INCOME TAX ACT, 1961

Deduction under sections 80HH/80-I- Computation-Profits and gains from industrial undertaking-Calculation of net profit for purpose of deduction whether proper

The issue arose under consideration was about justification of Tribunal in confirming the order passed by CIT (A) in holding that the deduction under section 80-I should be given without any deduction under section 80HH from the total income. Held:The provisions of section 80J(1) clearly provided that for computing the total income of assessee under section 80J, a deduction from the profits and gains (as reduced by the deduction, if any, admissible to the assessee under section 80HH or section 80HHA) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent per annum on the capital employed in the industrial undertaking. The underlined bracketed words are not to be found in section 80-I(1), which simply provides that, where the gross total income of an assessee includes any profits and gains derived from on industrial undertaking. to which this section applies, there shall, in accordance with, and subject to the provisions of the section, be allowed in computing the total income of assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. Section 80J was inserted with effect from 1-4-1968, and the bracketed portion in section 80J referring to section 80HH was inserted/substituted with effect from 1-4-1976, and the bracketed portion for section 80HHA was inserted with effect from 1-4-1978. Hence while inserting section 80-I in the year 1981, the Legislature was conscious of the formula prescribed in section 80J with effect from 1-4-1976, under which for computing the total income of assessee, a deduction from such profits and gains as reduced by deduction, if any, admissible to assessee under section 80HH, or section 80HHA was required to be made. Therefore, in view of the absence of the aforesaid bracketed words in the provisions of section 80-I, while computing the profits for the purpose of availing of deduction under section 80-I, the profits and gains of the assessees business were not required to be reduced by the deduction admissible under section 80HH. Hence, Tribunal was justified in confirming the order of CIT (A).