Arijit Pasayat, C.J.

1. This judgment will cover ITRs 132 to 135 of 1978.

Expressing doubt about the correctness of ratio indicated in CIT v. Marketing Research Corporation, (1987) 61 ITR 204, reference has been made by a Division Bench for interpreting the scope and ambit of Section 80-O of the Income Tax Act, 1961 (in short, the).

2. Background in which the reference has been made is as follows :

At the instance of Revenue, the Income-tax Appellate Tribunal (in short, Tribunal) referred following two questions for opinion of this Court under Section 256(1) of the:

(1) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled to exemption under Section 80-O on the gross receipts and not on the net income

(2) Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the disallowances made by theO of the consultation fees and commission paid to the Managing Director Sh. T.K. Roy

During hearing of the references, learned Counsel for Revenue submitted that issues stand concluded in view of the judgment in Marketing Research Corporations case (supra). Learned Counsel for the assessee, on the other hand, contended that the Marketing Research Corporations case was decided ex-parte by a short order taking note of the decision of Apex Court in Distributors (Baroda) Pvt. Ltd. v. UOI, (1985) 155 ITR 120 (SC) [LQ/SC/1985/208] . The said case related to Section 80-M of theand Section 80-O was contextually different. Reliance was placed on several decisions to substantiate this stand. The Bench hearing the matter felt that there was some substance and therefore, the reference has been made. The dispute relates to assessment years 1968-69, 1969-70, 1970-71 and 1971-72.

3. Learned Counsel for Revenue submitted that though Marketing Research Corporations case was disposed of with reference to Distributors (Baroda)s case dealing with Section 80-M the ratio had full application to a case under Section 80-O. He also submitted that Section 80-AB applies to Section 80-O and that made the decision fully applicable. Learned Counsel for the assessee submitted that though at first flush the stand of Revenue would appear attractive, in reality, it is not so. Effect of Section 17 of the Finance Act, 1974 which brought about certain amendments to Sections 80-N and 80-O have not been noticed and bare reading of the provision introduced by way of amendment makes the position clear that Section 80-AB has no application to the facts of the case.

4. In order to appreciate rival submissions, it would be proper to quote Section 80-AB and 80-O. They, at the relevant point of time, read as follows :

80-AB. Deductions to be made with reference to the income included in the gross total incomeWhere any deduction is required to be made or allowed under any section (except Section 80-M) included in this Chapter under the heading C.-Deductions in respect of certain incomes, in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.

Section 80-O prior to substitution by Finance (No. 2) Act of 1971 with effect from 1972.

80-O. Deduction in respect of royalties, etc. received from certain foreign companies.Where the gross total income of an assessee being an Indian company includes any income by way of royalty, commission, fees or any similar payment received by it from a foreign company in consideration for the use of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the foreign company by the assessee, or in consideration of technical services rendered or agreed to be rendered to the foreign company by the assessee under an agreement approved by the Central Government in this behalf before the 1st day of October, of the relevant assessment year, there shall be allowed a deduction of the whole of such income, in computing the total income of the assessee.

In the above quoted section, the expression a deduction of the whole of such income had been substituted for deduction from such income of an amount equal to 60% thereof by Finance Act, 1968 with effect from 1.4.1969.

Section 17 of Finance Act, 1974, on which a considerable emphasis was laid by learned Counsel for assessee reads as follows :

17. Amendment of Section 80-N and 80-O of the Income-tax Act as they stood during certain periods. The provisions of Section 80-N of the Income-tax Act, as they stood immediately before the 1st day of April, 1969, and the provisions of Section 80-O of that Act, as they stood from time to time before the 1st day of April, 1972 shall have and shall be deemed to have had effect subject to the modification that the deduction under the said provisions shall be allowed only with reference to the income referred to therein which is received inconvertible foreign exchange in India, or having been received inconvertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India is brought into India, by or on behalf of the assessee in accordance with any law for the time being in force for regulating payments and dealings in foreign exchange.

Explanation : For the purposes of this section :

(i) convertible foreign exchange means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the law for the time being in force for regulating payments and dealings in foreign exchange;

(ii) any income used by the assessee outside India in the manner permitted by the Reserve Bank of India shall be deemed to have been brought into India in accordance with the law for the time being in force for regulating payments and dealings in foreign exchange, on the date on which such permission is given.

