High Court Of Andhra Pradesh
CIT vs. Sri Venkateswara Hatcheries (P) Ltd.
Sections 80J, 80JJ
Asst. Year 1977-78, 1978-79
Ramanujulu Naidu & Y.V. Anjaneyulu, JJ.
Ref. Case No. 155 of 1985
29th February, 1988
Counsel Appeared
M.S.N. Murthy & A.V. Krishnakandinya, for the Revenue : S.E. Dastur & M.J. Swamy, for the Assessee
Y.V. ANJANEYULU, J.:
This reference arises under the IT Act 1961, and it is made by the Tribunal, Hyderabad Bench, under s. 256(1) of the IT Act, 1961 (“the Act” for short), at the instance of the CIT. Sri Venkateswara Hatcheries Private Ltd. (“the assessee” for short), established a poultry farm near Poona. It runs a hatchery in which eggs are hatched on a large scale by adopting latest scientific and technological methods. In connection with its IT assessments for the asst. yrs. 197778 and 1979-80, the assessee put forward certain claims for consideration of the ITO while making the assessments. It was firstly claimed that the assessee is a new industrial undertaking satisfying the requirements of s. 80J of the Act, and was consequently entitled to deduction computed in the manner provided under s. 80J of the Act and the Rules framed thereunder. The assessee also claimed that it is an industrial company, as defined in the Finance Acts, 1977 and 1979, and was consequently entitled to be taxed at the concessional rate provided in the Finance Acts for industrial companies. The third claim was that the assessee was entitled to deduction also under s. 80JJ of the Act as the requirements of that section were satisfied. For the asst. yr. 1977-78, there was a further claim that the assessee was entitled to deduction of agricultural development allowance under s. 35C of the Act.
The assessee’s final claim was that the deduction or allowance under s. 80JJ of the Act would have to be worked out with reference to the commercial profits earned by the assessee and not with reference to the income computed in accordance with the provisions of the Act. This contention relates only to the asst. yr. 1979-80. The ITO rejected the assessee’s principal claim that, being a new industrial undertaking, the assessee was entitled to the deduction provided for under s. 80J of the Act. According to the ITO, the assessee was not engaged in the manufacture or production of any articles and, consequently, the provisions contained in s. 80J(4)(iii) of the Act were not satisfied. According to the ITO, the operation or the process of hatching eggs does not amount to production of articles, as envisaged by s. 80J(4)(iii) of the Act. In that view, the assessee’s claim for deduction under s. 80J was rejected.
As a necessary corollary, the ITO also rejected the assessee’s claim to be regarded as an industrial company as defined under the Finance Acts of 1977 and 1979. The ITO pointed out that unless it can be said that the assessee is engaged in the production of any articles, it is not entitled to be treated as an industrial company for levy of concessional rate of tax. The assessee’s claim in this regards was, therefore, rejected by the ITO.
The assessee’s claim for deduction under s. 80JJ of the Act was accepted by the ITO but it was held that the deduction has to be computed with reference to the income computed in accordance with the provisions of the Act and not with reference to “commercial profits” as claimed by the assessee. Thus, while conceding the assessee’s claim for deduction under s. 80JJ of the Act, the further claim that it should be computed in accordance with commercial profits was rejected. Finally, the assessee’s claim for agricultural development allowance under s. 35C of the Act was also rejected by the ITO. As already observed, this claim related only to the asst. yr. 1977-78.
Aggrieved by the aforesaid findings of the Revenue, the assessee filed an appeal before the CIT (A)-II, Hyderabad. The CIT upheld the order of the ITO on the above points and rejected the assessee’s contentions. The assessee thereupon filed a second appeal before the Tribunal and reiterated its claims referred above. The Tribunal accepted all the claims preferred by the assessee. Accordingly, the Tribunal directed that the assessee should be granted appropriate relief in connection with the assessments for both the years.
The CIT was not satisfied that the order of the Tribunal granting the reliefs claimed by the assessee was correct. Accordingly, an application under s. 256(1) of the Act was filed by the CIT before the Tribunal seeking reference of five questions arising out of the Tribunal’s order. The Tribunal agreed to the CIT’s request for making a reference to this Court under s. 256(1) of the Act and consequently referred the following five questions for consideration of this Court:
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that relief under s. 80J has to be allowed ? Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is an industrial company within the meaning of the Finance Act of the relevant assessment year?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that relief under both ss. 80J and 80JJ are to be allowed ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that deduction under s. 35C should be allowed for the asst. yr. 1977-78 ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified that relief under s. 80JJ should be computed on “commercial profits” before allowance of deductions for the asst. yr. 1979-80 ?”
