Chapter VI-A deduction computation: Section 80HHC relief must follow deduction of Section 32A incentives.

Section 80AB governs computation of Chapter VI-A deductions, including Section 80HHC, by requiring the relevant income to be determined under the Act before it is included in gross total income. Gross total income under Section 80B(5) must therefore be computed before any Chapter VI-A deduction is given. Applying the Supreme Court's principle on Section 80-I, the text states that investment allowance and similar incentives had to be deducted before computing Section 80HHC relief. On that basis, the direction to allow Section 80HHC before considering Section 32A was incorrect, and Section 80HHC could not be computed in priority to Section 32A.

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Issues: Whether deduction under Section 80HHC of the Income-tax Act, 1961 was to be allowed before considering deduction under Section 32A of the Income-tax Act, 1961.

Analysis: Section 80AB governs computation of deductions under Chapter VI-A, including Section 80HHC, and requires the amount of income of the relevant nature to be determined in accordance with the Income-tax Act and only then included in gross total income. Section 80B(5) defines gross total income as total income computed before making any deduction under Chapter VI-A. The principle applied by the Supreme Court in relation to deduction under Section 80-I was treated as equally applicable, so investment allowance and similar incentives had to be deducted before computing the Section 80HHC relief.

Conclusion: The direction to allow deduction under Section 80HHC before considering deduction under Section 32A was incorrect. The assessee was not entitled to have Section 80HHC computed prior to Section 32A, and the Revenue succeeded on the issue.

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