SC on TI above Rs 1 Crore--After or Before Section 10A/B deduction?

Hi Mr Krishnan,

As far as Chapter VI-A deductions are concerned, there's no doubt those are to be excluded to arrive at the figure of Total Income. Section 80A, the opening section of Chapter VI-A says deductions mentioned in Section 80C to 80U are to be made IN computing the total income of the assessee. So clearly, Total Income is arrived at after reducing those deductions from the gross total income. And if that Total Income falls below Rs 1 crore, the company wouldn't be liable to pay surcharge. But I have my misgivings about Section 10A/B deductions. The language used in Section 10A/B is:[Subject to the provisions of this section, a deduction of such profits and gains […….] shall be allowed FROM the total income of the assessee]The use of the preposition FROM in Section 10A/B leaves little room for doubt that these deductions are to be allowed only AFTER the total income has been determined. In other words, what constitutes Total Income for determining threshold of Rs one crore for surcharge purposes would be the figure before we allow Section 10A/B deductions. Until A Y 2001-02, Section 10A/B said that the profit derived by an assessee from an eligible undertaking was not to be included in the total income. But effective from 1st April 2001, they began using the word "deduction". But instead of saying "in computing the total income of the assessee", Section 10A/B speaks of allowing the deduction FROM the total income of the assessee. This means that Sections 10A/B are no longer exemption sections—-income from an industrial undertaking in FTZ/SEZ would very much form part of total income of an assessee, but a deduction would be allowed. It is also worth noting that applicability of provisions of Sections 10A/B is optional—-an assessee may choose not to avail of these deductions by requesting the AO under sub-section 8. This fact may be contrasted with Exemptions or Incomes that do not form part of total income like those listed in Section 10. Exempt incomes are exempt; the assessee doesn't have an option not to avail the exemption. You may argue that Section 10A/B still appears under Chapter III, which is titled "Incomes which do not form part of total income", and so the SEZ/FTZ incomes won't form part of TI at all. But I don't think a Chapter heading holds more water than the text of the Section itself in so far as the interpretation of a statute is concerned. When the section clearly says a deduction would be allowed FROM the total income of the assessee, that clearly means TI has already been calculated before we sit down to working out that deduction. So to me it seems surcharge would be payable if the TI before Section 10A/B deduction is over Rs one crore. Nandri,CA Sanjeev Bedi--- In ICAI_CIRC_MEERUT_ CA@yahoogroups. com, "M.K.KRISHNAN" wrote:>> Dear CA.Rajesh Suthar> The surcharge is applicable on the Tax on Total Income after > Exemption under section 10A or 10B and after deduction of Chapter > VIA.> Regards> CA.M.K.Krishnan> Vellore> Tamilnadu> > --- In ICAI_CIRC_MEERUT_ CA@yahoogroups. com, "Rajesh Suthar" > wrote:> >> > Respected Members of the Group,> > > > Kindly guide about applicability of Surcharge on income tax:> > > > Is it applicable if Net taxable income is more than 1 crore (after > deduction u/c VIA and section 10A/B) or Net Income is more than > 1 crore (before deduction u/c VIA and section 10A/B).> > > > Best Regards,> > > > CA Rajesh Suthar> >