5. Section 80-AB appears in Chapter VI-A reading, Deductions to be made in computing total income. Section 80-O appears in heading C which deals with Deduction in respect of certain incomes. Section 80-AB provides that in respect of any deduction which is required to be made or allowed under any section (except Section 80-M), included in Chapter under heading C.-Deduction in respect of certain incomes in respect of any income specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, the manner of computation has to be in accordance with the provisions of Section 80-AB. Expression `notwithstanding anything contained in that section is of great relevance and significance. Use of the expression `notwithstanding anything contained is known as non-obstante clause. Sometimes it is placed at the beginning of a provision, and sometimes in the middle of it. Effect of the expression `notwithstanding anything contained is that in case of conflict between the two provisions the overriding effect has to be given over the provisions of Statute mentioned in the non-obstante clause. As succinctly stated by the Apex Court in Aswini Kumar v. Arbinda Bose, AIR 1952 SC 369 [LQ/SC/1952/61] , it should be first ascertained what enacting part of the section provides on a fair construction of the words used according to their natural and ordinary meaning, and the non-obstante clause is to be understood as operating to set aside as no longer valid anything contained in the relevant existing laws which is inconsistent with the new enactment. The decision was rendered in the context of two statutory enactments. It has to be noted that the expression notwithstanding anything contained in is used in contra-distinction to the phrase subject to. It was observed in Punjab Sikh Regular Motor Service v. Regional Transport Authority, Raipur, AIR 1966 SC 1318 [LQ/SC/1965/266] , that when provision A is subject to provision B, a case falling under provision B is taken out of the provision A. As observed in Clark Ltd. v. IRC, (1973) 2 All E.R. 513, the phrase `subject to is a simple provision which merely subjects the provisions of the subject sub-sections to the provisions of the master sub-sections. Where there is no clash, the phrase does nothing; if there is collision, the phrase shows what is to prevail. The phrase provides no warranty of universal collision. The distinction between the two expressions was again noticed in KSE Board v. Indian Aluminium Co., AIR 1976 SC 103. A non-obstante clause is also to be distinguished from the phrase without prejudice. Ordinarily, there is close approximation between the non-obstante clause and the enacting part of the section and the former may throw some light as to the scope and ambit of the enacting part in case of ambiguity. A non-obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment; that is to say to avoid the operation and effect of all contrary provisions. See Sebastian M. Hangay v Union of India, AIR 1984 SC 1022 [LQ/SC/1984/84] , a non-obstante clause is, to put it differently, a legislative device to modify the ambit of the provision or law mentioned in the non-obstante clause or to override it in specified circumstances.

6. In view of the stipulation contained in Section 80-AB one thing which emerges clearly is that the mode of computation as indicated in Section 80-AB has full application to the case relating to Section 80-O. In Moti Lal Pesticides (I) Pvt. Ltd. v. CIT, 243 ITR 26 [LQ/SC/2000/337] , the Apex Court has observed as under :

Mr. Ramamurti, learned Senior Counsel, appearing for the appellant, submitted that even though Cloth Traders (P) Ltds case (1979) 118 ITR 243 (SC), was overruled in Distributors (Baroda) Pvt. Ltd.s case (1985) 155 ITR 120 (SC) [LQ/SC/1985/208] , both the cases pertained to Section 80-M only and this Court had no occasion to consider the application of Section 80-AB with reference to Section 80-HH of the. He said Section 80-AB was specifically introduced with effect from April 1, 1981, and it would have no application to the assessment years 1979-80 and 1980-81 which were involved in the present case. The effect of Section 80-AB was now that deduction would have to be made from the net income and not from the gross income. But then, in all fairness, Mr. Ramamurti also referred to another decision of this Court in H.H. Sir Rama Varma v. CIT (1994) 205 ITR 433 [LQ/SC/1993/959] , where this Court observed that on a parity of reasoning with Section 80-AA as given in Distributors (Baroda) P. Ltd.s case (1985) 155 ITR 120 (SC) [LQ/SC/1985/208] , it must be held that Section 80-AB was enacted to declare the law as it always stood in relation to the decisions to be made in respect of the income specified under the head C of Chapter VI-A of the. Mr. Ramamurti also referred to a Circular dated May 10, 1982 issued by the Central Board of Direct Taxes in support of this submission but then this Circular has since been withdrawn.

Earlier in H.H. Sir Rama Varma v. CIT, (1994) 205 ITR 433 [LQ/SC/1993/959] , the Apex Court had observed as follows :

In the case of Distributors (Baroda) P. Ltd.s case (1985) 155 ITR 120 (SC) [LQ/SC/1985/208] , it was the retrospective effect of Section 80-AA which was under challenge. The Court, as aforementioned, interpreted Section 80-M in a manner different from that placed upon it in Cloth Traders case (1978) 118 ITR 243 (SC), it held that the decision in Cloth Traders case (1978) 118 ITR 243 (SC), was erroneous and had to be overturned. It was, therefore, unnecessary to consider the question of the constitutional validity of the retrospective operation of Section 80-AA. Section 80-AA, it was held was in its retrospective operation namely, declaratory of the law as it always had been since April 1, 1968, when the provisions of Chapter VI-A were introduced.

On a parity of reasoning it must be held that Section 80-AB was enacted to declare the law as it always stood in relation to the deductions to be made in respect of the income specified under the head C of Chapter VI-A. The manner of deduction specified under Section 80-AB accords with the interpretation that we have placed upon Section 80-T, read independently. (underlined for emphasis)

In fact, in Moti Lals case (supra), reference was made by Apex Court to H.H. Sir Rama Varmas case (supra). Above being the position, the inevitable conclusion is that mode of computation as indicated in Section 80-AB has to be applied while working out the incentives under Section 80-O of the. The reference is answered accordingly.

Matter shall be placed before the Division Bench for disposal on merits.