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General Provisions for Deduction from Gross Total Income

Written by: CHETNAA GOYAL Posted on: 21 January, 2023
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General Provisions for Deductions From Gross Total Income

Chapter VI-A contains deductions from gross total income. The important point to be noted here is that if there is no gross total income, then no deductions will be permissible. This Chapter contains deductions in respect of certain payments, deductions in respect of certain incomes, deductions in respect of other income, and other deductions. 

Section 80A

  1. Section 80A(1): This section provides that in computing the total income of an assessee, there shall be allowed from his gross total income, the deductions specified in sections 80C to 80U.

  2. Section 80A(2): According to this section, the aggregate amount of the deductions under this chapter shall not, in any case, exceed the gross total income of the assessee. Thus an assessee cannot have a loss as a result of the deduction under Chapter VI-A and claim to carry forward the same for the purpose of set-off against his income in the subsequent year.

  3. Section 80A(3): This section provides that in the case of AOP/BOI if any deduction is admissible under section 80G/80GGA/80GGC/80-IA/80-IB/80-ID/80-IE, no deduction under the same section shall be made in computing the total income of a member of the AOP or BOI in relation to the share of such member in the income of the AOP or BOI.

  4. Section 80A(4): The profits and gains allowed as deduction under section 10AA or under any provision of Chapter VI-A under the heading "C.-Deductions in respect of certain incomes" in any assessment year, shall not be allowed as deduction under any other provision of the Act for such assessment year.

  5. Section 80A(4): According to this section, the deduction, referred to in (4) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be. 

  6. Section 80A(5): No deduction under any of the provisions referred to in (4) above, shall be allowed if the deduction has not been claimed in the return of income 

  7. Section 80A(6): The transfer price of goods and services between such undertaking or unit or enterprise or eligible business and any other business of the assessee shall be determined at the market value of such goods or services as on the date of transfer. This is notwithstanding anything to the contrary contained in section 10AA or in any provision of Chapter VI-A under the heading “C- Deductions in respect of certain incomes” 

  8. For this purpose, the expression "market value" has been defined to mean-

  1. in relation to any goods or services sold or supplied, the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions if any

  2. in relation to any goods or services acquired, the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions if any

  3. if it is a specified domestic transaction referred to in section 92BA, - in relation to any goods or services sold, supplied, or acquired means the arm’s length price as defined in section 92F(ii) of such goods or services.

Where a deduction under any provision of this Chapter under the heading C – Deductions in respect of certain incomes” is claimed and allowed in respect of the profits of the such specified business for any assessment year, no deduction under section 35AD is permissible in relation to such specified business for the same or any other assessment year.

In short, once the assessee has claimed the benefit of deduction under section 35AD for a particular year in respect of a specified business, he cannot claim benefit under Chapter VI- A under the heading “C.-Deductions in respect of certain incomes” for the same or any other year and vice versa.

Section 80AB

This section provides that for the purpose of calculation of deductions specified in Chapter VI-A under the heading “C - Deductions in respect of certain incomes”, the income computed in accordance with the provisions of the Act (before making any deduction under Chapter VI-A) shall alone be regarded as income received by the assessee and which is included in his gross total income.

Accordingly, the deductions specified in the aforesaid sections will be calculated with reference to the net income as computed in accordance with the provisions of the Act (before making a deduction under Chapter VI-A) and not with reference to the gross amount of such income. This is notwithstanding anything contained in the respective sections of Chapter VI-A.

Section 80AC

Furnishing a return of income on or before the due date is mandatory for claiming deduction under Chapter VI-A under the heading "C- Deductions in respect of certain incomes"

Table showing the deductions contained in Chapter VI-A under the heading “C. – Deductions in respect of certain income”

Deduction

Section 80IA: covers deductions in respect of profits and gains from undertakings or enterprises engaged in infrastructure development/ operation/ maintenance, generation/ transmission/ distribution of power etc.

Section 80IAB: describes the deduction in respect of profits and gains derived by an undertaking or enterprise engaged in the development of SEZ.

Section 80IAC: tells about the deduction in respect of profits and gains derived by an eligible start-up from an eligible business.

Section 80IB: covers the deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.

Section 80IBA: covers the deduction in respect of profits and gains from housing projects/rental housing projects.

Section 80IE: describes the deduction in respect of profits and gains from the manufacture or production of eligible article or thing, substantial expansion to manufacture or produce any eligible article or thing or carrying on of eligible business in North-Eastern States

Section 80JJA: covers deduction in respect of profits and gains from the business of collecting and processing bio-degradable waste.

Section 80JJAA: covers the deduction in respect of the employment of new employees.

Section 80LA: describes the deduction in respect of certain income of Offshore Banking Units and International Financial Services Centre.

Section 80M: details the deduction in respect of certain inter-corporate dividends.

Section 80P: covers the deduction in respect of the income of co-operative societies.

Section 80PA: describes the deduction in respect of certain income of Producer Companies.

Section 80QQB: covers the deduction in respect of royalty income, etc., of authors of certain books other than textbooks.

Section 80RRB: covers the deduction in respect of royalty on patents.

The effect of this provision is that in case of failure to file a return of income on or before the stipulated due date, the undertakings would lose the benefit of deduction under these sections.

Example 1: Examine the following statements with regard to the provisions of the Income-tax Act, 1961

  1. For grant of deduction u/s 80-IB, filing of audit report in prescribed form is a must for a corporate assessee; filing of return within the due date laid down in section 139(1) is not required.

    Ans: The statement is not correct. Section 80AC stipulates compulsory filing of return of income on or before the due date specified under section 139(1), as a pre-condition for availing the benefit of the deduction, inter alia, under section 80-IB.

  2. Filing of belated return under section 139(4) of the Income-tax Act, 1961 will debar an assessee from claiming deduction under section 80-IE

    Ans: The statement is correct. As per section 80AC, the assessee has to furnish his return of income on or before the due date specified under section 139(1), to be eligible to claim deduction under, inter alia, section 80-IE.

Section 80B(5)

“Gross total income” means the total income computed in accordance with the provisions of the Act without making any deduction under Chapter VI-A. “Computed in accordance with the provisions of the Act” implies -

  1. that deductions under the appropriate computation section have already been given effect to;
  2. that income of other persons, if includible under sections 60 to 64, has been included;
  3. the intra-head and/or inter-head losses have been adjusted; and
  4. that unabsorbed business losses, unabsorbed depreciation, etc., have been set off. Let us first consider the deductions allowable in respect of certain payments.
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CHETNAA GOYAL

FCA, B.COM, More than 10 years of Experience in Direct Tax

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