We have heard learned standing counsel for the Revenue, Sri M. S. N. Murthy and also Sri S.E. Dastur, learned counsel for the assessee. At the outset, Sri Dastur informed that question No. 4 above referred need not be answered, as the assessee had represented to the Tribunal after the order was passed, giving up its claim for agricultural development allowance under s. 35C of the Act for the asst. yr. 1977-78 for certain technical reasons and the matter had already been rectified. In that view, learned counsel submitted that this Court need not answer question No. 4. Learned standing counsel for the Revenue did not dispute this statement of learned counsel for the assessee. In view of the aforesaid representation, we decline to answer question No. 4 above referred.
We shall first consider the question whether the assessee is entitled to claim deduction under s. 80J of the Act. In order to be entitled to the deduction, the requirements that have to be broadly satisfied are that the assessee must be a new industrial undertaking and it must manufacture or produce articles during the specified period. In a case where the industrial undertaking manufactures or produces articles, the undertaking should employ 10 or more workers in a manufacturing process carried on with the aid of power, or employ 20 or more workers in a manufacturing process carried on without the aid of power. It is not necessary to refer to the other provisions contained in s. 80J of the Act. There is no dispute in the present case that the assessee is a new industrial undertaking. It employs about 300 persons in the poultry farm. It has installed new apparatus and machinery for running an up-to-date and modern hatchery. Eggs are stored in a cold room at required temperature and humidity to secure optimum results. The incubation period of eggs is about 21 days which is also the period taken in the natural process of hatching by a mother-hen. During the first 18 days, eggs are incubated in a large scale in automatic machines at controlled temperature and humidity. After the completion of 18 days, the same eggs are transferred to another machine where they lie for a period of three days and on completion of the three-day period, chicks come out of the eggs. This, briefly is the process employed by the assessee for hatching the eggs. It is not denied that the operation is on a large scale with the result that the number of chicks secured by the artificial processes employed far outnumber the chicks that may be secured through natural process. The Revenue claims that the above operations do not result in any article being manufactured or produced. It is pointed out that the most important requirement under s. 80J(4)(iii) is that the undertaking should manufacture or produce articles. The Revenue claims that the chick produced, which is a living creature, is not an article for the purpose of s. 80J(4)(iii) and that straightaway disentitles the assessee to claim any deduction. The short question that arises for
consideration, therefore, is whether it can be said that the assessee-undertaking is manufacturing or producing any article when its operations are directed towards hatching the eggs.
10. We may perhaps, having regard to the requirements, rule out the possibility of any manufacture so far as the assessee is concerned. It is difficult to state that the assesseeundertaking is manufacturing chicks. But then s. 80J does not merely use the expression “manufacture”. It also alongside uses the expression “produce”. The expression “produce” is of wider import. According to Webster’s Third New International Dictionary, the word “produce” is defined as “something that is brought forth or yielded either naturally or as a result of effort and work; a result produced.” Black’s Law Dictionary, Fifth Edition, gives the following meanings to the expression “produce” :
“To bring forward; to show or exhibit; to bring into view or notice; to bring to the surface.” The Shorter Oxford English Dictionary, Third Edition, Vol. II, defines the word “produce” as: “To bring forward, bring forth or out; to bring into being or existence.” From the aforesaid meanings of the word “produce”, it is at once clear that no distinction is made between animate and inanimate objects. Even if a living creature is brought forth by human effort, it can be said to have been produced as indicated in Webster’s Third New International Dictionary above referred to. Learned standing counsel for the Revenue laid great emphasis on the fact that the word “produce” is not used in relation to animate objects. According to him, it is more appropriate to use the expression “produce” only to indicate when articles are brought forth by human effort. We are unable to accept this distinction which the Revenue seeks to make as there is no support or authority for such a view. The word should be understood in its common parlance— as understood by any layman according to the dictates of common sense. Could it not be said that India produced most eminent men? Is it not generally said that such and such university has produced most eminent academicians ? Do we not generally refer to men and women as the products of a great educational institution ? Now, in all these cases, the word “produce” is used in relation to living people. There is no reason why the popular meaning of expressions used in day-to-day life should be discarded and an attempt made to restrict the meaning of the expressions. If a statute using an expression gives a restricted meaning to that expression there is no alternative but to adopt that meaning. If, however, the expression used in a statute is of a general character, it should be understood in the sense in which every person understands that expression. It is not necessary to import artificial considerations into the matter. What the Revenue does in the present case is to restrict the meaning of the word “produce” by bringing in artificial considerations. We should understand this expression in its free usage and when we do so, we are bound to say that through the efforts, both of men and machines, the assessee-undertaking produces chicks and that immediately satisfies the requirement in s. 80J(4)(iii).
