Law: Income Tax Act, 1961

Section: 80,80AB,80B(5),80-O

Income-tax----Special deduction---Income by way of fees for work done outside India--­Deduction of such fees from gross total income---Fees received from abroad constituted assessee's gross receipt---Income from fees is to be computed in accordance with Act---Only amount so determined will constitute income from fees for purpose of deduction under S.80-O---Business loss and unabsorbed depreciation to be deducted to arrive at gross total income--­Indian Income Tax Act, 1961, Ss.80AB, 80B(5) & 80-O. The assessee, a firm of consultants, claimed a deduction of income received by way of fees for work done outside India from its gross total income under section 80-O of the Income Tax Act, 1961. It also claimed that loss or unabsorbed depreciation for 1977-78 and 1978-79 should be carried forward. The Income-tax Officer negatived the claim. whereas the Commissioner of Income-tax (Appeals) and the Tribunal on further appeal declared that the fee receipts should be deducted from the gross total income and that carry forward of all losses and unabsorbed depreciation should be allowed. On a reference by the Revenue: Held, that the Tribunal was clearly in error in holding that the assessee was entitled to deduction of the gross amount of the fees received by it, under section 80-O of the Act. "Gross total income" is defined in section 80B to mean the total income computed in accordance with the provisions of the Income-tax Act before making any deduction under Chapter VI-A. Section 80-O of the Act is one of the provisions contained in Chapter VI-A of the Act and is a provision to which section 80AB-applied­Section 80AB of the Act specifically provides that the deduction that can be claimed is the amount determined in accordance with the provisions of the Act. It is, therefore, not the gross amount or the total receipt that is to be deducted, but only the income derived under the head for which deduction is sought, that would be eligible for deduction. The fee that the assessee had received from aboard constituted its "gross receipts" and "income from fees" was required to be computed in accordance with the provisions of the Act and only the amount so determined would…

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