 61 ITD 167 (Cal). Reference was also invited to the decision of the Tribunal in the case of J. B. Boda and Co. (P.) Ltd. v. ITO in I. T. A. Nos. 1850 and 1851 (Bom) of 1991. Learned counsel contended that the decision of the Tribunal in the case of Tata Unisys Ltd. v. Deputy CIT [1993] 47 TTJ 8 (Bom), is not based on correct appreciation of facts. Referring to the decision of the Tribunal in the case of Tata Unisys Ltd. [1993] 47 TTJ 8 (Bom), learned counsel contended that the Bench has not decided the issue on the basis of language of section 80-O but on the basis of restriction placed by section 80AB. It was further contended that section 80AB applies in such cases where deduction is required to be allowed with reference to the income which is included in the gross total income of the assessee. In the case of section 80O, learned counsel contended that deduction is not required to be allowed with reference to gross total income of the assessee but with reference to the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120. Reliance was also placed on the decision of the Calcutta High Court in the case of Pilani Investment Corporation Ltd. v. CIT [1987] 165 ITR 138 in support of the contention that the aforementioned cases referred to in the decision of the Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 (SC) have not been overruled in Distributors (Baroda) Pvt Ltd.'s case [1985] 155 ITR 120 (SC) and therefore these are still binding. It was further contended that the legislative history should be taken into account in determining the meaning of section 80-O. Learned counsel further contended that section 80AB has limited application and it applies to such cases where the deduction is to be made with reference to the income included in the gross total income. Since in this case deduction is not provided with reference to the gross total income, section 80AB is inapplicable. It was further contended that it is the duty of the court to find out the extent to which the Legislature had intended to give one provision overriding effect on another provision. Reliance is placed on the decision of the Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it was enacted have been given restricted construction." Specific reference was also made to the following rule : "Where a statute made it an offence in certain cases for any person to intimidate any other person, but provided that nothing in the Act should apply to seamen (to whom a special disciplinary code was applicable), it was held that the proviso only operated where the offence was committed by a seaman, and not where it was committed against a seaman". Shri Vaish representing BMG Enterprises Pvt. Ltd. could not reach Mumbai but filed written submissions which we have considered. Learned counsel has relied upon the legislative history of section 80-O and sought to support the view that the deduction under section 80-O is permissible with reference to the gross foreign exchange earnings and the expenses incurred in India have not to be deducted. Reliance has been placed on the decision of the Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 in support of the contention that an enactment should be interpreted in such a manner so as to advance the purpose for which it has been incorporated. It was contended that since the section 80-O has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CBDT [1989] 175 ITR 523 in support of the contention that the object of section 80-O was to ensure and promote the spread of Indian technology to developing countries and in that process foreign exchange would also be realised. It has been pointed out that this principle has been reiterated in the case of J. B. Boda and Co. Pvt. Ltd. v. CBDT [1997] 223 ITR 271 (SC) at page 278. Learned counsel further contended that the interpretation advanced on behalf of the appellants is misconceived. The contention is not borne out by the object and purpose underlying the introduction of the provision, it was contended. Learned counsel further contended that the decision of the Supreme Court in the case of Cloth Traders (P.) Ltd. [1979] 118 ITR 243 led to the amendment of Chapter VI-A and insertion of section 80AA and section 80AB. Reliance was placed on the decision of the Supreme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120 in support of the contention that section 80AA was only declaratory provision as it had always been. Reliance was also placed on the decision of the Supreme Court in the case of H. H. Sir Rama Varma v. CIT [1994] 205 ITR 433 in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supports the view that the deduction under section 80-O must be based on income by way of specified sources calculated in accordance with the provisions of the Act. It was accordingly contended that the appeal of the assessee be dismissed. We have given our thoughtful consideration to the rival contentions. The issue to be resolved by this Bench is whether the quantum of deduction admissible under section 80-O of the Income-tax Act, 1961, is admissible on the gross income brought into India in convertible foreign exchange or the income computed after reducing the expenses incurred abroad as well as in India. Chapter VI-A of the Income-tax Act, 1961, provides for deduction to be made in computing the total income of an assessee. This