The main legal point established in the judgment is the overriding effect of the non-obstante clause in Section 80ab on conflicting provisions, and the reliance on previous case law to interpret the mode of computation for incentives under Section 80-O.

( 1 ) THIS judgement 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 Act ).

( 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 Act: -

"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 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 the ITO 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 Corporation s case (supra ). Learned counsel for the assessee, on the other hand, contended that the Marketing Research Corporation s 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 ). The said case related to Section 80-M of the Act and 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 Reasearch Corporation s case was disposed of with reference to Distributors (Baroda) s case, dealing with Section 80m the ratio had full application to a case under Section 80-O. He also submitted that Section 80ab 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 80ab has no application to the facts of the case.

( 4 ) IN order to appreciate rival submissions, it would be proper to quote Section 80ab and 80-O. They, at the relevant point of time, read as follows :- "80ab. Deduction to be made with reference to the income included in the gross total income Where any deduction is required to be made or allowed under any section (except Section 80m) 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 the section, the amount of income of that nature as computed in accordance with 248 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, se