Section 80HHC computation excludes short-term capital loss from business profits under the statutory gross total income framework.

Section 80HHC deduction had to be computed in light of Section 80AB, which limits Chapter VI-A deductions to income included in gross total income, and Section 80B(5), which defines gross total income as total income computed under the Act before Chapter VI-A deductions. Applying that statutory scheme, business income for Section 80HHC purposes was to be computed under the Act without first reducing it by short-term capital loss as contended by the Revenue. The short-term capital loss was therefore not deductible from business profits while working out the Section 80HHC deduction, and the issue was answered against the Revenue.

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Issues: Whether short-term capital loss was required to be deducted from business profits while computing deduction under Section 80HHC.

Analysis: The deduction under Section 80HHC had to be worked out in the light of Section 80AB, which confines Chapter VI-A deductions to income included in the gross total income. Section 80B(5) defines gross total income as total income computed in accordance with the Act before making deductions under Chapter VI-A. Applying the Supreme Court's interpretation of the statutory scheme, the business income for Section 80HHC purposes had to be computed under the Act without reducing it by short-term capital loss in the manner suggested by the Revenue.

Conclusion: The short-term capital loss was not deductible from business profits for computing the Section 80HHC deduction; the answer was against the Revenue.

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