11. Learned standing counsel for the Revenue points out that the assessee-undertaking has not brought about any changes in the hatching of eggs, inasmuch as, it follows the natural process of 21 days’ period. No special results have been produced by the assessee-undertaking engaging itself in the hatching of eggs giving birth to chicks. Learned standing counsel states that the assessee merely aids in the natural process and cannot, therefore, be held to be engaged in the production of chicks in the hatchery. We are afraid there is a misconception of the real operations carried on by the assessee. In the first place, it cannot be disputed that a mother-hen is completely excluded for purposes of hatching and that the entire operation is taken over by the labour and apparatus employed by the assessee. The production of the chicks is on a massive scale. It may be pointed out that until the advent of large-scale intensive poultry units, all hatching was done by broodyhens and it is not so easy to secure broodyhens for the purpose of hatching. The sheer volume of hatching eggs for those units meant that incubation had to become mechanical. Specific breeding of hybrid strains for either meat or egg production made the tendency to broodiness an undesirable characteristic and to be eliminated from the strain. Broodyhens are now virtually unobtainable from the commercial world (See comments of Dr. A.F. Anderson Brown in “The Incubation Book” at page 148). The hen is still a good mother for 10 to 12 chicks, but for the vast number of offspring produced commercially, mechanical surrogate “mothers” have been designed to incubate, hatch, brood and rear the young ones. Properly managed housing and equipment provide fresh air, a dry, warm climate, well- balanced diets, and the basic elements of tender and loving care. The business of breeding, rearing and housing poultry involves science and technology and also a certain amount of “art”, all of which require uniquely qualified managers to realise maximum potential from today’s very specialised poultry farming. Housing and equipment should serve the bird to provide a comfortable environment with minimum stress for optimal production of eggs and meat. (Please see the observations of Robert E. Moreng and John S. Avens in “Poultry Science & Production” at page 163.)
The factual data provided by the assessee before the lower authorities to which a reference has been made in the order of the Tribunal leaves no doubt whatsoever that the assessee- undertaking has completely taken over the hatching of eggs and producing chicks, eliminating the natural process, and excluding the broodyhens altogether. This was possible by the efforts made by the labour and the scientific apparatus employed by the assessee. The sum total of all these efforts is, if we may say so, to bring forth into existence the chicks from the eggs and that certainly is production of an article—an, article which need not necessarily be an inanimate object but can be a living being. We cannot attribute to the legislature any reason to deny the incentive provided by s. 80J of the Act to undertakings which, by their efforts, produce living creatures. The requirement in s. 80J(4)(iii) that the assessee- undertaking should be engaged in the production of “articles” should be understood in the larger sense so that the incentive provided by the legislature is not denied on the ground that what is produced is not an article (inanimate object) but a living organism like chicken. We are, therefore, satisfied that the assessee in the present case satisfies the requirements of s. 80J(4)(iii) and is consequently entitled to claim the deduction. The Revenue was in error in rejecting the assessee’s claim and the Tribunal was quite justified in directing the deduction in favour of the assessee. The answer to question No. 1 is accordingly in the affirmative, that is to say, in favour of the assessee and against the Revenue.
Before we take up the next question, we would like to observe that the record reveals an inconsistent view on the part of the Revenue in regard to eligibility to claim deduction under s. 80J. We find that the assessee was allowed investment allowance of Rs. 2,11,590 for the income-tax asst. yr. 1979-80. Investment allowance under s. 32A can be allowed to an industrial undertaking engaged, inter alia, in the production of any article or thing. If the Revenue found it possible to grant investment allowance in the present case, it would mean that it is satisfied that the assessee-undertaking is engaged in the production of an article, which is also the criterion for allowance of deduction under s. 80J of the Act. The Revenue should have realised that what is good for s. 32A of the Act is equally good for allowing deduction under s. 80J of the Act. This is a clear instance of the Revenue taking up inconsistent stands and we are surprised that neither the CIT(A) nor the Tribunal has referred to this aspect of the matter.
