1998 (10) TMI 52 - HC - Income Tax

High Court clarifies priority of deductions under Income-tax Act, distinguishing sections 80HHC and 80HH.

The High Court clarified that deductions under section 80HHC are to be allowed first before computing total income, distinguishing it from section 80HH. ... Special Deduction, Export Business Issues Involved: The issues involved in the judgment are the interpretation of deductions under section 80HHC of the Income-tax Act, 1961, conflicting decisions from different High Courts, and the correct method of computing total income under section 80HHC.Interpretation of Deductions under Section 80HHC: The assessee filed a return of income for the assessment year 1992-93, claiming deductions under section 80HHC after admitting a loss. The Commissioner of Income-tax (Appeals) held the issue debatable due to conflicting decisions from different High Courts. The Tribunal also dismissed the appeal, leading the Revenue to file under section 256(2) of the Income-tax Act.Conflicting High Court Decisions: The Commissioner noted a difference of opinion between the Gujarat High Court and the Orissa High Court regarding deductions under section 80HH. The Gujarat High Court held that losses and depreciation must be deducted before arriving at figures for deduction under section 80HH, while the Orissa High Court held that gross total income computed under specific sections is not relevant for deductions under section 80HH.Correct Interpretation of Section 80HHC: The High Court clarified that the interpretations of section 80HH are not directly applicable to section 80HHC. Section 80HH allows deductions from gross total income, whereas section 80HHC specifies deductions from profits derived by the assessee. The court emphasized that deductions under section 80HHC are to be allowed first before computing total income.Method of Computing Total Income under Section 80HHC: The court rejected the Revenue's argument to compute total income by deducting previous year's losses and depreciation before allowing deductions under section 80HHC. It distinguished the language of section 80HHC from section 80E and emphasized that the principles from a previous Supreme Court case do not apply to section 80HHC. The court concluded that the questions raised for reference do not apply in this case and dismissed the income-tax case without costs.