Industrial Consulting Bureau Pvt. Ltd. vs Commissioner of Income Tax

T.D. Sugla J.

The reference is at the instance of the assessee. The assessment year involved are 1972-73, 1973-74 and 1974-75. By its order dated February 3, 1976, u/s 256(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal has referred to this court the following question of law;

"Whether, on the facts and in the circumstances of the case and on a correct interpretation of the provisions of section 80MM, the Tribunal erred in law in holding that the relief admissible to the assessee under that section is required to be restricted to the net income and not with reference to the actual amount of income by way of consulting fees received. Amounting to Rs. 3,27,350 (assessment year 1972-73), Rs. 4,99,170 (assessment year 1973-74) and Rs. 67,448 (assessment year 1974-75) ?"

It is stated by Shri Dilip Dwarkadas, learned counsel for the assessee, that the issue before the Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, involved the interpretation of section 80M and not section 80MM, He pointed out that our court, in an unreported judgment in the case of CIT v. Banque National de Paris (income tax Reference No. 597 of 1976 decided on July 19, 1990) was also dealing with the interpretation of rule 1(x) of the First Schedule to the Surtax Act, 1964. His submission is that the question herein is not covered by the decision of the Supreme Court or of our court. Placing reliance on the Madras High Court decisions in the cases of COMMISSIONER OF Income Tax Vs. MADRAS MOTOR AND GENERAL INSURANCE CO. LTD., and CIT v. K. S. Narayana [1985] 159 ITR 618 and the Calcutta High Court decision in the case of Pilani Investment Corporation Ltd. Vs. Commissioner of Income Tax, , he submitted that the Supreme Court decision in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, , must be held limited to the interpretation of section 80M.

We, however, find that all these decisions have been considered by our court in the unreported judgment in CIT v. Banque National de Paris (income tax Reference No. 597 of 1976). It cannot be disputed that the language of section 80MM is similar, if not identical, with that of rule 1 (x) of the First Schedule to the Companies (Profits) Surtax Act, 1964. Moreover, the Supreme Court itself recently in the case of CIT v. P. K. Jhaveri [1990] 181 ITR 79 has, following its earlier decision in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, , held that the interpretation given to section 80M in that case was applicable to section 80K also. Reliance placed by Shri Dilip Dwarkadas on the Board''s Circular No. 341 dated May 10, 1982, reported in [1982] 137 ITR 4 , is of no consequence as the said circular was issued on the basis of the Supreme Court''s earlier decision in the case of Cloth Traders (P) Ltd. Vs. Additional Commissioner of Income Tax , Gujarat-I, which now stands overruled by the Supreme Court''s subsequent decision in Distributors ( Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, , in that view of the matter, it has to be held that, on the basis of the interpretation of the language used in section 80MM, the relief is to be allowed on the net income and not on the gross income.

Accordingly, the question of law referred to us is answered in the negative and in favour of the Revenue.

No order as to costs.