SENGUPTA,J. - (1.) IN this reference under S. 256 (1) of the IT Act, 1961 ('the Act') , the following question of law has been referred by the Tribunal : "Whether, on the facts and in the circumstances of the case, and on a correct interpretation of s. 80VVA, 80 HHC and 80A (2) of the IT Act, 1961, the Tribunal was right in upholding the CIT's order by which he had directed the ITO to allow the benefit of carry forward to Rs.91,822 only, as against Rs.3,71,146 allowed by the ITO in his assessment order?"
(2.) THIS reference relates to the income-tax assessment of the assessee company for the previous year ending 31st March, 1984 corresponding to the asst. yr. 1985-86. The assessment for the said year was originally completed by the ITO on 24th Jan., 1986 under S. 143(3) of the Act . In making the said assessment, the ITO computed the gross total income of the assessee-company before allowing any deduction under Chapter VIA of the said Act in the sum of Rs.3,06,071. The only deduction to which the assessee-company was entitled to in the said year under Chapter VIA was in respect of export turnover under S. 80HCC of the Act. This deduction was computed by the ITO in the sum of Rs.5,85,389. The ITO found that having regard to the provisions of S. 80A(2) of the Act, the aggregate deduction under Chapter VIA could not exceed the gross total income which in this case was Rs.4,06,071. Therefore, the deduction under S. 80HHC in any case could not have exceeded Rs.3,06,071. However, having regard to the provisions of S. 80VVA(i) of the Act, the ITO computed the deduction under S. 80HHC at 70 per cent of Rs..3,06,071, i.e., Rs. 2,14,249 and the balance sum of Rs.91,822 (Rs.3,06,071 Rs.2,14,249) was assessed as the total income of the assessee-company for the said year. The ITO, thereafter also observed that the unabsorbed deduction of Rs.3,71,140 (Rs.5,85,389-Rs.2,14,249) under S. 80 HHC, r/w S. 80 VVA is to be carried forward for being set off against the income of the assessee-company in the subsequent years. The CIT examined the assessment records of the assessee company for the said year and found that the ITO had wrongly applied the provisions of S. 80VVA in regard to the deduction admissible under S. 80HHC insofar as it related to his directions to carry forward the unabsorbed deduction under S. 80HHC in the sum of Rs.3,71,140. The CIT initiated proceedings under S. 263 of the Act and after giving the assessee-company an opportunity of being heard determined the amount to be carried forward under S. 80VVA, r/w S. 80HHC, in the sum of Rs.91,822 only and not Rs.3,71,140 as indicated by the ITO in his said assessment order dt. 24th Jan., 1986. The assessee-company filed appeal to the Tribunal against the said order passed by the CIT, West Bengal-II , Calcutta, under S. 263. The Tribunal upheld the view taken by the CIT by observing that having regard to the scheme of law and more particularly the provisions of S. 80HHC, r/w S. 80(2) and 80VVA, the amount to be carried forward on account of unabsorbed deduction under S. 80HHC would be Rs..91,822. only. This reference arises out of the aforesaid order of the Tribunal.
(3.) IT is an undisputed fact, in this case, that the gross total income of the assessee-company before granting any deduction under Chapter VIA in respect of the asst. yr. 1985-86 was Rs.3,06,071. If S. 80 VVA would not have been on the statute book in relevant year, the deduction under S. 80HHC,which is the only deduction admissible to the assessee-company under Chapter VIA in the said year would have been limited to the gross total income, i.e., Rs.3,06,071. There can be no dispute on this account having regard to the clear provisions of sub-s. (2) of S. 80A,which provides that the aggregate amount of the deduction under Chapter VIA shall not, in any case, exceed the gross total income of the assessee. As already mentioned earlier, the only deduction to which the assessee-company is entitled to in the relevant year under Chapter VIA was in respect of export turnover under S. 80HHC. Since the gross total income of the assessee-company for the asst. yr. 1985-86 was Rs.3,06,071,the deduction under S. 80HHC although computed in the sum of Rs.5,55,389 could never have exceeded Rs.3,06,071 having regard to the specific provisions of s. 80A(2).;