Section 80IC deductions are capped by gross total income and not allowed in MAT book-profit computation under section 115JB.

Chapter VI-A deductions, including deduction under section 80IC, are confined by section 80A(2) to the amount of gross total income and cannot exceed it or create a loss. On that basis, the deduction was restricted to gross total income. For MAT computation under section 115JB, book profit is determined by an exhaustive deeming mechanism, and Explanation 1 does not permit reduction of section 80IC deduction unless expressly provided. The commentary notes that section 115JB(5) does not import Chapter VI-A deductions into the book-profit calculation. The resulting position is that section 80IC relief is unavailable in computing book profit under section 115JB.

---

---

Issues: (i) Whether deduction under section 80IC of the Income-tax Act, 1961 could be restricted to the amount of gross total income under section 80A(2); (ii) Whether deduction under section 80IC could be reduced from book profit computed under section 115JB of the Income-tax Act, 1961.

Issue (i): Whether deduction under section 80IC of the Income-tax Act, 1961 could be restricted to the amount of gross total income under section 80A(2).

Analysis: Chapter VI-A deductions are allowed only from gross total income. Section 80A(2) expressly bars the aggregate deduction under that Chapter from exceeding gross total income, and gross total income means income computed before Chapter VI-A deductions. The statutory scheme therefore requires the deduction to be confined to the gross total income and not to create or enlarge a loss. Binding precedent was also consistent with this interpretation.

Conclusion: The restriction of deduction under section 80IC to the amount of gross total income was upheld, against the assessee.

Issue (ii): Whether deduction under section 80IC could be reduced from book profit computed under section 115JB of the Income-tax Act, 1961.

Analysis: Section 115JB is a special deeming provision with a non obstante clause. Its computation of book profit is exhaustive, and Explanation 1 does not provide for reduction of section 80IC deduction. Section 115JB(5) saves the operation of other provisions of the Act, but it does not override the specific scheme of section 115JB or permit import of deductions not expressly provided in the book-profit computation. The earlier regime under section 115JA was different, and the legislative omission of Chapter VI-A deductions in section 115JB indicates a conscious change. The Tribunal also noted supporting High Court authority against allowing section 80IC reduction in MAT computation.

Conclusion: Deduction under section 80IC was held not allowable while computing book profit under section 115JB, against the assessee.

Final Conclusion: The assessee failed on both substantive issues, and the tax computation made by the revenue authorities was sustained.

Ratio Decidendi: Chapter VI-A deductions cannot exceed gross total income under section 80A(2), and section 115JB prescribes an exhaustive MAT computation that does not permit reduction of section 80IC deductions unless expressly provided in the book-profit mechanism.

---