Section 80AB

Section 80AB — the law in short

What the courts have decided on section 80AB, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Reliance Energy Ltd Supreme CourtHelps taxpayer
  My section 80-IA deduction is larger than my business income. Can I set it against my other income too, or only against business income?
  Against gross total income, subject to the Chapter VI-A ceiling. The Supreme Court held that section 80AB deals only with computing the deduction on net income and cannot be read as curtailing the width of section 80-IA. Section 80-IA(5) is confined to determining the quantum of the deduction by treating the eligible business as the only source of income; it cannot be pressed into service to read a limitation confining the deduction under sub-section (1) to business income. Section 80A(1) allows the Chapter VI-A deductions from gross total income and section 80A(2) caps the aggregate at gross total income. The Revenue's appeals were dismissed on this issue.
• Vijay Industries v CIT Supreme CourtHelps taxpayer
  Is my section 80HH deduction 20 per cent of the undertaking's gross profits and gains, or of the income left after depreciation?
  Of gross profits and gains, for the years before section 80AB applied. A three judge bench of the Supreme Court held that section 80HH allows a deduction of 20 per cent of profits and gains, and that profits and gains is conceptually different from income; read with section 80A the deduction is of gross profits and gains, before computing income under sections 30 to 43D, so depreciation and investment allowance are not first deducted. Motilal Pesticides, which had equated the language of section 80HH with that of section 80M, was held erroneous and overruled. Section 80AB is prospective from 1 April 1981 and did not apply to assessment years 1979-80 and 1980-81.
• IPCA Laboratory Ltd v Deputy CIT Supreme CourtHelps departmentValidity unconfirmed
  I made a profit on exporting my own manufactured goods and a bigger loss on exporting trading goods. Can I claim the deduction on the profit and ignore the loss?
  No. The Supreme Court dismissed the appeal and held that where an assessee exports both self manufactured goods and trading goods, section 80HHC(3)(c) requires the profits of both to be counted, and a loss in one must be set against the profit in the other. Profit throughout section 80HHC means positive profit arrived at after taking losses into account. Section 80AB overrides the sections in Chapter VI-A, including section 80HHC, and requires income to be computed in accordance with the Act, which brings in losses as well as profits. Against a profit of Rs 3.78 crore and a loss of Rs 6.86 crore there was a net loss, so no deduction survived.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.