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TMI Blog1990 (3) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to tax. At the concluding part of the order the ITO stated -- "A loss of Rs. 3,71,140 is to be carried forward in accordance with provisions contained under section 80HHC with 80VVA of IT Act". Clearly, he arrived at the said figure of Rs. 3,71,140 by deducting from the total relief of Rs. 5,85,389 admissible under section 80HHC, the sum of Rs. 2,14,249 being the deduction allowed under section 80VVA. 3. Thereafter, invoking the powers vested in him by and under section 263 of the IT Act, 1961, the CIT called for and examined the assessment records of the assessee. On such an examination he observed first that the ITO had allowed deduction under section 80HHC without applying the provisions of section 80A(2), and secondly, that the ITO had wrongly applied the provisions of section 80VVA "on such gross calculation under section 80HHC which is without taking into consideration the provisions of section 80A(2)". He, therefore, put the assessee on notice of his intention to pass suitable orders under section 263. 4. The assessee's case before the CIT was that the impugned assessment order was neither erroneous nor prejudicial to the interests of the revenue for the following re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) with those of section 80VVA(3) occurring in Chapter VIB. That sub-section uses the term "for the purposes of restricting under sub-section (1), the amount or, as the case may be, the aggregate amount of deduction under those provisions". This will clearly indicate that under section 80VVA will apply even in a case where only one of the many sections mentioned under section 80VVA(2) is applicable. Section 80A(2) on the contrary, does not contain a like stipulation. It should, therefore, follow that that section is not applicable to a case where the assessee is eligible for deduction under only one of the sections contained in Chapter VIA. 9. Shri Sanyal then contended that it is section 80VVA(4) that governs matters relating to the carry forward of the deduction that could not be allowed under section 80VVA(2) and that, consequently, the ITO had correctly computed the amount to be carried forward. 10. Shri Sanyal also made a faint attempt to argue that the ITO having initiated action under section 154, the CIT was not justified in invoking section 263. 11. In view of the foregoing, therefore, contended Shri Sanyal, the assessee is entitled to succeed. 12. Shri V. Sahai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liament, in its wisdom, has incorporated certain non-fiscal provisions into the Act, with a view to achieving the objectives of State policy in diverse fields. Some of the non-fiscal provisions are contained in Chapter VIA. Through these provisions, the Legislature has accorded favoured treatment to certain types of (i) expenditure and (ii) income. The provisions of sections 80C to 80G (both inclusive) falling under "B-Deduction in respect of certain payments" relate to specified items of expenditure; and those of sections 80H to 80TT (both inclusive) falling under "C-Deduction in respect of certain income" deal with certain items of income. 22. Having identified the items of expenditure/income which qualify for favoured treatment, Chapter VIA has laid down the conditions which must be fulfilled. Quite a few of the sections lay down the pre-conditions which must be satisfied before the benefit of the favoured treatment could be claimed. For example, section 80J, which deals with "Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases", has, under sub-sections (4), (5) and (6), laid down the pre-conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court applied the ratio of the decision of the Supreme Court in the case of Cloth Traders (P.) Ltd. 26. Chapter VIB was inserted into the IT Act by the Finance Act, 1983, with effect from 1-4-84 and is accordingly applicable to the assessment year 1984-85 and onwards. Dealing with the said Chapter, the Memo. explaining the provisions in Finance Bill, 1983, states : "82. Under the existing provisions of the Income-tax Act, certain deductions are allowed in the computation of profits and gains of business or profession. Various deductions are also allowed under Chapter VIA of the Income-tax Act in computing total income. 83. With a view to securing that the various deductions in respect of tax concessions admissible under the Income-tax Act do not result in reducing the taxable income of companies to the extent that no tax or only a negligible tax is paid by profit-making companies, it is proposed to make a provision in the Income-tax Act to the effect that where in the case of companies the aggregate amount of deductions admissible under certain specified provisions of the Income-tax Act exceeds 70 per cent of the amount of total income computed before making such deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80VVA(1)] is Rs. 3,06,071, 70 per cent of which comes to Rs. 2,14,249. The deduction admissible to the assessee under Chapter VIA, that is to say, section 80HHC read with sections 80A(2) and 80B(5) is Rs. 3,06,071. This clearly exceeds 70 per cent of the pre-incentive total income. And consequently, the deduction admissible would have to be restricted to 70 per cent of the pre-incentive total income. This comes to Rs. 2,14,249. This is the amount that the ITO has disallowed. 30. The question that then arises for consideration is : What is the fate of the sum of Rs. 91,821 being 30 per cent. of the sum of Rs. 3,06,071 which the assessee would have been entitled to as and by way of deduction but for the operation of section 80VVA(1) ? The answer is furnished by section 80VVA(4) which says that the assessee is entitled to have the said sum to be carried forward to subsequent assessment year(s). 31. The ITO, however, has allowed the assessee the benefit of carry forward in respect of the sum of Rs. 3,71,140, being the difference between the deduction available to the assessee under section 80HHC without applying the provisions of section 80A(2) (Rs. 5,85,389) and the restr ..... 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