Chapter VI-A deductions must be based on net income included in gross total income, not gross profits.

Deduction under Chapter VI-A was required to be computed on the net income actually included in the gross total income, not on gross profits. The Court treated section 80AB as declaratory and clarificatory of that scheme and applied it to section 80HH, holding that the qualifying amount for deduction must reflect income after the relevant deductions and adjustments. The earlier view in Cloth Traders was overruled for this purpose, and the assessee could not claim deduction on gross income. The appeals therefore failed and the High Court's view was affirmed.

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Issues: Whether deduction under section 80HH of the Income-tax Act, 1961, is to be computed on the gross income or on the net income for the relevant assessment years.

Analysis: Section 80HH is in the same Chapter VI-A framework as section 80M of the Income-tax Act, 1961. The earlier view in Cloth Traders was overruled, and the later decisions treated the scheme of Chapter VI-A as requiring deduction to be allowed only on the income actually included in the gross total income, namely the net income. Section 80AB was understood as declaratory and clarificatory of the position of law, and the assessment years in question did not take the appellant outside that principle.

Conclusion: Deduction under section 80HH was payable on the net income and not on the gross income, and the question was answered against the assessee.

Final Conclusion: The appeals failed, and the High Court's view that the assessee was not entitled to compute the deduction on gross profits was affirmed.

Ratio Decidendi: For deductions under Chapter VI-A, the qualifying profit must be determined on the basis of the net income included in the gross total income, and section 80AB is clarificatory of that position.

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