Facts of the case [in a recent judgment Reported in 2008 -TMI - 3485 - Supreme court ]

The appellant-assessee is a Company incorporated under the provisions of the Indian Companies Act, 1956.  It is engaged in the business of oil and chemicals.  It has a unit for oil division at Sirohi District, Rajasthan.  It has also a chemical division at Jodhpur.  The appellant had earned profit in the assessment year 1990-91 and 1991-92 in both the units.  However, the appellant had suffered losses in the oil division in earlier years. The appellant claimed deductions under Section 80HH and 80-I of the Act, claiming that each unit should be treated separately and the loss suffered by the oil division in earlier years is not adjustable against the profits of the chemical division while considering the question whether deductions under Sections 80HH and 80-I were allowable.  The Assessing Officer noticed that the gross total income of the appellant before deductions under Chapter VI-A was 'Nil'.  Therefore, he concluded that the assessee was not entitled to the benefit of deductions under Chapter VI-A.  Feeling aggrieved the appellant carried the matters in appeal before the Commissioner of Income Tax (Appeals) V, Mumbai who confirmed the view of the Assessing Officer by dismissing the same.  Therefore, the appellant preferred two appeals before Income Tax Appellate Tribunal Mumbai Bench 'B', Mumbai.  The Tribunal held that gross total income of the appellant had got to be computed in accordance with the Act before allowing deductions under any Section falling under Chapter VI-A and as the gross total income of the appellant after setting off the business losses of the earlier years,  was 'Nil',  the appellant was not entitled to any deductions either under Section 80HH or 80-I of the Act.  In that view of the matter the Tribunal dismissed the appeals filed by the appellant.  Thereupon, the appellant invoked jurisdiction of the High Court under Section 260-A of the Act by filing these appeals.  The High Court has dismissed the same by Judgment dated July 23, 2001.

Finally, the assessee has sought relief from the honorable Supreme Court. But the Apex Court has analyzed the provisions of Income Tax Act, 1961 in details and  rejected the appeal by stating that:

"The proposition of law, emerging from the above discussion is that the gross total income of the assessee has first got to be determined after adjusting losses etc., and if the gross total income of the assessee is 'Nil' the assessee would not be entitled to deductions under Chapter VI-A of the Act." 

[For full text of judgment visit - 2008 -TMI - 3485 - Supreme court]

Gross Total Income determination: Chapter VI-A deductions disallowed if income is nil after set-off of brought forward losses. Determination of gross total income requires first adjusting brought forward and current year business losses before considering deductions under Chapter VI-A; if gross total income after such loss set offs is nil, the taxpayer is not entitled to Chapter VI-A deductions.