Chapter is divided into four parts. Part A is General. Part B deals with deductions in respect of certain payments. Part C deals with deductions in respect of certain incomes. Part D deals with other deductions. Section 80-O finds its place in Chapter VI-A, Part C. This section as applicable to the assessment year 1992-93 is reproduced hereunder : "80-O. Where the gross total income of an assessee, being an Indian company or a person other than a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation of section 80-O. The Madras High Court in the case of CIT (Addl.) v. Isthmian India Maritime P. Ltd. [1978] 113 ITR 570 held that deduction under section 80-O is permissible with reference to the gross receipts without deducting the expenditure incurred in India. The same High Court in the case of CIT (Addl.) v. Crompton Engineering Co. (Madras) Ltd. [1979] 119 ITR 921 while interpreting section 85C held that deduction was permissible with reference to the gross amount of royalty, etc. (These cases were decided before the decision of the Supreme Court in the case of Distributors (Baroda) Pvt Ltd. [1985] 155 ITR 120). The Calcutta Bench of the Tribunal in the case of M. N. Dastur and Co. v. Dy. CIT (supra) held that deduction under section 80-O was allowable on income brought in India in the shape of convertible foreign exchange without taking into account expenses incurred in India. This decision of the Tribunal has again been followed in the case of M. N. Dastur and Co. Ltd. v. Deputy CIT [1997] 62 ITD 113 (Bang). However, the Delhi High Court in the case of CIT v. Marketing Research Corporation [1987] 61 CTR 204, relying upon the decision of the Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981] 132 ITR 637, 640. In the case of CIT v. B. N. Bhattacharjee [1979] 118 ITR 461, at page 480, their Lordships of the Supreme Court quoted the following by Per Denning L.J. (Seaford Court Estates Ltd. v. Asher [1949] 2 All ER 155, 164 (CA)) : "It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament ….. A judge should ask himself the question if the makers of the Act had themselves come across this ruck in the texture of it, how would they have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases." A statute is to be read as a whole A statute is to be read as a whole. This rule is based on the decision of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535, at page 541. A provision for deduction, exemption or relief should be so construed as to effectuate the object of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been intended." (See Maxwell on the Interpretation of Statutes, Twelfth edition, page 105) Per Megarry J. in Simpson v. Jones (H. M. Inspector of Taxes) [1968] 44 TC 599, 608 (Ch D) : "In thickets so dense and statute-laden as the law of income tax, common sense, is I suppose, a frail guide. Certainly it cannot become the master, for then it would usurp the function of the statute book. But in territory which remains unoccupied by either statute law or case law, I do not see why common sense should be abjured". Courts not to make the law In the case of Crawford v. Spooner [1846] 4 MIA 179 (PC), the Judicial Committee said (Page 187) : "We cannot aid the Legislature's defective phrasing of the statute ; we cannot add and mend, and, by construction, make up deficiencies which are left there". In 1951, in Magor and St. Mellons Rural District Council v. Newport Corporation [1951] 2 All ER 839, it was held by the House of Lords that a court has no power to fill any gaps disclosed in an Act. To do so would be to usurp the function of the Legislature. In other words, the language of Acts of Parliament, and more especially of modern Acts, must neither be extended beyond its, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the words of the statute and expound the words in the natural and ordinary sense of the words. Since there is a difference of opinion amongst various Benches of the Tribunal, it cannot be presumed that the language of section 80-O is free from doubt. In case of doubtful meaning of a provision it becomes the paramount duty of the court to put upon language a rational meaning. It becomes our duty to examine every word, every section and every provision of the Act to be examined as a whole. The necessity which gave rise to the incorporation of the provision, the mischief which the Legislature intended to redress are to be taken into account. The provision is also not to be considered in isolation. The provision is not to be separated from the motive force behind. The provision is to be considered to ensure coherence and consistency within the law as a whole and to avoid undesirable consequences. The task of interpretation of a statutory enactment is not a mechanical task. In the case of K. P. Varghese v. ITO [1981] 131 ITR 597 their Lordships of the Supreme Court held that construing of a provision in an attempt to discover the intent of Legislature from the language used by it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The objective of section 80-O is encouraging the export of Indian technical know-how and augmenting foreign exchange resources of the country also emerges from the decision of the Supreme Court in the case of Petron Engineering Construction P. Ltd. v. CBDT [1989] 175 ITR 523. We quote from the above decision