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TMI Blog2001 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of gross total income from the industrial undertaking manufacturing electrical contacts under Chapter VI-A of the Income-tax Act, 1961 (for short "the Act of 1961"). The Assessing Officer while upholding the claim of the assessee that he is entitled to claim relief under section 80-I as well as under section 80HH, allowed the deduction, firstly under section 80HH and then under section 80-1. In doing so, the computation of relief under section 80-I was made after deducting the relief admissible under section 8OHH from the gross total computed for that purpose. So far as the computation of relief under section 80HH is concerned, there is no disputer However, the assessee aggrieved by the order by computing relief under section 80-I on the gross profit, after reducing the gross total profit for the purpose of computing relief under section 80HH, he appealed before the Commissioner of Income-tax and he allowed the appeal of the assessee and the said order was confirmed by the Income-tax Appellate Tribunal by holding that relief under section 80-I is to be computed without deduction for relief under section 80HH in the computation of gross profit for that purpose. It is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates that no deduction under Chapter VI-A is to be taken into consideration for computing gross profit for the purpose of quantifying deduction in any provision of Chapter VI-A and in view thereof the Tribunal was justified in not permitting deduction of allowance made under section 80HH from the gross total income of the assessee. He also contended that since the decision in Shree Engineers computation appears to have been rendered without taking note of section 80AB, merely on the basis of the earlier decision in Vishnu Oil and Dal Mills' case [1996] 218 ITR 71, is per incuriam. It would be apposite to refer to the relevant provisions of the Act of 1961 to understand the true scope of the provisions. So far as the substantive provisions the Act of 1961 have followed a scheme of their own for computation of income in giving effect to the provisions for levy of charge which also include the deductions permitted to be made for arriving at the taxable income. Chapter I deals with preliminary definitions by defining various expression used in the Act subject to the context of the issue. Chapter 11 deals with the basis of charge for levying income-tax and additional income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any assessment year is determined only after reaching the net result after applying all the provisions, as are applicable in respect of different matters. Yet each Chapter deals with independent subject matter at different stages. As noticed briefly above, the Chapter IV sets the stage for computing income from different sources. On computing income from each different source, and income of other persons in certain cases to be added in total income, the stage is reached for making adjustments of losses of the current year from any sources as well as losses carried forward from previous year to be adjusted against income of current year. It is in the light of these provisions. we find that these are specific provisions made that gross total income computed until before reaching the stage of invoking any provisions of Chapter VI-A, is not to be further adjusted for quantifying any claim to further deductions under Chapter VI-A. In this connection the provisions of sections 80B(5) and 80AB insert ed by the Finance (No. 2) Act, 1980, with effect from April 1, 1981, call special attention from which it, is clear that the expression "gross total income" which has been used in vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er various heads dealt with in Chapter IV defining heads of income and providing the method and manner of computing income from different sources, viz., salaries, house property, profits and gains of business or profession, capital gains and income from other sources, as well as the adjustments are to be made in respect of income from such sources so computed while making aggregation of income and set off or carry forward of loss under Chapter VI of the Act. However, the computation of gross total income from such source for the purpose of Chapter VI-A ends at that. Thereafter, no deduction under Chapter VI-A is further permissible to be made for the purposes of arriving at gross total income for the purposes of computing any deduction under Chapter VI-A except under section 80M with which we are not concerned. With the insertion of section 80AB, the same expression has further been used "for the purposes of computing such deduction in Chapter VI-A which is included in the gross total income of the assessee, the amount of income of that source to which the deduction applies is to be computed in accordance with the provisions of this Act before making any deduction in this Chapte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft, to which the said section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in commuting the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof. Such deduction is equal to 25 per cent. in the case of the assessee being a company. The provision of section 80-1 applies to an industrial undertaking which fulfils the conditions prescribed in sub-section (2) of that section., viz., it is not formed by the reconstruction of a business already in existences and is not formed by the transfer of a new business of machinery or plant previously used for any purpose, and it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India, and begins to manufacture or produce articles or things or to operate such plant or plants, at any time within the period of ten years next following March 31, 1981, or further period as the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es priority of order in which deduction under each provision is to be adjusted in the gross total income derived from such industrial undertaking to which section 80HH or section 80-I or section 80J, respectively, apply simultaneously. In case any undertaking falls in the category of any new unit and is established in a backward area it is entitled to avail the benefit under all the provisions. The provision merely envisages that amongst the three deductions allowable, deduction under section 80HH is to be made in the first instance which is with an object to promote industrial establishment in backward areas and only thereafter deduction computed under section 80-I or 80J shall be given effect to. It does not deal with the question of permissible deduction under any other section. It only deals with adjustments against gross profit with respect to 20 per cent. or 25 per cent. as the case may be. Computation of permissible deduction is to be made unaffected by section 80HH(9). It is further of significance, that while sub-section (9) of section 80HH tells us that in a case where claims to deduction under section 80HH and 80-I and/or 80J exist simultaneously in respect of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which claim he opts to be adjusted against available gross total profit for that purpose. The object of section 80HH(9) is not to reduce the limit of eligible deduction under section 80-I or 80J in any way. Coming to the judgment relied on by learned counsel for the Revenue in Shree Engineers' case, we are of the opinion that the answer question No. 3 which was referred by the Tribunal has been rendered solely with the Deference to the earlier decision of the court in Vishnu Oil and Dal Mills' case [1996] 218 ITR 71 (Raj) only without noticing the relevant provisions of sections 80A and 80AB and section 80B(5) and also section 80HH(9). It may be noticed that the decision in Vishnu Oil and Dal Mills' case [1996] 218 ITR 71 (Raj) dealt with the question whether in computing the gross total income for the purpose of Chapter VI-A requires adjustments of unabsorbed carried forward loss or unabsorbed carried forward depredation in terms of Part D of Chapter IV or in terms of Chapter VI of the Act, which as seen above has to be computed without taking into account the provisions of Chapter VI-A, but after taking into account other provisions of Act-whether under Chapter IV or Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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