As regards question No. 2, whether the assessee could be regarded as an industrial company within the meaning of the Finance Acts of 1977 and 1979, it is not disputed that once the assessee is considered as an industrial undertaking engaged in the production of articles, it so qualifies. We, accordingly, hold that the assessee is an industrial company within the meaning of the Finance Acts of 1977 and 1979. Our answer to question No. 2 is accordingly in the affirmative, that is to say, in favour of the assessee and against the Revenue.
We now come to the third question whether the assessee is entitled to claim deduction both under s. 80J as well as under s. 80JJ of the Act. Sec. 80JJ of the Act provides for deduction in respect of profits and gains from business of livestock breeding or poultry or dairy farming. In computing the total income of the assessee, the deduction as specified in the said section is allowed. This deduction underwent changes from time to time. For the asst. yr. 1977-78, the deduction was in cases where the amount of profits and gains derived from the business of livestock breeding, etc., did not exceed in the aggregate Rs. 10,000, the whole of such amount and in any other case one- third of the aggregate amount of such profits and gains or Rs. 10,000, whichever is higher. For the asst. yrs. 1978-79, 1979-80 and 1980-81, the position continued to be the same. For the asst. yr. 1981-82, there was a change. In a case where the amount of profits and gains did not exceed in the aggregate Rs. 15,000, the whole of that amount was allowed as deduction. In any other case, one-fifth of the aggregate amount of such profits and gains or Rs. 15,000 whichever is higher. There is also a proviso added that in computing the aggregate amount of such profits and gains in a case where the profits and gains derived from a business of poultry farming exceed Rs. 75,000, such excess shall be ignored. As can be noticed, the changes are drastic as the maximum amount of deduction is now restricted to Rs. 15,000 and any income from a business of poultry farming in excess of Rs. 75,000 is ignored for the purpose of reckoning the deduction. For the asst. yrs. 1982-83 and 1983-84, the position continued to be the same as in 1981-82. For the asst. yr. 1984-85, there was again a change. In a case where the amount of profits and gains did not exceed in the aggregate Rs. 15,000, the whole of such amount was allowed as deduction. In any other case, 15% of the aggregate amount of such profits and gains or Rs. 15,000 whichever is higher, was allowed as deduction. We now notice that instead of 1/5th of the aggregate amount, it was reduced to 15% in 1984-85. There is also a change in the proviso to the effect that in computing the aggregate amount of such profits and gains in a case where the profits and gains derived from a business of poultry farming exceed Rs. 1,00,000, such excess shall be ignored, that is to say, the sum of Rs. 75,000 applicable to the past years is now enhanced to Rs. 1,00,000, so that the maximum amount of deduction allowed does not exceed Rs. 15,000. As far as asst. yr. 1985-86 was concerned, there is no change and the position continued to be the same as in 1984-85. Finally, s. 80JJ was omitted by the Finance Act, 1985, with effect from 1st April, 1986, so that an assessee is no longer entitled to claim deduction under this head. This, briefly, is the legislative history. It is already pointed out that the ITO agreed to the assessee’s claim for deduction under this head and it was allowed. Learned standing counsel for the Revenue, however, submits that the claim for deduction under s. 80JJ was allowed in view of the findings that the assessee was not entitled to claim deduction under s. 80J of the Act. Learned standing counsel advances the plea that if this Court were to hold that the assessee is entitled to claim deduction under s. 80J of the Act, then, it must be held that the claim for deduction under s. 80JJ is not due and the deduction already allowed for the assessments should be withdrawn. It is stated that the effect of question No. 3 referred to this Court is to resolve the above position.
It is urged on behalf of the Revenue that while s. 80J has general application to all cases, s. 80JJ has application subject to the assessee’s deriving income from business of livestock breeding or poultry or dairy farming. It is submitted that this special provision is applicable to all cases of poultry farming and not the provisions contained in s. 80J generally. It is submitted that the legislature did not intend that an assessee should be entitled to a dual deduction, one under s. 80J and the other under s. 80JJ. According to the Revenue, if deduction is held permissible under one section, it ousts the assessee’s eligibility to claim deduction under the other. We find no support for this proposition advanced by learned standing counsel for the Revenue.
