Retrospective block-assessment amendment requires Chapter VI-A deductions to be considered when computing undisclosed income.

Retrospective amendment of section 158BB was treated as governing block-assessment computation in accordance with the Act, which brought Chapter VI-A deductions within the undisclosed-income calculation. On that footing, deduction under section 80HHC could not be excluded merely because the earlier wording of section 158BB was read as limiting computation to Chapter IV. The Tribunal's approach based on the pre-amendment text was therefore unsustainable, and the assessee's eligibility for section 80HHC had to be reconsidered on merits under the amended regime.

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Issues: (i) Whether deduction under section 80HHC of the Income-tax Act, 1961 could be considered while computing undisclosed income in a block assessment under Chapter XIV-B; (ii) Whether the amended section 158BB of the Income-tax Act, 1961, given retrospective effect, required computation of undisclosed income in accordance with the provisions of the Act so as to permit consideration of Chapter VI-A deductions.

Issue (i): Whether deduction under section 80HHC of the Income-tax Act, 1961 could be considered while computing undisclosed income in a block assessment under Chapter XIV-B.

Analysis: The earlier view of the Tribunal proceeded on the basis that section 158BB, as it then stood, required computation only in accordance with Chapter IV and thereby excluded deductions under Chapter VI-A. Once the amended provision is applied, undisclosed income is to be computed in accordance with the provisions of the Act, which necessarily brings Chapter VI-A deductions within the computation framework.

Conclusion: The question of eligibility under section 80HHC could not be finally rejected on the basis adopted by the Tribunal and had to be reconsidered on merits.

Issue (ii): Whether the amended section 158BB of the Income-tax Act, 1961, given retrospective effect, required computation of undisclosed income in accordance with the provisions of the Act so as to permit consideration of Chapter VI-A deductions.

Analysis: The amendment to section 158BB was given full retrospective effect from 1 July 1995. Therefore, the amended text governed the computation of undisclosed income for the block period, even though the Tribunal had decided the matter on the basis of the law as it then stood. On that footing, the statutory scheme required application of the provisions of the Act as amended.

Conclusion: The amended section 158BB governed the computation retrospectively and Chapter VI-A deductions were required to be considered.

Final Conclusion: The appeal succeeded to the extent that the Tribunal's order was set aside and the matter was sent back for fresh consideration of the assessee's eligibility for deduction under section 80HHC on merits.

Ratio Decidendi: Where a retrospective amendment changes the computation provision for block assessments to require computation in accordance with the Act, deductions otherwise excluded by the earlier wording must be considered under the amended regime.

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