1. In this case the assessee made a claim for relief under Section 80HH of the Income-tax Act, 1961 ('the Act'), which the ITO refused. In appeal the AAC allowed the claim. The ITO gave effect to the order of the AAC. While giving effect to that order, the ITO deducted from the total income of Rs. 1,17,888 a total sum of Rs. 41.513 which included the relief of Rs. 14,310 under Section 80HH. The ITO then set off losses of the previous year and determined the total income at nil. A note was also added to the order indicating unabsorbed depreciation and business losses carried forward. Later on the ITO realising that the gross total income of the assessee would be nil if the business losses are set off first against the total income, thus disentitling the assessee to relief under Section 80HH, rectified the assessment under Section 154 of the Act, withdrawing the said relief. The learned Commissioner (Appeals) upheld the order of the ITO for the reasons given below : I have carefully considered the contentions put forward by Shri Shurpali. Sub-clause (5) of Section 80B defines 'gross total income' as the total income computed under the provisions of the Act before any deduction under Chapter VIA or under Section 280-O. 'Total income' is defined under Section 2(45) as the total amount of income referred to in Section 5 computed in the manner laid down in the Act. Section 5 which defines the scope of total income sets out the categories of income which are assessable in the hands of a person who is resident in India and a person who is a non-resident. Though the categories of income referred to consist of income which was received or accrued or arose during the year, it is made clear that the computation is subject to the provisions of the Act. The meaning of total income becomes clearer on reading Section 4 which levies income-tax in respect of total income of the previous year. If the contention put forward by the appellant that the total income is the income of the previous year before the set off of unabsorbed depreciation and business losses of past years were to be accepted, it would mean that an assessee who had earned taxable income in the relevant year would be liable to tax even if unabsorbed depreciation and business losses of earlier years would completely wipe out the income of the year. The interpretation is not consistent with the basis of charge as set out in Section 4.
The form of return of income prescribed under the Income-tax Rules provides further support to the view that the gross total income has to be arrived at after the deduction of the unabsorbed depreciation and business losses of earlier years. The columns in Part I of the return provide first for the aggregation of income under the various heads of income and for the deduction from such aggregate income of unabsorbed depreciation and business losses of past years for arriving at the gross total income. The only further deduction provided from this gross total income for arriving at the total income are deductions set out in Part I of Annexure F. These deductions consist entirely of deductions under Chapter VIA. I, therefore, hold that the procedure followed by the ITO in arriving at the total income of the appellant in his order under Section 154 is in conformity with the procedure laid down in the Income-tax Act as well as in the Income-tax Rules.
It would thus appear from the Commissioner (Appeals)'s order that he considered that there was a mistake apparent from record in the ITO's order dated 26-12-1976. Being aggrieved, the assessee has filed this appeal before us.
2. The learned counsel for the assessee submitted that there was no mistake apparent from record. There can be two opinions about how the relief under Section 80HH was to be given. When there are two provisions allowing different kinds of reliefs to the assessee, there was no reason to deny the assessee one of the reliefs to which it is entitled to. He relied on the decision of the Kerala High Court in Indian Transformers Ltd. v. CIT  86 ITR 192. In that case relief under Section 80E was sought to be reduced by the income-tax authorities on the ground that such relief was not available to the assessee on the income arrived at after setting off the previous losses. The High Court answered the question in favour of the assessee.
It was submitted that on the basis of the decision the assessee was entitled to relief in accordance with the order passed by the ITO on 26-12-1977 and there was no apparent mistake in that order.
3. The learned departmental representative on the other hand submitted that the Court did not consider the definition of 'gross total income' as defined in Section 80B. The wordings in Section 80E were different and as such the Kerala High Court's decision did not apply.
4. The revenue's case is that Section 80B defines 'gross total income'.
The gross total income is the income arrived at according to the provisions of the Act before giving the deductions under Chapter VIA.Hence, the total income had to be computed after setting off of losses and unabsorbed depreciation. If there is no resultant income, no relief would be admissible as provided in Section 80A. All these are apparent from the Act itself and any deviation from these principles set out in the Act would constitute a mistake apparent from record.
5. However, the Kerala High Court's decision does not support the case of the revenue. The wordings in Section 80E as it stood then are as follows : 80E. Deduction in respect of profits and gains from specified industries in the case of certain companies.-(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent thereof, in computing the total income of the company.
We find that the wordings 'as computed in accordance with the other provisions of the Act' bring that section in line with the definition of 'gross total income' as defined in Section 80E. That being so, it would appear that two views are possible regarding giving relief under any of the sections enumerated in Chapter VIA. Thus, the issue becomes debatable and is taken out of the purview of Section 154. The ITO's order rectifying the assessment is not valid. We, accordingly, set aside the order of the Commissioner (Appeals) and cancel the order of rectification passed by the ITO.