2018 (12) TMI 692 - AT - Income Tax

Tribunal Confirms Deduction Limits under Section 80-O, Emphasizes Compliance with Income Tax Act

The Tribunal upheld the allowance of deduction under section 80-O based on direct expenses and ensured that aggregate deductions under Chapter VI-A did ... Computation of deduction u/s 80-0 - Held that:- As perused relevant material on record. So far as the method of computation of impugned deduction is concerned, we find that first appellate authority has merely followed the order of this Tribunal in assessee’s own case for AY 1995- 96. Nothing on record suggest that the aforesaid decision has even been over-ruled by any higher judicial authority or the same has no application for impugned AY. Therefore, the stand of Ld. CIT(A), in this regard, could not be faulted with. Ground Number-1 stands dismissed. Whether a deduction u/s. 80-O to the assessee aggregating total chapter VI-A deduction without considering the fact that as per provisions of section 80A(2) the aggregate amount of deductions under chapter VI-A shall not, in any case exceed the gross total income of the assessee - Held that:- We concur with the same that overall deduction under Chapter-VIA could not exceed gross total income of the assessee in terms of Section 80A(2). Therefore, the aforesaid deduction shall be granted by AO within this overall limit provided u/s 80A(2). The impugned order stand modified to that extent. Ground Number-2 stands allowed. Issues:1. Deduction u/s 80-O of the IT Act for Assessment Year 1990-91.2. Allowance of deduction u/s. 80-O and aggregate deductions under chapter VI-A.Analysis:Issue 1: Deduction u/s 80-O of the IT Act for Assessment Year 1990-91:The appeal by the revenue contested the order of Ld. Commissioner of Income Tax (Appeals) regarding the deduction u/s 80-O. The Ld. CIT(A) directed the A.O to allow the deduction u/s 80-O as per the assessee's computation, which was challenged by the revenue. The Tribunal remitted the issue back to the CIT(A) for fresh consideration after considering relevant judgments. The deduction u/s 80-O was related to foreign income, and the calculation involved deducting only direct expenses. The Tribunal directed the AO to verify the computation and grant the deduction accordingly. The first appellate authority and the Tribunal for AY 1995-96 had already decided in favor of the assessee regarding the method of computation for deduction u/s 80-O based on direct expenses only.Issue 2: Allowance of deduction u/s. 80-O and aggregate deductions under chapter VI-A:The revenue raised an additional ground questioning the allowance of deduction u/s 80-O and the aggregate deductions under chapter VI-A. The Tribunal concurred with the revenue that deductions under Chapter-VIA could not exceed the gross total income of the assessee as per Section 80A(2). The Tribunal modified the impugned order to ensure that the deduction u/s 80-O falls within the overall limit provided by Section 80A(2). The appeal of the revenue was partly allowed based on this modification.In conclusion, the Tribunal upheld the direction to allow deduction u/s 80-O based on direct expenses and ensured that the aggregate deductions under Chapter VI-A did not exceed the gross total income of the assessee. The judgment provided clarity on the computation of deductions and the limits set by the relevant provisions of the IT Act.