High Court Of Gujarat
CIT vs. Apoorva Shantilal Shah (HUF)
Sections 80AB, 80L
Asst. Year 1982-83, 1983-84
A.R. Dave & D.A. Mehta, JJ.
IT Ref. No. 139 of 1986
5th July, 2001
Counsel Appeared
B.B. Nayak with M.M. Bhatt for Manish R. Bhatt, for the Applicant : None, for the Respondent
JUDGMENT
D.A. MEHTA, J. :
The Tribunal, Ahmedabad Bench ‘C’ has referred the following question of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”). “Whether, the Tribunal is right in law in holding that the assessee is entitled to a deduction under s. 80L of the IT Act, 1961 in respect of Rs. 2,000 and Rs. 3,308 received on its compulsory deposits for the asst. yrs. 1982-83 and 1983-84 respectively, disregarding the provisions of s. 80AB of the IT Act, 1961?”
The assessment years involved are 1982-83 and 1983-84. The relevant previous years being S.Y.2037 and S.Y- 2038, respectively. The assessee claimed deduction of interest of Rs. 3,007 and Rs. 3,308 respectively for both the years under s. 80L of the Act as the said income was earned as interest from compulsory deposits. The ITO disallowed the said claim and the assessee went in appeal before the AAC. The AAC upheld the assessment orders and being aggrieved the assessee carried the matter in appeal before the Tribunal for both the years. The Tribunal for the reasons stated in its order dt. 10th Jan., 1986 upheld the claim of the assessee and allowed the appeals.
On behalf of the Revenue, Mr. B.B. Nayak along with Smt. M.M. Bhatt for Mr. Manish R. Bhatt appeared and contended that the Tribunal was in error in reading the provisions of s. 80AB of the Act along with s. 80L of the Act. It was contended that there was no positive income under the head “Other sources” and hence, there was no question of permitting any deduction under s. 80L of the Act. It was submitted that provisions of s. 80AB and s. 80L of the Act are clearly unambiguous and after insertion of s. 80AB of the Act only the net income which is included in the gross total income would be entitled to deduction under Chapter VI-A of the Act. Further contention was raised that for the purpose of ascertaining deductible amount under s. 80L of the Act, it was not necessary for the ITO to examine each and every item falling under the head “Other sources”. If there was no positive income under the said head in light of specific provision under s. 80AB of the Act, no deduction was permissible under s. 80L of the Act.
The scheme for computation of total income commences with s. i4 in Chapter IV of the Act, wherein specific heads of income viz. “A” to “F” have been laid out. Thereafter, the Act has provided the nature of income specifically falling under each of the heads and the machinery for computing the said income under each of the heads. In so far as the heads specified under items “A” to “E” in s. 14 of the Act, It is not necessary for us to deal with the same for the present controversy. Under item “F” “Income from other sources” is to be computed. Sec. 56 of the Act provides the nature of income which is to be considered as falling under the said head and s. 57 provides for deductions which are permissible for ascertaining the income specified under s. 56 of the Act. Sec.
80AB falls in Chapter VI-A and the said chapter deals with deduction to be made in computing the total income. Sec. 80AB provides for deduction to be made with regard to income included in the gross total income. It is stated in the said section that where any deduction is required to be made or allowed under any section falling within the said chapter under the heading ‘C’ “Deductions in respect of certain incomes” in respect of any income of the nature specified in that section where the income is included in the gross total income of the assessee then regardless of anything contained in that section, computation of deduction under that section has to be of the amount of income of the specified nature as computed in accordance with the provisions of the Act. It is further provided in the said section that such income computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income which is derived or received by the assessee and included in the gross total income. Sec. 80B(5) defines gross total income to mean the total income computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A. Therefore, for an income of the nature described in s. 80L it is first of all necessary that it should be included as component of the gross total income. The inclusion has to be of the amount of income which is computed in accordance with the provisions of the Act. It is only after these two stages have been complied with that it is permissible to an assessee to claim deduction under any of the sections specified in heading ‘C’—Deductions in respect of certain incomes falling in Chapter VI-A.
In the present case the assessee has earned interest income from compulsory deposits and is seeking deduction of the said interest income under s. 80L of the Act. It appears that the assessee has also earned dividend income from certain shares held by it and for earning such dividend income the assessee had made borrowings on which it has paid Interest. Therefore, in relation to dividend income there is deficit as worked out under the provisions of s. 56 r/w s. 57(i) of the Act. The stand of the Revenue is that the interest income earned on compulsory deposits has to be set off against such deficit in relation to the dividend account and if the net figure is negative i.e. deficit., then the assessee cannot claim any deduction under s. 80L of the Act.
On plain reading of the provisions of the Act with special reference to the scheme set out hereinbefore it is not possible for us to accept the aforesaid proposition. As stated s. 80AB shall come into play at the point of time when the deductions are to be made in computing the total income. “Total income” is defined under s. 2(45) of the Act to mean the total amount of income referred to in s. 5 computed in the manner laid down in the Act. This takes us to s. 56(1) which provides that income of every kind which is not excluded from the total income under the Act shall be chargeable to income-tax under the head “Income from other sources” if it is not chargeable under any of the heads specified in s. 14 viz. items ‘A” to “E”. Interest from compulsory deposit does not fall within any of the specified heads and it would fall within the provisions of s. 56(1) of the Act. Sec. 56(2) of the Act enumerates various other incomes which would fall within this head viz. “Income from other sources”, and sub-s. (2) of s. 56 opens with the phrase “in particular, and without prejudice to the generality of the provision of sub-s. (1)”—As interest from compulsory deposit does not fall within any of the items enumerated in sub-s. (2) it is by way of residuary income which would fall under s. 56 of the Act. The deductions as are available for computing income under the head “Income from other sources” are specified in s. 57 and except for cl. (iii) the interest income from compulsory deposits cannot be computed under any other clause. Sec. 57 (iii) provides that any other expenditure which is not in the nature of capital expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income shall be deducted from such residuary income. In the present case admittedly no expenditure has been incurred for earning interest from compulsory deposits and hence there is no question of reducing the figure of interest income.
Now insofar as the contention of Revenue to set off one income against another income under the head “Income from other sources” is concerned, no such provision is found in s. 57 of the Act. The emphasis on provision of s. 80AB to undertake such exercise is not warranted by the specific provision in view of the fact that the total income already stands computed as provided in accordance with the provisions of the Act and s. 80AB comes into play only at that latter stage.
In view of this legal position which emerges from a conjoint reading of the various provisions of the Act, we find no infirmity in the reasoning and conclusion of the Tribunal. We, therefore, hold that the Tribunal was right in law that the assessee was entitled to deduction under s. 80L of the Act in respect of the interest income received on compulsory deposits for two years under consideration.
The question referred to us is answered in the affirmative i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs.
[Citation : 255 ITR 390]
