80-IA deduction from Gross Total Income comprising of income from other sources

[vdboss]

Can 80-IA deduction in respect of profits of eligible undertaking be claimed from the Gross Total Income which mainly comprises of income from other sources?

For example, the taxpayer is having 2 units eligible to claim 80-IA deduction with profits from business of Unit No. 1 of Rs. 20 and loss of Unit No. 2 of Rs. (80) thereby showing net loss from business at Rs. (60). The taxpayer has earned dividend income of Rs. 100. Can the taxpayer claim deduction u/s. 80-IA in repsect of profits of Unit No. 1 of Rs. 20 against Gross Total Income of Rs. 40 (100-60)? There are no brought forward losses.

[ashutosh majumdar]

S. 80-IA reads as follows:

Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years

Is our example correct? The dividend income is exempt from tax. So, your Gross Total Income will be a loss of Rs. 60.

Lets assume that you had some other taxable income of Rs. 100. If this was non-business income, then you would be in trouble because s. 70 requires that a profit under one head has to be set off against the loss under the same head. The result is that your income under the head "Profits & gains" will be a loss of Rs. 60. This can be set off against the other income of Rs. 100. However, the GTI would *not* include the profits derived from the eligible undertaking.