at page 532 : "Although there is no indication in section 80-O regarding the supply of technical know-how or rendering technical services to newly developing countries, yet it may be reasonable to infer from the said speech of the Finance Minister that at the time when section 85C was introduced in the Act, one of the objectives was to supply technical know-how and render technical services to newly developing countries. Foreign exchange can be earned by various other modes, but that will not, in all cases, entitle the assessee to a deduction of income-tax. Section 80-O, as it stood during the relevant period with which we are concerned, grants cent per cent. deduction of tax. In the context of such deduction of tax, it will not be unreasonable to presume that the principal objective of section 80-O is to supply technical know-how or render technical services to developing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here in our order which gives the direction in which the expositors of the law have to proceed in the event of any doubt in the meaning of a provision of the Act. It is provided that in the event of doubtful meaning of a provision beneficial interpretation in favour of the assessee should be adopted. However, it is to be borne in mind that such interpretation is to be adopted only when the intention of the Legislature is not available. The rules permitting the interpretation which will advance the object of a provision is also applicable when the intention of the Legislature is not explicit. When the object is to encourage export of Indian technical know-how and augmentation of foreign exchange resources, it becomes our duty to ascertain the intention of the Legislature in regard to achieving such object. The contention cannot be accepted that the object of augmenting foreign exchange resources can be achieved only by providing a deduction of the gross income from the specified sources of income. The Supreme Court in the case of Petron Engineering Construction P. Ltd. v. CBDT [1989] 175 ITR 523, held that the foreign exchange resources can be augmented by various modes. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising out of use of Indian technical know-how abroad was first introduced in the form of section 85C of the Act by the Finance Act, 1966 with effect from April 1, 1966. At the time of its introduction, this section provided for tax at the rate of 25 per cent. of such income. Section 80-O of the Act was introduced for the first time by the Finance (No. 2) Act, 1967 to replace section 85C as it stood then. The new section 80-O allowed deduction of 60 per cent. of income by way of royalties, commission, fees, etc. received by an Indian company from a foreign company in consideration for its supply of technical know-how or technical services under approved agreements. Section 80-O was amended by the Finance Act, 1968, to enhance the deduction available under that section to 100 per cent. of the income by way of royalties, etc. The Departments' Circular No. 72, dated 6th January, 1972 (Chaturvedi and Pithisaria Compendium of Circulars, Volume 1, page 1369), explained that the underlying purpose of the amendment was to encourage Indian companies to develop an export technical know-how and expertise. The Finance (No. 2) Act, 1971, substituted the provisions of section 80-O with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-[1974] 93 ITR (St.) 145 while explaining the scope of the amendment under section 80-O of the Act stated as follows : "The main objective of this tax concession is to encourage Indian companies and resident non-corporate taxpayers to develop technical 'know-how' and make it available to foreign governments and foreign companies so as to augment our foreign exchange resources. The Bill seeks to make the following two changes in this provision : (a) As one of the main objects of the aforesaid tax concession is to augment our foreign exchange resources, it is proposed to specifically provide that the deduction under this provision will be allowed only to the extent the income by way of royalty, commission, etc., is received in or is brought into India by the taxpayer in accordance with the law regulating payments and dealings in foreign exchange. The existing provision in the law is being amended, retrospectively, from April 1, 1972, i.e., the date from which the relevant provision as it stands at present, was brought into force". The Finance Act, 1984, reduced the quantum of deduction to 50 per cent. with effect from 1st April, 1985. The Central Board of Direct Taxes Circular No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard remittance of foreign exchange within a reasonable period. Therefore, Explanation II to section 80-O as it stood earlier has been deleted and a third proviso has been inserted in section 80-O, laying down that a deduction will be allowed under that section only in respect of income which is received in India in convertible foreign exchange or has been brought into India within a period of six months. However, where the Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is unable to do so within the time specified above, because of reasons beyond his control, he may allow such further time as may be considered necessary." The Finance Act, 1988, made certain modification to the