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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 ..... on-eligible business. The cardinal principle of interpretation emerged from the maxim generalia 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. 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi, Judicial Member. 1. The Revenue is in appeal against the order dated 14-5-2003 passed by the ld. CIT(A) for the assessment year 1996-97. The grounds raised by the Revenue are as under: - (i) That the ld. CIT(A) has erred in law and on facts in directing the Assessing Officer to allow deduction under section 80-IA before adjustment of brought forward loss. (ii) That the appellant prays that the order of ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2. In the course of assessment proceedings, it was stated by the assessee before the Assessing Officer that the deduction under section 80-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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone through the orders of the authorities below. We have deliberated upon the decisions cited at the Bar. We have also deliberated upon the provisions of law contained in that behalf. 8. We consider it fit and proper to refer to the relevant provisions of law as stood in the assessment year 1996-97. 8.1 Section 80A stipulates as under: - Deductions to be made. - (1) in computing the total income of the assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to SOU. (2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the initial five assessment years and thereafter, thirty per cent of such profits and gains; (ic) in the case of an undertaking referred to in sub-section (4C), hundred per cent of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty five per cent of the profits and gains derived from such business: Provided that where the assessee is a company, the provisions of this clause shall have effect as if the words twenty five per cent , the words thirty five per cent had been substituted : (ii) in the case of a hotel referred to clause (iii) of sub-section (4), fifty per cent of the profits and gains derived 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-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of an amount equal to the percentage specified in sub-section (5) of section 80-IA and for such number of assessment years as is specified in sub-section (6) of section 80-IA. The quantum of deduction from profits and gains of any eligible business is provided under sub-section (5) of section 80-IA. For the purpose of determining the quantum of deduction under section (5) of section 80-IA, the eligible business is to be treated as the only source of income of the assessee during the relevant assessment year as provided under sub-section (7) of section 80-IA. A careful perusal of section 80-IA(7) shows that section 80-1A(7) enacts provisions 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of eligible business to which section 80-IA apply before the provisions of section 80-IA were applied, inasmuch as, it is clear from the provisions contained in sub-section (7) of section 80-IA that the deduction under section 80-IA is to be computed as if such eligible business were the only source of income of the assessee during the relevant assessment year. Thus section 80-IA can be said to be a special provision providing a special mode of computation of deduction from the profits and gains derived from eligible business under section 80-IA. Having regard to the cardinal principle of interpretation emerged from the maxim generalia 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n determining gross total income and, in turn, in determining the quantum of deduction under section 80-IA. Consequently, the deduction, expenses and losses etc. and the unabsorbed losses, unabsorbed depreciation, etc. relating to other non-eligible business or any other source of income cannot be taken into account in computing the Gross Total income for the purpose of computing the quantum of deduction admissible under section 80-IA. The provisions of sections 80A, 80AB and 80B(5) are, therefore, be read and applied, for the purpose of computing deduction under section 80-IA, in such a manner as the assessee had only 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 ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee to that amount of income of eligible business as so computed. The computation of total income or the gross total income and the amount of deduction available under section 80-IA has to be made only in respect of eligible business, de hors the profits or loss of the non-eligible business or any other source. Therefore, for an income of the nature described in section 80-IA, it is first of all necessary that it should be included as component of the gross total income. The inclusion has to be of the amount of income which is computed in accordance with the provisions*of the Act in respect of eligible 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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