Law:

Section:

Section 80-O of the Income-tax Act, 1961 – Deductions – Royalty etc. from certain foreign enterprises – Assessment year 1968-69 – Whether for purpose of working out deduction under section 80-O, it is amount actually received by assessee that should be taken into account and not amount computed by way of net income under head, after deducting expenses – Held, yes Words and phrases: Expression "gross total income" as occurring in section 80-O of the Income-tax Act, 1961. FACTS The assessee company returned certain loss for the assessment year 1968-69. That loss was arrived at on the basis that, out of Rs. 3,08,698, which the company received by way of fees, as contemplated by section 80-O, the company was entitled to a deduction of 60 per cent. The ITO did not accept this case of the assessee. The Tribunal held that the expression "any income" occurring in section 80-O is admittedly referable to income by way of royalty, commission, fees, etc., received by the assessee and the expression "any income" cannot be read in isolation and has to be read in conjunction with the succeeding words and phrase, "by way of royalty, commission, fees, etc., received by it" and that a harmonious construction of these expressions would necessarily lead to the inevitable conclusion that the income received by the assessee was the amount that had to be considered. In this view, the Tribunal allowed the appeal and directed the ITO to calculate 60 per cent of the gross fees received by the assessee. On reference : HELD It is clear from the language of section 80-O that the conclusion of the Tribunal was correct on the construction of that section. As the Tribunal itself pointed out, the section uses the expression, "any income by way of royalty, commission, fees or any similar payment received by it". Consequently, what is to be taken into account for the purpose of working out the deduction is the amount actually received by the assessee and not the amount computed by way of net income under the head, after deducting the expenses, which will necessarily be a subsequent process. Therefore, the Tribunal was right in holding that in the instant case 60 per cent had to be applied to the…

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