In the first place, there is nothing in either of the s. 80J or 80JJ to indicate that they are mutually exclusive. It is only proper to interpret that provisions in both the sections would apply if the requirements of both the sections are satisfied. In the present case, we have already held that the requirements of s. 80J are satisfied and, therefore, the assessee was entitled to the deduction under s. 80J. Would that have the consequence of the assessee’s claim for deduction under s. 80JJ being rejected, even if the requirements of that section are satisfied ? We do not find anything in the Act to support such a view. Undoubtedly, the requirements of s. 80JJ are also satisfied in the present case and the assessee would be entitled to claim the deduction under that provision.
We have earlier indicated the amount of deduction allowed under s. 80JJ from year to year until the provision was taken out of the statute. While, in the first few years, the amount of deduction was sizeable, it was clear from the asst. yr. 1981-82 onwards, the maximum deduction was restricted to a paltry sum of Rs. 15,000. Could it be said that this paltry deduction for which provision is made in s. 80JJ ousts the assessee’s claim for deduction under s. 80J, which, speaking generally, is high ? We have no doubt that while an assessee is entitled to claim deduction under s. 80J of the Act if the requirements of that section are satisfied, an additional incentive is provided in s. 80JJ in favour of live-stock breeding or poultry or dairy farming because of the emphasis on developing these avenues. In order to promote and advance livestock breeding and poultry and dairy farming which have great significance in rural areas, the legislature thought it fit to provide an additional incentive and that incentive is specified in s. 80JJ of the Act.
20. That apart, there is clear evidence in the Act itself that the provisions contained in s. 80J and s. 80JJ are not mutually exclusive so that if a deduction is permissible under s. 80J, deduction shall still be allowed under s. 80JJ. Wherever the legislature wanted to so exclude, a provision is expressly made in the Act itself. See, for instance, s. 80HH dealing with the deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. Sub- s. (9) of that section provided specifically that in a case where the assessee is entitled also to the deduction under s. 80J, effect was first to be given to the provisions of s. 80HH. We may also refer to sub-s. (9A) which provided that where a deduction in relation to the profits and gains of a small scale industrial undertaking to which s. 80HHA applies, is claimed and allowed under that section for any assessment year, deduction in relation to such profits and gains shall not be allowed under s. 80HH for the same or any other assessment year. This is a total prohibition. We may refer to s. 80GGA(4) which provides that where a deduction under this section is claimed and allowed for any assessment year in respect of any payments of the nature specified in sub-s. (2), deduction shall not be allowed in respect of such payments under any other provision of this Act for the same or any other assessment year. Reference may also be invited to s. 80C(5A) which sets out that where a deduction under this section is claimed and allowed for any assessment year in respect of any sum specified in sub-s. (2), the sum in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year. We may also notice the provisions contained in s. 80CC(6) which likewise provides that where a deduction is claimed and allowed under sub-s. (1) with reference to the cost of any equity shares, the cost of such shares shall not be taken into account for the purpose of s. 54E. We find likewise a total prohibition in s. 80HHB(5) which provides that notwithstanding anything contained in any other provision of this Chapter (Chapter VI-A), no part of the consideration or of the income comprised in the consideration payable to the assessee for the execution of a foreign project referred to in cl. (a) of sub-s. (1) or of any work referred to in cl. (b) of that sub-section shall qualify for deduction for any assessment year under any such other provision. Finally, we may refer to s. 80QQ which provides for the deduction in respect of profits and gains from the business of publication of books. In sub-s. (3), it was provided that for the purpose of this section, “books” shall not include newspapers, journals, magazines, diaries, etc., by whatever name called.
We have referred above only to the provisions contained in Chapter VI-A so far. There are provisions outside Chapter VI-A also. See for instance s. 20(2) and s. 36B(2).
We have referred to the aforesaid provisions at some length only to demonstrate that wherever the legislature wanted to exclude allowance or a deduction because of allowance granted elsewhere in the Act, a specific provision is always made that both the provisions shall not take simultaneous effect. We find no such provision made by the legislature in s. 80J or s. 80JJ. We are, therefore, unable to accept the submissions of learned counsel for the Revenue that if the assessee should be entitled to the deduction under s. 80J of the Act, no deduction under s. 80JJ could be allowed. In our view, the ITO rightly allowed the assessee’s claim for deduction and no interference is called for.
We have earlier indicated that so for as question No. 4 is concerned, it does not call for our answer in view of the submissions made to us by counsel for both sides.
