M/S. VIJAY INDUSTRIES versus COMMISSIONER OF INCOME TAX

Citation: [2019] 4 S.C.R. 928 · Decided: 01-03-2019 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 4 S.C.R.
M/S. VIJAY INDUSTRIES
v.
COMMISSIONER OF INCOME TAX
(Civil Appeal Nos.1581-1582 of 2005)
MARCH 01, 2019
[A. K. SIKRI, S. ABDUL NAZEER AND M. R. SHAH, JJ.]
Income Tax Act, 1961 – ss. 80HH(1), 80A, 80AB and ss. 30 to
43D – Assessees claimed deduction u/s. 80HH @ 20% of profits
and gains, i.e. gross profits – Whereas, the stand of the Income Tax
Department was that deduction @ 20% is to be computed after
taking into account depreciation, unabsorbed depreciation and
investment allowance – In other words, as per Department, the
income of the assessee is to be computed in accordance with the
provisions contained in ss.28 to 44DB which are the provisions for
computation of ‘income’ under the head ‘profits and gains of
business or Professions’ and once income is arrived at, 20% thereof
is allowable as deduction u/s. 80HH – Further, the Revenue sought
the application of s.80AB – Held: In the instant case, Assessment
Years 1979-1980 and 1980-1981 were under consideration –
s.80HH specifically mentions that deduction @ 20% of ‘profit and
gains’ – Reading of s. 80HH along with s. 80A would clearly signify
that such a deduction has to be of gross profits and gains i.e. before
computing the income as specified in ss. 30 to 43D of the Act –
Insofar as s.80AB is concerned, the said section was inserted by
Finance (No.2) Act, 1980 with effect from 1st April, 1981 – Clearly,
s.80AB is a provision made with prospective effect – Therefore, it
cannot apply to the Assessment years 1979-80 and 1980-81 –
Finance (No.2) Act, 1980.
Allowing the appeals, the Court
HELD: 1. The scheme of the Income Tax Act, 1961 insofar
as assessment of income is concerned, particularly, with reference
to computing the income as provided in Chapter IV of the Act
and contrasted it with the deductions that are allowable under
Chapter VI-A of the Act while computing total income. That
scheme itself draws distinction between the concept ‘income’ on
                                        [2019] 4 S.C.R. 928
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the one hand and ‘profits and gains’ on the other hand. Insofar as
computation of income under the head ‘profits and gains’ from
business or profession is concerned, Section 28 of the Act
mentions various kinds of incomes which are chargeable under
this head.  Therefore, all those incomes specifically mentioned
in that provision when earned by a particular assessee, are to be
aggregated to arrive at profits and gains of the assessee.  Section
29 thereof mentions the method of arriving at ‘income’ which is
to be computed in accordance with the provisions contained in
Sections 30-43D of the Act.  Sections 30-43D contain deductions
of various kinds which are in the nature of expenditure or the
like nature.  After providing the deductions admissible in these
provisions, one arrives at the figure  of net profits which would
become the net income under the head ‘profits and gains of
business or profession’. In contrast, as mentioned above, under
Chapter VI-A of the Act certain deductions are given by way of
incentives. Assessees may earn these deductions on fulfilling the
eligibility conditions contained therein, even when they are not
in the nature of any expenditure incurred by the assessee. Here,
Section 80A of the Act provides that in computing the total income
of assessee, there shall be allowed from his gross total income,
in accordance with the subject of the provisions of this Chapter,
the deductions specified in Sections 80C to 80U.  As mentioned
above, Sections 80C to 80U contain different subject matters and
also specify particular percentage of deductions for a particular
period.  Significantly, Section 80A itself uses the expression ‘from
his gross total income’ as it states that deduction is to be allowed
to an assessee ‘from his gross total income’. Moreover, different
provisions from Sections 80C to 80U, while mentioning the
percentage at which and for which period a particular deduction
is allowable, also specifies as to how such a deduction is to be
worked out, namely, specific percentage of deduction of which
component.  These sections provide different parameters. Insofar
as Section 80HH is concerned, it specifically mentions that
deduction @ 20% of ‘profits and gains’. Reading of Section 80HH
along with Section 80A would clearly signify that such a deduction
has to be of gross profits and gains, i.e., before computing the
income as specified in Sections 30 to 43D of 

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