Sec 80AB, 80HH : Hotel – Special Deduction – Computation – Deduction to be out of profits and gains without deducting therefrom Depreciation and Investment Allowance not out of “Income” as computed under the Act.

IT : Section 80HH deduction is available out of gross profit and gains without deducting therefrom ‘depreciation and investment allowance’

• The issue for consideration of Supreme Court is that while computing the deduction under section 80HH whether it is to be available out of ‘income’ as computed under the Act or out of ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’.

1) Conceptually “income” or “total income” is different from “profits and gains”. There are various heads of income and if the assessee is earning income under more than one heads, all these are to be clubbed together to arrive at the total income. Profits and gains from business or profession is only one of the heads of income.

2) The sub-section (1) of section 80HH allows “a deduction from such profits and gains of an amount equal to 20 per cent thereof”, in computing the total income of the assessee. Thus, so far as deduction admissible under this provision is concerned, it is from the ‘profits and gains’. Reading of section 80HH along with section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in sections 30 to 43D.

Vijay Industries Vs CIT [2019] 412 ITR 1 (SC).