operative part of section 80-O which continue till this date. The nexus between quantum of deduction admissible under this section and inward remittance of convertible foreign exchange continues unaffected. It is observed from above that section 85C enacted by the Finance Act, 1966, provided concessional tax in respect of income from specified sources at the rate of 25 per cent. of such income. It is abundantly clear that the intention of the Legislature was to give deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, commission, etc., is received in or is brought into India by the taxpayer in accordance with the law regulating payments and dealings in foreign exchange. The existing provision in the law is being amended, retrospectively, from April 1, 1972, i.e., the date from which the relevant provision, as it stands at present, was brought into force. . ." The comparison of the provisions of section 80-O with effect from April 1, 1972, before the amendment by the Finance Act of 1974, and section 80-O after the amendment by the Finance Act of 1974, would be extremely useful in appreciating the intention of the Legislature : "Section 80-O as inserted by the Finance Act, 1968, with effect from 1st April, 1969 : Where the gross total income of an assessee being an Indian company includes any income by way of royalty, commission, fees or any similar payment received by it from a foreign company in consideration for the use of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80-O will be allowed only to the extent of the income by way of specified sources is received in or is brought into India by the taxpayer. When we interpret section 80-O in granting deduction with reference to the gross receipts received in or brought into India from the specified sources, we are clearly interpreting the law in a manner which is not intended by Parliament. Such a construction of a statutory provision is not permissible. We may also refer to the amendment made by the Finance Act of 1984 (see para 48 (pages 65 to 68) of this order) (which reduced the quantum of deduction to fifty per cent. of the income from April 1, 1985). While explaining the amendment by the Finance Act, 1984, it was stated that deduction under section 80-O was introduced primarily to stimulate the flow of technology from India and that the said objective could be attained with reduced deduction on that account. The legislative history of section 80-O speaks loud of the intention of Parliament in regard to the quantum of deduction. It also becomes abundantly clear that by the relevant amendment the Legislature imposed a condition of the receipt of earnings in India for grant of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anting deductions with reference to the gross foreign exchange earnings. The objectives could be achieved by providing some incentive. It is for the Legislature to decide the manner in which the objectives can be achieved. In this case we have seen from the legislative history, as also the scheme of the Act below, that the Legislature always intended to give deduction under section 80-O with reference to the net income included in the gross total income. Scheme of the Act : We have found the object of section 80-O. We have also ascertained the intention of the Legislature in regard to the quantum of deduction. For appreciating the meaning of section 80-O, we have also to keep in mind the scheme of the Act, a provision of which is subject-matter of interpretation. As already pointed out, it is the duty of the Tribunal to find out the intention of Parliament if any with regard to the quantum of deduction. It is necessary for the Bench to examine every section and every provision of the Act as a whole to examine the necessity giving rise to the amendments on the basis of which the controversy has arisen to look at the mischief which the Legislature intended to redress by making amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ureau (P.) Ltd. [1991] 189 ITR 346 have held that deduction under section 80MM is allowable with reference to the net income and not with reference to the actual amount of income by way of consulting fees received. The Supreme Court in the case of CIT v. P. K. Jhaveri [1990] 181 ITR 79 held that deduction under section 80K was allowable on the amount of dividend after deduction of interest on money borrowed for such investment and that the deduction was not permissible with reference to the gross amount received. In this case the Tribunal had relied upon the decisions of the Bombay High Court in the case of CIT v. New Great Insurance Company Ltd. [1973] 90 ITR 348 ; in the case of CIT v. Industrial Investment Trust Co. Ltd. [1968] 67 ITR 436 and in the case of CIT v. Jupiter General Insurance Co. [1975] 101 ITR 370 and held that deduction under section 80K was allowable on the gross dividend. Reference was made to the Supreme Court under section 257 of the Incometax Act, 1961. Their Lordships of the Supreme Court held that deduction under section 80K was allowable on the net amount of dividend after taking into account the interest paid on money borrowed specifically for investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or skill made available or provided or agreed to be made available or provided to such Government or enterprise by the assessee, or in