Section 80AB overrides all other sections for the purpose of deduction in Chapter VI-A of the Income Tax Act, and both profits and losses have to be taken into consideration for the computation of income.

1. Revenue is before this Court challenging the order dtd 26-2-2001 passed in ITA No. 1039/Bang/1998 for the assessment year 1994-95.

2. Assessee carried on the business of manufacturing and sale of telecommunication cables. In respect of the assessment year 1994-95 return of income was filed by the assessee showing a total income of Rs. 8,43,81,674/- on 28-11-1994. The assessing officer in computing the relief under Section 8 of the Act. Assessee had considered only business income from Tele Cables and the assessee did not take into account the loss on account of lease business. The assessing officer concluded that the net income has to be based on the income of the manufacturing business and also the lease business in the light of the judgment of the Supreme Court in Commissioner of Income Tax, Bombay Vs. P.K. Jhaveri, (1990) 181 ITR 79 SC. Aggrieved by the order of the assessing authority an appeal was filed before the appellate commissioner. The appellate commissioner ruled that the assessing authority is not justified in reducing the eligible profits on which deduction under Section 80I is to be given by the loss incurred by the appellant in its leasing business. He allowed the appeal. Aggrieved by the same, an appeal was filed by the revenue before the tribunal. Both the assessee as well as the revenue filed two appeal before the tribunal. The tribunal rejected the appeal of the revenue. Revenue aggrieved by the order of the tribunal is before us in this appeal.

The following question of law is raised;

Whether the assessee is entitled to deduction under Section 80I out of the gross total income computed from the manufacturing business of the assessee or the entire and the loss incurred in the leasing business should be taken into consideration for the purpose of computation of deduction.

3. Sri Seshachala, learned Counsel would invite our attention to the material produced namely 80I and 80AB has to be given an higher status other than Section 80I of the Act. He says Section 80AB would provide in terms of the material placed in the case on hand. According to him, if Section 80AB is understood in a proper way the loss is also to be considered for the purpose of deduction in terms of the Income Tax laws. He would rely on the Constitutional Bench Judgment of the Supreme Court in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, AIR 1985 SC 1585 and also the judgment of the Supreme Court in IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income Tax, Mumbai, (2004) 266 ITR 521 SC . He would also rely on Motilal Pesticides (I.) Pvt. Ltd. Vs. Commissioner of Income Tax, (2000) 243 ITR 26 SC . He would invite our attention to the judgment of this Court in ITA 86/99 dtd 12-7-2006. While concluding he would invite our attention to a judgment of the Bombay High Court reported in Synco Industries Ltd. (Formerly known as Synco Textiles Pvt. Ltd.) Vs. Assessing Officer of Income Tax and Others, (2002) 254 ITR 608 Bom in which the Bombay High Court has considered Commissioner of Income Tax (Central) , Madras Vs. Canara Workshops (P) Ltd., Kodialball, Mangalore, AIR 1986 SC 1727 for the purpose of consideration of Section 80AB of the Income Tax Act. Be would say that the Commissioner has committed a legal error in granting the relief, which is confirmed by the tribunal. He would request us to answer the question of law in favour of the revenue.

4. Per contra, learned Counsel Sri Parthasarathi appearing for the assessee would support the order of the tribunal, in addition he would invite our attention to the judgment of the Supreme Court in Commissioner of Income Tax (Central) , Madras Vs. Canara Workshops (P) Ltd., Kodialball, Mangalore, AIR 1986 SC 1727 and also Commissioner of Income Tax Vs. Siddaganga Oil Extractions Pvt. Ltd., (1993) 201 ITR 968 KAR and Commissioner of Income Tax Vs. H.M.T. Ltd., (1993) 199 ITR 235 KAR and also Sterling Foods Vs. Commissioner of Income Tax, Karnataka, (1984) 150 ITR 292 KAR. H