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JUDGMENT Sethuraman, J.-In this reference under s. 256(1) of the I.T. Act 1961, the following question has been referred: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was entitled, for the assessment year 1973-74, to relief under section 80T of the Income-tax Act, 1961, on an amount calculated in terms of the aforesaid provisions, with reference to the gross capital gains of Rs. 1,02,740?" The assessee, a HUF, derived capital gains of Rs. 1,02,740 in the relevant previous year for the assessment year 1973-74. There is no dispute about this figure. The assessee claimed that the capital gains should be processed under section 80T on the entire sum of Rs. 1,02,740, reduced only by the exemption of Rs. 5,000 available under the same provision. The ITO considered that this claim was not tenable and he adjusted the business loss of Rs. 41,892 against the capital gains of Rs. 1,02,740 and brought to tax a sum of Rs. 55,848 as capital gains. How this sum of Rs. 55,848 was arrived at will be clear from the following : Rs. Capital gains 1,02,740 Less: Business loss 41,892 Balance 60,848 Less : Exemption u/s. 80T( b) 5,000 55,848 The assessee appealed to the AAC and submitted that the relief under s. 80T should have been allowed on the gross capital gains of Rs. 1,02,740 after deducting the basic allowance of Rs. 5,000 but without deducting the business loss. The AAC accepted this contention and directed the modification of the assessment accordingly. The department appealed to the Tribunal and the Tribunal held that, as the total amount of capital gains was included for the purpose of computing the gross total income, the assessee was entitled to the deductions from that amount as provided in s. 80T. In this view, the decision of the AAC was considered to be in order and the department's appeal thus failed. This order of the Tribunal has given rise to the reference of the question referred to above. Section 80T, in so far as it is material, runs as follows : "Where the gross total income of an assessee not being a company includes any income chargeable under the head 'Capital gains' relating to capital…

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