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income-tax Officer Vs. Nippon Electronics (P.) Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Bangalore
Decided On
Reported in(1986)17ITD823(Bang.)
Appellantincome-tax Officer
RespondentNippon Electronics (P.) Ltd.
Excerpt:
.....on the ground that the deductions under section 80vv are permitted only when there is a positive total income. on appeal, the commissioner (appeals) held that the audit fee is allowable as an item of expenditure and, accordingly, deleted rs. 2,260. against the same, the revenue has preferred this appeal.2. the learned departmental representative submitted that since the assessee returned loss and the assessment has been completed on a loss, the deduction claimed under section 80vv is not allowable as it could be allowed only when there is a positive income. the learned counsel for the assessee supported the order of the commissioner (appeals).3. we have considered the rival submissions. the issue for consideration is that when there is no positive income, whether the deduction claimed.....
Judgment:
Per Shri T. Venkatappa, Judicial Member - The assessee filed a return declaring loss of Rs. 10,94,562. The ITO completed the assessment determining the loss at Rs. 8,96,520. A sum of Rs. 2,260 incurred by the assessee as expenditure for representation in taxation matter was claimed as deduction under section 80VV of the Income-tax Act, 1961 (the Act). The ITO disallowed the same on the ground that the deductions under section 80VV are permitted only when there is a positive total income. On appeal, the Commissioner (Appeals) held that the audit fee is allowable as an item of expenditure and, accordingly, deleted Rs. 2,260. Against the same, the revenue has preferred this appeal.

2. The learned departmental representative submitted that since the assessee returned loss and the assessment has been completed on a loss, the deduction claimed under section 80VV is not allowable as it could be allowed only when there is a positive income. The learned counsel for the assessee supported the order of the Commissioner (Appeals).

3. We have considered the rival submissions. The issue for consideration is that when there is no positive income, whether the deduction claimed under section 80VV is allowable. To decide the issue it will be necessary to examine the relevant provisions, section 80VV, Section 80A (1), section 80A (2) and section 80B (5) of the Act which are relevant for our purpose read as under : "80VV. In computing the total income of an assessee, there shall be allowed by way of deduction any expenditure incurred by him in the previous year in respect of any proceedings before any income-tax authority or the Appellate Tribunal or any Court relating to the determination on any liability under this Act, by way of tax, penalty or interest : Provided that no deduction under this section shall, in any case, exceed in the aggregate five thousand rupees.

80A (1). In computing the total income of an assessee there shall be allowed from his gross total income, in accordance with an subject to the provisions of this Chapter, the deductions specified in sections 80C to 80VV.(2) The aggregate amount of the deductions under this chapter shall not, in any case, exceed the gross total income of the assessee.

80B (5).gross total income means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under section 280-O." The above provisions occur in Chapter VI-A of the Act which is headed Deductions to be made in computing total income sub-section (1) of section 80A provides that in computing the total income of an assessee, deductions specified in sections 80C to 80VV of the Act shall be made from his gross total income. Sub-section (2) of section 80A provides that the aggregate amount of the deductions required to be made under Chapter VI-A of the Act shall not exceed the gross total income of the assessee. So, the total income arrived at after making deductions specified in section 80C to 80VV from the gross total income can never be minus or negative figure. The gross total income is defined in section 80B (5) according to which gross total income means the total income computed in accordance with the provisions of the Act before making deductions under Chapter VI-A or under section 280-O of the Act.

Under section 80VV, expenditure incurred in respect of any proceedings before any income-tax authority or the Tribunal or any Court relating to the determination of any liability under the Act by way of tax, penalty or interest shall be allowed as deduction which shall not exceed in the aggregate Rs. 5,000. Section 80VV comes under Chapter VI-A. Sub-section (2) of section 80A shall not exceed the gross total income. Thus, the total income after allowing deductions should not be a negative figure. Section 37 of the Act makes it clear that in respect of expenses covered by section 80VV no deduction can be claimed under section 37(1). Thus, a reading of the above provisions will clearly indicate that when the assessment results in a loss, the deduction claimed under section 80VV cannot be allowed. Since the claim of assessee in under section 80VV it cannot be allowed under section 37 of the Act also. Thus, the claim of the assessee made under section 80VV is not allowable as there is no positive income.

In Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, the Supreme Court considered the provisions of sections 80A (1) and 80A (2). The Supreme Court held that the total income arrived at after making deductions specified in sections 80C to 80VV from the gross total income can never be minus or negative figure. It was observed as under : "... It is true that on this view the deduction in respect of the income by way of dividends from a company falling within clause (a) of sub-section (1) of section 80M may exceed the quantum of such income included in the gross total income, but that possibility is indeed contemplated and taken care of by section 80A, sub-section (2), which provides that the aggregate amount of the deductions shall not in any case exceed the gross total income of the assessee." (p. 259) It is clear from the above observation that the aggregate amount of the deductions shall not in any case exceed the gross total income and the total income after allowing the deductions can never be a minus or a negative figure. Thus, the deductions under Chapter VI-A can be allowed only when there is positive income. The above ratio squarely applies to the instant case. we have already pointed out that there is no positive income, as the assessment has resulted in loss. Thus, the deduction under section 80VV cannot be allowed as there is no positive income.

The Commissioner (Appeals) was wrong in allowing the sum of Rs. 2,260.

We reverse his order on this point and restore the addition of Rs. 2,260.


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