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TMI Blog2004 (10) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IA should be allowed first, and thereafter, the set off of loss brought forward from earlier years should be allowed. This claim of the assessee was not accepted by the Assessing Officer as the Assessing Officer was of the view that first gross total income is to be computed and thereafter the deduction has to be made. It was further stated by the Assessing Officer that while computing the gross total income, the brought forward losses has to be taken into first, and if there is any remaining profit available then the deduction under section 80-IA has to be given. The Assessing Officer had relied on the provisions contained in section 80AB. 3. Being aggrieved, the assessee preferred an appeal before the ld. CIT(A) which was initially dismissed because of non-compliance. Later on, the order dismissing the assessee's appeal was recalled by the ld. CIT(A) as he found that notices of hearing were not served on the assessee, and he then decided the appeal on merits vide his order dated 14-5-2003. Having considered the submission of the ld. counsel for the assessee, the ld. CIT(A) directed the Assessing Officer to allow deduction under section 80-IA from the whole of the profit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. (3).........." 8.2 Section 80AB of the Income-tax Act, as it stood in the assessment year 1996-97, reads as under: - "Where any deduction is required to be made or allowed under any section except section 80M 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 section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction 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 which is included in his gross total income." 8.3 The term "gross total income" is defined under section 80B(5) as under: - "gross total income" means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter. 8.4 The provisions of section 80-IA to the extent they are relevant to the issue in hand, are as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from the business of such hotel: Provided that the said hotel is approved by the prescribed authority for the purpose of this clause in accordance with the rules made under this Act: Provided further that the said hotel approved by the prescribed authority before the 31st March, 1992, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1st day of April, 1991. (iii) in the case of a hotel referred to in clause (iv) of sub-section (4), thirty per cent of the profits and gains derived from the business of such hotel; (iv) in the case of a ship, thirty per cent of the profits and gains derived from such ship." 80-IA(7) "Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (5) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of overriding nature. Section 80-IA(7) is a part of section 80-IA, which was newly inserted in the Income-tax Act by the Finance (No. 2) Act, 1991 w.e.f. 1-4-1991. It starts with the words "notwithstanding anything contained in any other provisions of this Act". Thus, section 80-IA(7) has been given an overriding effect over any other provisions of Income-tax Act. In other words, section 80-IA(7) provides that its provisions are to prevail over any other provisions of the Act. All other provisions of the Act would thus be applied subject to the provisions of section 80-IA(7) for the purpose of determining quantum of deduction under sub-section (5) of section 80-IA. It is seen that section 80-IA provides a special mode for computation of the profits and gains derived from eligible industrial undertaking under section 80-IA. According to section 80-IA(7), notwithstanding anything contained in any other provision of the Act, the profits and gains of an eligible business to which the provisions of sub-section (1) of section 80-IA apply shall, for the purpose of determining the quantum of deduction under sub-section (5) of section 80-IA for the assessment year immediately succ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia specialibus non derogant", the special provision of section 80-IA(7), which is overriding in nature, must prevail over general provisions to the extent of its scope and limit. It is not in dispute that the said maxim lays down a rule of interpretation that a special rule controls or cuts down the general provision. 11. At this stage, we should make a reference to sections 80A, 80AB and 80B(5) of the Act. Section 80AB was introduced in 1980 w.e.f. 1-4-1981. The purpose of introduction of section 80AB was to clarify that the deductions admissible under various provisions of Part-C of Chapter-VIA will be available with reference to the amount of income of that nature as computed in accordance with the provisions of the Act (before making any deduction under Chapter-VIA), which shall alone be deemed to be the amount of that nature which is derived or received by the assessee and which is included in the gross total income. In other words, according to the section 80AB, for the purpose of computing the deduction admissible under various provisions of Part-C of Chapter-VIA, the amount of income of that nature which is included in the gross total income as computed in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y one source of income from eligible business in respect of which the assessee is entitled to get deduction under section 80-IA. In other words, the provisions contained in sections 80A, 80AB and 80B(5) are to be read subject to the provisions contained in section 80-IA(7) of the Act. It is well known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. The section 80-IA(7) has been given by the Legislature an overriding effect to any other provisions of Income-tax Act, and it is not subject to sections 80A, 80AB, 80B(5) or any other provisions of Income-tax Act. It is pertinent to note that section 80-IA(7) was inserted in the statute w.e.f. 1-4-1991 when sections 80A, 80AB and 80B(5) were already part of Income-tax Act, and even then the Legislature in all its wisdom has enacted the special provision of section 80A(7) giving the same an overriding effect over any other provisions of the Act meaning thereby that the Legislature in al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business only by treating the said eligible business as the only source of income of the assessee during the relevant assessment year for which the determination of deduction available under section 80-IA is to be made. The gross total income within the meaning of sections 80A, 80AB and 80B(5) read with section 80-IA(7) is, therefore, to be computed, for the purpose of determining the amount of deduction allowable under section 80-IA of the Act, in accordance with the provisions of the Act with reference to the eligible business only to which section 80-IA apply. In other words, all losses or allowances or deductions relating to non-eligible business or any other sources of income except the losses or allowances or deductions relating to eligible business to which section 80-IA apply are to be ignored to determine the amount of deduction allowable under section 80-IA and which is included in the gross total income. In other words, for the purpose of determining the amount of deduction under section 80-IA, the taxable income of the eligible business is to be ascertained and computed as if such eligible business were an independent business owned by the assessee and the assessee had ..... 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