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TMI Blog1989 (2) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the expenditure of Rs. 4,587 incurred in connection with the foreign travel of one of the partners and after computing the business loss and setting off the income by way of interest on securities, capital gains and dividend, the net loss was computed at Rs. 5,618. In doing so, the Income-tax Officer declined to allow deduction under sections 80K and 80T of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Aggrieved by that, the assessee preferred an appeal before the Appellate Assistant Commissioner contending, inter alia, that deductions under sections 80K and 80T of the Act should have been allowed. The Appellate Assistant Commissioner accepted the contention of the assessee and directed the Income-tax Officer to grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, are placed at a disadvantage in the matter of claiming the benefit of deductions and allowances and that such a situation ought to be removed. On the other hand, learned counsel for the Revenue, inviting attention to sections 80A(1), 80A(2) and 80B(5) of the Act and relying upon the decisions in CIT v. Mercantile Bank Ltd. [1988] 169 ITR 44 (Bom) and CIT v. Rambal (P.) Ltd. [1988] 169 ITR 50 (Mad), submitted that where the gross total income is a loss, there can be obviously no question of any deduction being allowed under Chapter VI-A of the Act and the Tribunal was, therefore, right in its conclusion. Adverting to the difficulty mentioned by learned counsel for the assessee, it was further submitted that, having regard to the limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith and subject to the provisions of Chapter VI-A, the deductions specified in sections 80C to 80U (as the section stood at the relevant time). Section 80A(2) provides that the aggregate amount of the deductions under Chapter VI-A shall not, in any case, exceed the gross total income of the assessee. For purposes of Chapter VI-A, section 80B(5) of the Act defines "gross total income" as meaning "total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under section 280-O." It is thus seen that while, under section 80A(1) of the Act, the Revenue is empowered, in computing the total income of an assessee, to allow deductions specified in Chapter VI-A from the assessee's gross total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on by learned counsel for the Revenue. In CIT v. Mercantile Bank Ltd. [1988] 169 ITR 44 (Bom), the assessee claimed the benefit of deduction under sections 80L and 80M of the Act with reference to its negative income in the relevant assessment years in question. The authorities declined to allow the deduction so claimed by the assessee. In dealing with the question, whether the authorities were right in doing so, the Bombay High Court pointed out, referring to sections 80A(1), 80A(2) and 80B(5) of the Act, that, for the purpose of applying the provisions of Chapter VI-A, the first enquiry to be made is, whether the assessee's gross total income includes any income by way of dividends and if it does, the next step would be to compute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80B(5) occurring in Chapter VI-A, if the total income, as computed under section 80B(5) of the Act is "nil", then no relief could be granted based on the other sections in view of the limitations contained in section 80A(2) according to which, the aggregate amount of deduction under Chapter VI-A shall not, in any case, exceed the gross total income of the assessee and if the gross total income of the assessee is determined as "nil", then, there is no question of any deduction being allowed under Chapter VI-A as that will clearly exceed the gross total income of the assessee. We are of the view that the principle laid down in the decisions referred to above would be applicable in this case also. We, therefore, answer the question referr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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