We now take up question No. 5. In fact, this question is an off-shoot of question No. 3 concerning the allowance under s. 80JJ. The assessee claimed that it is entitled to claim deduction under s. 80JJ of the Act and such deduction should be computed not with reference to the profits and gains determined in accordance with the provisions of the Act but should be reckoned with reference to “commercial profits”. As we had already indicated, s. 80JJ provides that: “Where the gross total income of an assessee includes any profits and gains derived from a business of livestock breeding or poultry or dairy farming, there shall be allowed in computing the total income of the assessee, a deduction as specified hereunder, namely:— (a) in a case where the amount of such profits and gains does not exceed, in the aggregate, ten thousand rupees, the whole of such amount; and (b) in any other case, one-third of the aggregate amount, of such profits and gains or ten thousand rupees, whichever is higher.”
The ITO allowed the assessee’s claim that it is entitled to deduction under this provision but calculated the deduction with reference to the profits and gains computed in accordance with the Act under the head “Business”. To illustrate, from the profits and gains computed in accordance with the provisions of the Act, the ITO deducted allowances like investment allowance, etc., and on the net profits and gains so determined, the deduction was calculated. The assessee claims that the deduction must be calculated with reference to the “commercial profits” of the assessee and not on the net profits and gains determined in accordance with the provisions of the Act. We already observed that the Tribunal conceded the assessee’s claim and directed the ITO to compute the deduction accordingly.
25. We are unable to subscribe to the view that s. 80JJ requires the deduction to be worked out on “commercial profits” derived from business by an assessee. Sri Dastur, learned counsel for the assessee, invited our attention to the Madras High Court decision in CIT vs. K. S. Narayanan (1986) 54 CTR (Mad) 235 : (1986) 159 ITR 618 (Mad). He drew analogy from the decisions of the Madras High Court in CIT vs. Madras Motor & General Insurance Co. Ltd. (1975) 99 ITR 243 (Mad), and Madras Auto Service vs. ITO (1975) 101 ITR 589 (Mad). These two decisions of the Madras High Court related to the relief under s. 80K of the Act. The ITO held that the relief under s. 80K should be granted only on the net dividend income of the assessee (after deducting interest and brokerage), whereas the Madras High Court held that the relief should be given on the gross dividend before deduction. Learned counsel pointed out that the aforesaid two decisions of the Madras High Court with regard to the interpretation of s. 80K are not overruled by the decision of the Supreme Court in Distriboutors (Baroda) Ltd. vs. Union of India & Ors. (1985) 47 CTR (SC) 349 : (1985) 155 ITR 120 (SC), as that decision related to the relief under s. 80M of the Act. Learned counsel pointed out the observations of the Madras High Court that s. 80AB came into operation only from 1st April, 1981, prospectively and, consequently, the principle enunciated by the Madras High Court in the earlier two decisions concerning relief under s. 80K stood firmly. This principle, contends the learned counsel, should be applied in regard to the working out of deduction under s. 80JJ also, in the sense that the deduction should be worked out without making the usual deductions under the Act. We are unable to agree with the analogy drawn by learned counsel which is inappropriate and, in any event, there is no warrant for applying that principle in regard to s. 80JJ. The scope of “commercial profits” is altogether different as explained in a catena of cases dealt with under s. 23A of the 1922 Act and s. 104 of the 1961 Act. We do not see why, for the purpose of working out the deduction allowed by s. 80JJ, the profits and gains computed in accordance with the provisions of the Act should be discarded and a totally different endeavour should be made to determine what the assessee’s “commercial profits” are. It is not reasonable to understand that s. 80JJ was referring to the profits and gains derived from business computed in accordance with the provisions of the Act, as the constituent of the gross total income for the purpose of s. 80J is not “commercial profits” derived by the assessee but the profits and gains derived from the business computed in accordance with the provisions of the Act. We are, therefore, unable to accept the assessee’s claim that the deduction under s. 80JJ should be worked out with reference to the “commercial profits” and not profits and gains derived from the business computed in accordance with the provisions of the Act. We accordingly answer question No. 5 in the negative, that is to say, in favour of the Revenue and against the assessee.
In the result, questions Nos. 1, 2 and 3 are answered in the affirmative, that is to say, in favour of the assessee and against the Revenue. Question No. 4 is not answered in view of the representation made by counsel for both sides. Finally, question No. 5 is answered in the negative, that is to say, against the assessee and in favour of the Revenue.
As the assessee has succeeded substantially, the CIT shall pay the assessee’s costs. Advocate’s fee Rs. 500.
[Citation : 174 ITR 231]
