Section 80B(5)

Section 80B(5) — the law in short

What the courts have decided on section 80B(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Synco Industries Ltd v Assessing Officer Supreme CourtHelps department
  My eligible unit made a profit but brought-forward losses of my other division wipe out my income. Can I still claim the Chapter VI-A deduction on the profitable unit?
  No. The Supreme Court held that gross total income must first be worked out under the Act, after intra-head and inter-head set off and after setting off brought-forward business losses and unabsorbed depreciation. Chapter VI-A deductions come out of that figure. If it is nil or a loss, section 80A(2) leaves nothing for the deduction to be given from, and none can be allowed. The non obstante clause in section 80-I(6), which treats the eligible undertaking as the only source of income, fixes the quantum of the deduction only; it does not decide eligibility.
• CIT v. Willamson Financial Services (Supreme Court) — a Chapter VI-A deduction on a tea company's composite income is allowed AFTER the Rule 8(1) sixty-forty apportionment, not against the whole composite income Supreme CourtHelps department
  Our tea company exports. Should the section 80HHC deduction be worked out on the whole composite income before Rule 8 splits it sixty-forty, or only on the forty per cent that is taxable?
  Only on the forty per cent. The Supreme Court held that the deduction under section 80HHC is required to be allowed AFTER the apportionment of income under Rule 8(1), and answered the issue in favour of the Department. The legal fiction in Rule 8(1) is confined to that rule: it assigns chargeability and computability only to the non-agricultural forty per cent, and it cannot be extended into section 80HHC(3)(a), because deductions under Chapter VI-A are made from gross total income and are not part of the computation of income under the head "Profits and gains of business".
• IPCA Laboratory Ltd v Deputy CIT Supreme CourtHelps department
  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.
• ITO v Kuldeep Jain ITATHelps departmentSuperseded by amendment
  When my three minor children's income is clubbed with mine under s.64(1A), can I claim the Chapter VI-A deduction separately for each child's income as well as for my own?
  No. The Chapter VI-A deduction is available to the assessee, and once s.64(1A) operates the only assessee is the parent, so there is no separate computation of total income for each minor. The Tribunal held that the deduction in issue (then s.80L) was admissible once, to the parent, and not again for each minor whose income was clubbed.

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.