consideration of technical or professional services rendered or agreed to be rendered outside India to such Government or enterprise by the assessee. (2) Such income is received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating : -Payments and dealings in foreign exchange, in accordance with, and -Subject to the provisions of the section. (3) A deduction of an amount equal to fifty per cent. of the income so received in, or brought into India in computing the total income of the assessee. In the first part, it is provided that the income from the specified sources is included in the gross total income of the assessee. Thus, the first condition is that the gross total income of the assessee must include income by way of specified source(s). The gross total income is defined in section 80B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income so received" in third part of section 80-O must also necessarily mean the income included in the gross total income and received in convertible foreign exchange. The receipt in foreign exchange is not the basis for deduction but a condition precedent for grant of deduction. We may now consider some of the contentions advanced on behalf of the appellants. It was pointed that the Calcutta Bench in the case M. N. Dastur and Co. Ltd. (supra) has relied upon the decision of the Calcutta High Court in the case of CIT v. Darbhanga Marketing Co. Ltd. [1971] 80 ITR 72 and the decision of the Bombay High Court in the case of CIT v. New Great Insurance Co. Ltd. [1973] 90 ITR 348. The Calcutta High Court had held that the aforementioned two decisions had not been overruled by the Supreme Court in the case of Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 and are still binding. It was argued before us that whereas the Calcutta High Court decisions may not be binding upon this Bench but the decisions of the Bombay High Court in the case of New Great Insurance Co. Ltd. [1973] 90 ITR 348 and in the case of CIT v. Industrial Investment Trust Co. Ltd. [1968] 67 ITR 436 not having been over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be made to the decision of the Bombay High Court in the case of Industrial Consulting Bureau Pvt. Ltd. v. CIT [1991] 189 ITR 346 where it was held that deduction under section 80MM was allowable with reference to the net income and not on the gross income. The afore mentioned decision of the Bombay High Court is in regard to a deduction allowable under a provision of the Act contained in Chapter VI-A. There may be similarities in the provisions of section 80MM and section 80-O to a great extent. Section 80-O is also part of Chapter VI-A. The two sections are part of the same structure. On the other hand section 99(1)(iv) differs in language as well as in structure with provisions of section 80-O. The interpretation on the provisions of section 99(1)(iv) does not guide us in interpreting the provisions of section 80-O in view of the later decisions of the Supreme Court in the case of Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 and in the case of CIT v. P. K. Jhaveri [1990] 181 ITR 79. In any case the Supreme Court having provided guidance in the case of Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 in interpreting a similar provision of the Act, i.e., sections 80M and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction is with reference to the net income. Therefore, the contention raised does not advance the case of the assessee. Our attention was also drawn to the circular of the Board No. 281, dated September 22, 1980-[1981] 131 ITR (St.) 4 at page 20, containing explanatory notes on provisions of the Finance (No. 2) Act, 1980, by which section 80AB was inserted in the statute. In this circular it was clarified that the deduction specified in the aforesaid section will be calculated with reference to the net income as computed in accordance with the provisions of the Act (before making any deductions under Chapter VI-A and not with reference to the gross amount of such income, subject, however, to the other requirements of the respective sections). On the basis of this circular it was contended that section 80AB is not applicable to section 80-O as the requirement of section 80-O is other than the net income. We have pointed out earlier that section 80-O is a provision providing a deduction related to income from the specified sources. We, therefore, do not find any merit in the contention advanced before us in this regard. It was contended that there is no merit in the contention on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has earned foreign exchange of Rs. 8,52,59,173 out of which an expenditure of Rs. 1,32,10,173 has been incurred abroad. A sum of Rs. 6,76,76,773 had been received in India in foreign exchange out of which Rs. 1,10,06,689 have been spent in India, leaving the net income of Rs. 5,66,70,084. If the deduction to be allowed to the assessee is with regard to the foreign exchange received in India, then the assessee would get a deduction of Rs. 6,76,76,773 out of the income of Rs. 5,66,70,084 which is included in the gross total income. Considering the fact that section 80-O is a provision providing a deduction in computing the taxable income of the assessee, there cannot be a presumption that the Legislature intended to give more deduction than