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Judgment
Following questions of law have been referred for the opinion this Court by the income tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, ''the Tribunal''), arising out of its order dated 1993 in IT Appeal No. 49 of 1987, for the assessment year 1972-73:- 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the share income derived by the assessee from Punjab Fertilizers, Ludhiana, was to be included in the gross total income of assessee before allowing deductions u/s 80P(2)( a ) of the income tax Act, 1961?
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the CIT(A) that deduction claimed by the assessee u/s 80P(2) could be allowed by a rectification order u/s 154 of the Income Tax Act, 1961?
The assessee derived income from its business activities and also from share income from share income from Punjab Fertilizers, Ludhiana. The Assessing Officer while giving appeal effect to the order passed by the Tribunal did not take into consideration share income from Punjab Fertilizers as part of gross total income while granting deduction u/s 80P of the Act. Application for rectification filed by the assessee to correct the error was rejected. The appellate authority directed the Assessing Officer to include the share income in the gross total income. The revenue filed appeal before the Tribunal, which has been dismissed.
We have heard learned counsel for the revenue and perused the findings recorded.
Learned counsel for the revenue submitted that the appellate authority and the Tribunal erred in including share income of the assessee also in addition to business income in the gross total income for the purposes of deduction u/s 80P of the Act.
Learned counsel for the assessee submitted that there was no warrant for excluding any income out of the gross total income. The deductions as per sections 80C to 80U of the Act are to be allowed from "gross total income", which is defined u/s 80B(5) of the Act as income computed before making any deduction under this Chapter. Total income was defined in section 2(45) of the Act as income referred to u/s 5 of the Act.
Statutory provisions referred to above clearly show that share income of the assessee is not liable to be excluded for purposes of gross income and, therefore, rectification order u/s 154 of the Act erroneous and view taken by the Tribunal is in conformity with law. It however, made clear that we are not going into the question as to what is the scope of deductions u/s 80P(2)(a) as the scope of the question Bared is confined only to includibility of share income in gross total income and not about allowability or otherwise of deductions u/s (2)( a ) of the Act.
In view of the above, the questions referred are answered against the revenue and in favour of the assessee. Reference is disposed of accordingly.