- (1.) AT the outset learned counsel for the assessee does not want to press the question Nos. 1 and 2 in DB IT Ref. No. 80/1987 and question Nos. 1, 3 and 4 in DB IT Ref. No. 7/1995. He wants to press the question only relating to Section 80HH in asst. yrs. 1979 -80 and 1980 -81.
(2.) ON an application under Section 256(1) of the IT Act, the Tribunal has referred the following questions for the opinion of this Court: For asst. yr. 1979 -80 : 'Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the deduction under Section 80HH would be available out of income as computed under the IT Act, and not out of the profits and gains of the industrial undertaking without deducting therefrom depreciation and investment allowance?' For asst. yr. 1980 -81 : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that for the purposes of allowing deduction under Section 80HH the profits and gains of an industrial undertaking should be computed by taking into consideration unabsorbed depreciation, current depreciation and investment allowance?' Learned counsel for the Revenue brought to our notice that now the issue has been covered by their Lordships decision in the case of Motilal Pesticides (I) (P) Ltd. v. CIT : [2000]243ITR26(SC) and as per the decision of their Lordships, Section 80HH is available only on the net income and not on gross income.
(3.) MR . Kasliwal, learned counsel for the Revenue, has made the submissions and given his submissions in writing also. The submissions given in writing reads as under: 'Sections 80HH : Where the gross total income of assessee includes any profits and gains derived from an industrial undertaking be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to 20 per cent thereof.' Thus, deduction under Section 80HH is available to an industrial undertaking, which fulfils the requirements of the section. Section 80HH provides for deduction from out of 'profits and gains' of an industrial undertaking of the amount specified therein. Section 80HH provides for deduction of 20 per cent of profits and gains of an eligible industrial undertaking and that deduction is to be made out of the 'profits and gains' of that industrial undertaking while computing the total income of the assessee. From a bare reading of Section 80HH, it will be noticed that the deduction as envisaged in Section 80HH is available only to an 'industrial undertaking' as distinct from an assessee and is to be allowed only out of the 'profits and gains' of that industrial undertaking. Just to illustrate, if an assessee owns two industrial undertakings, one of which is eligible and qualified for the deduction under Section 80HH, whereas, the other does not qualify for the deduction under Section 80HH, in that case, the deduction @ 20 per cent of the 'profits and gains' of that eligible industrial undertaking will be allowed and the profits and gains of such industrial undertaking will be reduced by the deduction as available to such industrial undertaking and thereafter, the balance will go for the purpose of computation of total income of the assessee. It is not that first the income of both the units will be clubbed and then deduction under Section 80HH is to be worked out. This would result in an absurd situation. There may be another situation where the profits of the industrial undertaking eligible for deduction under Section 80HH may be taken up by the losses of other industrial undertaking which is not eligible for the deduction. There may be an adverse situation where there may not be a profit with the industrial undertaking eligible for the deduction under Section 80HH and 80I but there may be a profit with an industrial undertaking not eligible for deduction under Sections 80HH and 80I and if both are taken together, the assessee may get the benefit of deduction under Sections 80HH and 80HH, which was not intended to be given by the legislature. It is, therefore, submitted that as per the legislative intention and keeping in view the language of Sections 80HH and 80I, the deduction ought to be made available to the industrial undertaking with reference to profits and gains of such industrial undertaking. 4. It is relevant to mention that Sections 80HH and 80I very categorically refer to and use the terminology 'profits and gains of industrial undertakings'. It may please be noted that 'profits and gains' and 'income' are not same but are different. The term 'profits and gains' has not been defined under the provisions of IT Act whereas the term 'income' has been defined in the IT Act. It may also be noted that there are a number of provisions under Chapter VI -A, some of which refer to the term 'profit and gains' and some of them refer to the term 'income'. Thus, in some of the provisions of Chapter VI -A, the deduction is intended to be given out of profits and gains, whereas in some other sections, the deduction has been provided to be given out of 'income'. When the term 'profits and gains' has not been defined under the Act, in that case, its meaning has to be understood as is being understood in commercial world. Here it is relevant to draw your Lordship's kind attention to the provisions of Sections 28 and 29 of the IT Act. Section 29 provides for computation of income out of profits and gains. It says and provides that out of profits and gains, income will be computed by taking into consideration the provisions of Section 30 to Section 43D of the IT Act. It means the 'profits and gains' is the figure, out of which income is to be computed. It is, therefore, submitted that the term 'profits and gains' and 'income' are not synonymous and, therefore, the profits and gains has to be taken as understood in the commercial world. ;