Effect of decision of the Supreme Court in Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120

Reference is invited to the judgment of the Supreme Court in the case of Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243/[1979] 1 Taxman 335, where it was observed that the amount of deduction under section 80MM should be worked out with reference to gross income.  Section 80AB, inserted by the Finance (No. 2) Act, 1980, provides that the deduction under section 80MM should be worked out with reference to net income.  Section 80AB has been made effective from April 1, 1981, and not retrospectively.  It is, therefore, clarified that the judgment of the Supreme Court applies to assessments up to and inclusive of the assessment year 1980-81.

Circular : No. 341 [F. No. 167/231/74-IT(A-I)], dated 10-5-1982.

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