the income included in the gross total income. It would give rise to absurdity, which is to be avoided. On the basis of our findings and the detailed discussion we sum up our conclusions as under : That the object of section 80-O is to encourage export of Indian technical know-how to the developing countries so as to augment the foreign resources of the country ; that the interpretation which advances the object of the provision is to be adopte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied source(s)." We find support for our view from the decision of the Delhi High Court in the case of CIT v. Marketing Research Corporation [1987] 61 CTR 204. The Delhi High Court has held that deduction under section 80-O is permissible with reference to the net income as computed under the provisions of the Act. The decision of the Supreme Court in the case of Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 has been relied upon. It was contended before us that the decision of the Delhi High Court related to the assessment year 1968-69 and that the language of section 80-O as applicable for that assessment year did not provide a deduction withreference to the receipt of income in convertible foreign exchange. We have demonstrated elsewhere that the intention of Parliament has always been to allow deduction under section 80-O with reference to the income as included in the gross total income which is the income arrived at after deducting the expenses incurred abroad as well as in India. Subsequent amendments at no point of time had been made with a view to grant more deduction than the income included in the gross total income. We have also given the comparison of section 80-O p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aliquam partem recte intelligere potest antequam totum iterwn arque iterum perlegerit . "It is the most natural and genuine exposition of a statute to construe one part of a statute by another part of the same statute, for that best expresses the meaning of the makers. . . . . and this exposition is exvisceribus actus." But this rule of construction is never allowed to alter the meaning of what is of itself, clear and explicit ; it is only when any part of an Act of Parliament is penned obscurely and when other passages can elucidate that obscurity, that recourse ought to be had to such context for that purpose ; for no rule of construction can require that when the words of one part of a statute convey a clear meaning it shall be necessary to introduce another part of a statute for the purpose of controlling or diminishing the efficacy of the first part. It is not the duty of a court of law, said Selwyn L. J. in Simith's case, "to be astute to find out ways in which the object of an Act of the Legislature may be defeated." In Bywater v. Brandling [1828] 7 B & C 643, 660 Lord Tenterden said : "In construing Acts of Parliament we are to look into not only at the language of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute contained in the same Chapter. Section 80-O provides a deduction from the gross total income. The deduction is with reference to the income. Therefore, section 80AB clearly applies to section 80-O. Reverting back to the language of section 80AB the first part of section 80AB provides that whenever any deduction is required to be made or allowed under any section included in this Chapter under the heading "CDeductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in gross total income of the assessee. Section 80-O provides for deduction in respect of royalties, etc., from certain foreign enterprises in respect of the income which is included in the gross total income. Therefore, the first part of section 80AB gets attracted in regard to section 80-O. In the second part of section 80AB it is provided that for the purposes of computing the deduction, the amount of income of that nature as computed in accordance with the provisions of this Act before making any deductions under this Chapter, shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am in general agreement. I would only like to add that, while the object of section 80-O is to encourage the bringing in of foreign exchange into India through exports of technical know-how, etc., the quantum of incentive granted has to be considered in the light of the provisions of section 80AB read with section 80-O. To my mind, there is no reason to think that the Legislature desired to give incentive to the activity mentioned in section 80-O to such an extent that an amount higher than the income included in the gross total income from the activities specified in section 80-O has to be allowed as a deduction in the computation of the total income. The provisions of section 80AB clearly mandate that the amount of income of the nature specified in the relevant section which in the present case is section 80-O and included in the gross total income is the amount as computed in accordance with the provisions of the Act before making any deduction under Chapter VIA. This provision clearly excludes the concept of gross receipt being included in the gross total income and that is also the ratio of the decision of the apex court in the case of Distributors (Baroda) (P.) Ltd. [1985] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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