Law: Income Tax Act, 1961

Section: 80E

JUDGMENT L. Narasimha Reddy, J. - It is too well known that the Income Tax Act, 1961 (for short, the Act) provides for levy of tax on what is known as total income as defined under Section 10 read with Section 5 of the Act. It takes in its fold the various categories of incomes of an assessee. One of the important steps to be taken under the Act in computing the total income is the identification of deductions that are permitted and provided for under Chapters VI and VI-A. While Chapter VI provides for setting off or carry forward of amounts under different heads, Chapter VI-A provides for deduction of certain amounts from the general income of an assessee on the one hand, and deduction of certain amounts in respect of incomes of a specified category on the other hand. For example, Section 80CCA provides for deduction in respect of deposits under the National Savings Scheme or payment to a deferred annuity plan, Section 80CCB provides for deduction in respect of investments made under equity linked savings scheme. Section 80G is in respect of donations to certain funds, charitable institutions etc., from the general income of an assessee. 2. Deductions in respect of specific incomes are covered by part C of Chapter VI-A. Such deductions are to be made only from the income of a particular source. For example, if an assessee establishes industrial undertaking or hotel business in backward areas, he is entitled to make deduction to the extent of 20% from the profits and gains, under Section 80HH. Similarly, where the assessee establishes small scale industries in certain areas, Section 80 HHA provides for identical deduction. Deduction in respect of profits and gains from projects outside India which earn foreign exchange is provided for under Section 80HHB. 3. Certain complications do arise when an assessee is entitled to deductions under more than one provision, more so, when they fall within heading C of Chapter VI-A. The controversy would be as to whether the deduction must be confined to the source of income of that particular category or it can be from the combined income from different sources referable to different sections. 4. The respondent herein is an…

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