ORAL JUDGMENT

S.H Kapadia, J.

Although several questions have been raised in the Memo of Appeal, the point which arises for determination by this Court in the present Appeals under Section 260-A of the Income Tax Act, 1961 is as follows:

"Whether the Assessing Officer was right in rejecting the claim of the assessee on the ground that the gross total income of the assessee, computed as per the provisions of the before deductions under Chapter VI-A, was NIL"

2.For the purposes of deciding these Appeals, the relevant facts are as follows:

In these Appeals, we are concerned with the assessment years 1990-91 and 1991-92. Since both the Appeals raise common question of law and fact, they are disposed of by this common judgment. However, for the sake of convenience, the facts in Appeal No.591 of 2000 are mentioned hereinbelow.

3.The assessee is engaged in the business of oil and chemicals. It has a Unit for Oil Division in Sriphi District, Rajasthan. It has a Chemical Division at Jodhpur. The assessee claimed deductions under Section 80HH and Section 80I in respect of the aforestated two Divisions. The Assessing Officer reflected the claim of the assessee on the ground that the gross total income of the assessed before deductions under Chapter VI-A, was "Nil" and, therefore, the Assessing Officer came to the conclusion that the assessee was not entitled to the benefit of the deductions under Chapter VI-A and in particular Sections 80HH and 80I. Being aggrieved, the assessee carried the matter in Appeal. The Order of the Assessing Officer was confirmed by C.I.T. (Appeals). Being aggrieved, the assessee went in Appeal to the Tribunal which dismissed the Appeal of the assessee and, therefore, the assessee has come by way of Appeal to this Court under Section 260-A of the Income Tax Act.

4.It is urged on behalf of the assessee that it had earned profits from the Chemical Division during the assessment years in question. In respect of the Oil Division, the assessee had carried forward the losses and to that extent, the assessee did hot claim the deductions under Sections 80HH and 80I. However, with regard to the Chemical Division, it was contended that Section 80HH and Section 80I provide for a deduction in respect of profits and gains of the Undertaking/ Division. It was contended that profits and gains of the Chemical Division were required to be determined in accordance with the provisions of the as if the only source of income of the assessee is the income from that Unit. That, the assessee had earned income from the Chemical Division and that such income formed part of the gross total income. It was urged on behalf of the assessee that computation of income from profits and gains of business is to be made in accordance with the provisions of the. That, once the income was computed under the aforestated Sections, deduction under Chapter VI-A is required to be computed. It was urged that for the purposes of applying the provisions of Sections 80HH and 80I, each Unit has got to be treated separately and the loss suffered by the Oil Division cannot be adjusted against the profits of the Chemical Division in arriving at the deductions under Section 80HH and 80I. In this connection, reliance was placed on the Judgment of the Supreme Court in the case of Commissioner of Income Tax vs. Canara Workshops Pvt. Ltd. 161 I.T.R. 320.

5.On behalf of the department, it was contended that deductions under Chapter VIA were allowable out of the gross total income. That, in the present case, the gross total income was "Nil" and, therefore, deduction under Section 80HH or Section 80I were not allowable.

6.We find merit in the stand taken by the department. At the outset, it may be mentioned that it is not in dispute that if the interpretation placed by the assessee is accepted, then it would result in violation of the provisions of Section 80A(2) in the sense that the deductions claimed would exceed the gross total income of the assessee. In the case of Commissioner of Income Tax vs. Nima Specific Family Trust 248 I.T.R. 29, this Court took the view that Section 80HH was inserted by Direct Tax Amendment Act, 1974 with effect from 1st April, 1974. That, it has continued to remain on the Statute Book without any change in the Statute Book. That, Section 801 was a successor to Section 80J. That, under Section 801, as inserted with effect from 1st April, 1981, it was provided that where gross total income of an assessee included profits derived from an Industrial Undertaking to; which the Section applied, then there shall be a deduction from such profits of an amount equal to twenty percent. In the said judgment it was further laid down that where an Undertaking/Unit was entitled to relief under Section 80HH and also under Section 80I, then priority shall be given first to the deduction under Section 80HH. This is in view of section 80HH(9). It was also laid down that Section 80HH did not contemplate carry forward of shortfall as in the case of Section 80J(3) . That, after 1st April, 1981, Section 80HH and Section 801 both, dealt with deductions based on profits. In that matter, the Court gave a hypothetical example by pointing out that if profits derived from an Industrial Undertaking was Rs.80.00 and simultaneously, if there was a loss from another Unit of Rs. 50.00, then the gross total income would be Rs.30.00. However, for the purposes of deductions under Section 80HH and 80I, the total deduction available would be Rs.32.00. To this extent, there is no conflict in the views of the department and the assessee. However, we have taken the view that in view of Section 80A(2), the deduction under Chapter VI-A is restricted to the gross total income of Rs. 30.00 and since the total deduction of Rs. 32.00 under section 80HH and Section 80I exceeds the gross total income of Rs.30.00, the deductions are restricted to Rs.30.00. In other words, the Legislature has introduced Section 80A(2) and Section 80B(5) in order to put a ceiling on the claim for deduction. Section 80A(2), inter alia, lays down that the aggregate amount of deduction under Chapter VIA shall not exceed the gross total income of the assessee. This indicates that if the deductions under Chapter VLA are required to be claimed, then the gross total income should be sufficient to absorb such deduction. In other words, if the gross total income is Nil, then deduction under Section 80HH and 80I cannot be claimed because it would mean that the aggregate amount of deduction would exceed the gross total income of the assessee. So also Section 80B(5) defines "gross total income to mean total income computed in accordance with the provisions of the before making any deduction under Chapter VIA. Therefore, it is clear that in order to determine the gross total income, the loss of Oil Division is required to be adjusted against the profit the Chemical Division before making any deductions under Chapter VIA. This is the view which we have taken in the aforestated judgment of Nima Specific Family Trust (supra). In our view, the said judgment applies to the facts of the present case. However, it is urged on behalf of the assessee that in that matter, this Court was not required to consider the ambit of Section 80I(6). It was contended that to a certain extent, the above judgment of this Court was applicable. It was contended, however, that under Section 80I(6) the profits of an Industrial Undertaking were required to be computed as if such Industrial Undertaking was the only source of income and it was, therefore, contended that profits of the Chemical Division were required to be treated as the only source of income and, therefore, such profits could not be red.