B.R. Arora, J.@mdashThe Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the Revenue, has referred the following question of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in confirming the view of the Commissioner of Income Tax (Appeals) that deduction u/s 80HH of the Income Tax Act, 1961, should be allowed on the gross total income instead of the net income as computed in accordance with the provisions of the Income Tax Act before making any deduction under Chapter VI-A ?"
2. The assessee, Vishnu Oil and Dal Mills, Jodhpur, was assessed by the Income Tax Officer, A-Ward, Jodhpur, for the assessment year 1979-80. The assessee claimed deduction u/s 80HH at the rate of 20 per cent. of the gross profit of Rs. 5,70,596.46 but the Income Tax Officer allowed deduction on Rs. 3,30,168, i.e., the net income computed under the Act and rejected the claim of the assessee for the remaining amount. Aggrieved by the order passed by the Income Tax Officer in not allowing the deduction on the basis of the commercial profit of the industrial undertaking and allowing the deduction on the computed income of Rs. 3,30,168, the assessee preferred an appeal before the Commissioner of Income Tax, Jodhpur, which was allowed and it was held that the allowance of the claim u/s 80HH should be given to the appellant on the gross total income. Dissatisfied with the order dated August 8, 1986, passed by the Commissioner of Income Tax (Appeals), Jodhpur, the Revenue preferred an appeal before the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur. The Tribunal dismissed the appeal filed by the Revenue and maintained the order dated August 8, 1986, passed by the Commissioner of Income Tax (Appeals), Jodhpur. Thereafter an application was moved by the Revenue u/s 256(1) for referring the question of law mentioned above for the opinion of the High Court and the Tribunal, by its order dated October 28, 1989, referred the above question for the opinion of this court.
3. It is contended by learned counsel for the Revenue that u/s 80HH of the Income Tax Act, 1961, (for short, "the Act"), the deduction can be allowed only on the net income and not on the gross total income of the assessee in view of Section 80AB of the Act, which is retrospective in nature.
4. We have considered the submissions made by learned counsel for the Revenue.
5. Section 80HH of the Act deals with the deduction in respect of the profits and gains from newly established industrial undertakings or hotel business in backward areas and states that "where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which Section 80HH applies, there shall, in accordance with and subject to the provisions of Section 80HH, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent. thereof." This Section 80HH was inserted by the Direct Taxes (Amendment) Act, 1974 (Act No. XXVI of 1974). Section 80AB of the Act deals with the deduction to be made with reference to the income included in the gross total income and states that where any deduction is required to be made or allowed under any section (except Section 80M) included in this Chapter (Chapter VI-A) under the heading ''C''--"Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under Chapter VI-A) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income. This Section 80AB was inserted with effect from January 1, 1981. The position of law which stands after the insertion of Section 80AB is that the unabsorbed losses and unabsorbed depreciation had to be deducted before arriving at the figures that would be eligible for the purpose of deduction u/s 80HH and the amount of income computed in accordance with the provisions of the Act, i.e., the net income after making deductions, etc., shall alone be deemed to be the amount entitled for deduction u/s 80HH of the Act. The question : whether the provisions of Section 80AB are prospective or retrospective, came up for consideration before the Supreme Court in the matter of
6. The reference is, therefore, answered in favour of the Revenue and against the assessee.
