Deduction under Section 80m is allowable even if the net result after setting off of losses under Sections 71 and 72 is a negative figure.

AJIT K. SENGUPTA, J.

( 1 ) AT the instance of the Commissioner of Income-tax, the following questions of law have been referred to this court under Section 256 (1) of the I. T. Act, 19. 61, for the assessment years 1969-70, 1970-71 and 1971-72. " (1) Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 80b (5), Section 80a (2) and other relevant provisions of the Income-tax Act, 1961, the Tribunal was correct in holding that setting off of the current year's losses and carried forward losses of the earlier years against the current year's income under Sections 71 and 72 of the said Act was not part of the computation of total income and deductions under Sections 80l and 80m should be allowed even if the net result after such setting off was a negative figure ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in annulling the orders of the Income-tax Officer under Section 154 of the Income-tax Act, 1961, in the view that there was no mistake apparent from the record in the earlier orders granting relief under Sections 80l and 80m of the said Act ?"

( 2 ) THE facts which are admitted and/or found by the Tribunal and incorporated in the statement of the case are stated hereunder : the assessee is a shipping company. Besides income from shipping business, it derives income by way of dividends and also interest on securities. In the original orders of assessment for the three assessment years under reference, the ITO did not allow the relief claimed by the assessee under Section 80l and Section 80m of the I. T. Act, 1961. Later, the ITO passed orders suo motu granting relief under Sections 80l and 80m of the Act. Later, by another set of orders, he purported to rectify under Section 154 of the Act, the earlier orders allowing relief under Section 80l and Section 80m. By those subsequent orders, the ITO had withdrawn the relief granted earlier under the aforesaid sections in the view that the granting of relief thereunder was a mistake apparent from the record.

( 3 ) AGGRIEVED by the action of the ITO in withdrawing the reliefs granted under Sections 80l and 80m, the assessee company preferred appeals before the AAC, who disposed of the appeals for all the three years under consideration by a consolidated order. He agreed with the view of the ITO that setting off the business loss of the current year and also the carried forward business losses of the earlier years against the current year's income from other sources formed part of the process of the computation of total income and the total income was what remained after such setting off. He also agreed with the view that in view of Section 80a (2) of the Act, no deduction under Sections 80l and 80m of the Act was allowable where the total income was a negative figure. Not having obtained relief from the AAC, the assessee company preferred appeals before the Tribunal for the three years under reference and the Tribunal disposed of all those appeals by a consolidated order.

( 4 ) THE Tribunal after considering the rival contentions and two decisions--one of the Kerala High Court in the case of Indian Transformers Ltd. v. CIT [1972] 86 ITR 192 and the other of the Mysore High Court in the case of CIT v. Balanoor Tea and Rubber Co. Ltd. [1974] 93 ITR 115--followed the order dated April 23, 1984, in the case of M/s. Aditya Investments Pvt. Ltd. , where the Tribunal held as follows :"the aforesaid two rulings, one of the Kerala High Court and the other of the Mysore High Court, are authorities for the proposition that the deduction contemplated by one or the other of the sections in Chapter VI-A goes into the computation of the total income, that the set-off under Section 71 or under Section 72 is not part of the process of computation of total income and that such a set-off is something to be made after the computation of the total income. We, therefore, uphold the contention of the assessee co

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