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TMI Blog2011 (3) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 260A of the Income-tax Act, 1961 (hereinafter referred to as the Act ), against the order dated November 25, 2002, passed by the Income-tax Appellate Tribunal, Delhi Bench C , New Delhi, in I. T. A. No. 246/Del/1998, for the assessment year 1994-95, claiming the following substantial question of law : (i). Whether, under the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in computing the quantum of deduction under section 80-I of the Income-tax Act, 1961, out of the profits and gains of unit No. 1 the loss incurred in another independent unit No. 2 should be set off against the profits of unit No. 1 ? 2. The assessee manufactures automobile parts at Gurgaon. It is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with reference to the income which is included in his gross total income. The expression 'gross total income', as defined under section 80B(5), means the total income computed in accordance with the provisions of the Act before making any deduction under this Chapter. Thus, the entire scheme for computing deduction in Chapter VI envisages that first gross total income would be computed by applying the provisions of the Act and on the total income so arrived at deduction under Chapter VI-A would be computed. Thus, section 70 which provides for set off of loss under any head from one source against income from any other source under the same head would be given effect to while computing the gross total income. On the basis of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) CIT v. Chemical and Metallurgical Design Co. Ltd. [2001] 247 ITR 749 (Delhi) [FB] ; (5) CIT v. Nima Specific Family Trust [2001] 248 ITR 29 (Bom) ; and (6) Synco Industries Ltd. v. Assessing Officer of Income-tax [2002] 254 ITR 608 (Bom). 6. In order to appreciate the controversy, it would be appropriate to refer to the following provisions : 80A.(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee . . . . 80AB. Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C.- Deductions in respect of certain incomes' in respect of any income of the nature specified in that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. It is clear from the above provisions that the component on which deduction is permissible under section 80-I is the gross total income which is defined in section 80B(5) and is also referred to in sections 80A(2) and 80AB. In Distributors (Baroda) P. Ltd. [1985] 155 ITR 120 (SC), the said provisions were so interpreted, which was also followed in H. H. Sir Rama Varma [1994] 205 ITR 433 (SC). The judgment in Canara Workshops does not refer to section 80AB. As observed by the Madras High Court in Macmillan Co. of India Ltd. [2000] 243 ITR 403 (Mad) if the component of deduction under section 80-I is to refer the total income without excluding the loss therefrom, it will be against the statutory provisions. It will be appropriate to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Union of India [1985] 155 ITR 120 (SC) in which the court while upholding the constitutional validity of section 80AA also in Chapter VI-A of the Income-tax Act, held that section 80AA is merely declaratory of the law as it always was since April 1, 1968. Section 80AB similarly must be held to be declaratory of the law as it always was since April 1, 1981. It has been so held by the apex court in the case of H. H. Sir Rama Varma v. CIT [1994] 205 ITR 433 (SC). 8. We are, thus, in agreement with the view taken by the Madras High Court in Macmillan Co. of India Ltd. [2000] 243 ITR 403 (Mad) and the Bombay High Court in Nima Specific Family Trust [2001] 248 ITR 29 (Bom) and Synco Industries Ltd. [2002] 254 ITR 608 (Bom) The provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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