JUDGMENT judgment of court was delivered by L. Narasimha Reddy J.-This appeal is filed by Revenue feeling aggrieved by order dated August 21, 2001, passed by Hyderabad B Bench of Income-tax Appellate Tribunal in I. T. A. No. 349/Hyd/97 for assessment year 1993-94. following substantial question of law has been framed. "Whether, on facts and in circumstances of case, Tribunal is correct in holding that deduction under section 80HHC of Income-tax Act, 1961, be allowed on gross total income and not on net total income?" respondent is industry and is assessed to income-tax. It undertakes export of manufactured goods. In returns submitted for assessment year 1993-94, it claimed deduction under section 80HHC of Income-tax Act, 1961 (for brevity Act). controversy was about stage of deduction. According to respondent, deduction of amount covered under section 80HHC of Act can be done at threshold, i.e., before deduction of unabsorbed losses or carried forward depreciation are effected. assessing authority did not agree for same and by placing reliance upon section 80HH of Act directed deduction under section 80HHC at later stage. Aggrieved by that, respondent filed appeal before Commissioner of Income-tax (Appeals) III, Hyderabad. said appeal was dismissed through order dated December 27, 1996. Thereupon, respondent filed appeal in I. T. A. No. 349/Hyd/97 and Income-tax Appellate Tribunal, Hyderabad "B" Bench allowed said appeal by order dated August 21, 2001. Sri J. V. Prasad, learned counsel for appellant, submits that Chapter VI-A of Act that provides for certain deductions, is almost self-contained code on subject and from section 80AB of Act, it is clear that deductions referable to heading "C" under Chapter are to be effected from corresponding gross total income and not otherwise. He submits that Tribunal did not take into account subtle distinction in this regard and allowed appeal simply by referring to judgment of Supreme Court in CIT v. Shirke Construction Equipment Ltd. [2007] 291 ITR 380 (SC). He further submits that judgment of Supreme Court in CIT v. Williamson Financial Services [2008] 297 ITR 17 (SC) has no application to facts of case. Sri A. V. Krishna Koundinya, learned counsel for respondent-assessee, on other hand, submits that Tribunal has taken correct view of matter, duly taking into account scheme under Chapter VI-A of Act. He submits that deduction provided for under section 80HHC is of separate category and it is to be effected from corresponding "total income" in contra distinction to "gross total income". One of important steps in processing returns of assessee, where it is industry, is identification of deductions that are allowed under Chapter VI-A of Act. It can safely be observed that Chapter VI-A of Act is one of most oft amended part of Act. Parliament has to take into account deductions of different categories to be allowed for various classes of assessees. Even while permitting deductions, extreme care is to be taken to ensure that assessees do not walk away with uncovered amounts, by claiming them to be permissible deductions. Obviously, for that reason, length of some sections exceeds whole text of certain enactments. While identification of amount deductible is important step, equally important, is identification of stage at which deduction is to be made. Deductions, by their very nature, are to be made from income. However, under Act, connotation of word "income" is not uniform. It is ascribed different meanings, depending on purpose. For example, definition of word "income", under section 2(24) of Act, is inclusive in nature. It takes in its fold, several components, like profits and gains, dividends, voluntary contributions, perquisites, special allowances, and like; mentioned in clauses (i) to (xvi). Under section 5 of Act, scope of expression "total income" is explained. said section reads as under: "5. Scope of total income.-(1) Subject to provisions of this Act, total income of any previous year of person who is resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that, in case of person not ordinarily resident in India within meaning of sub-section (6) of section 6, income which accrues or arises to him outside India shall not be so included unless it is derived from business controlled in or profession set up in India. (2) Subject to provisions of this Act, total income of any previous year of person who is non-resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within meaning of this section by reason only of fact that it is taken into account in balancesheet prepared in India. Explanation 2.-For removal of doubts, it is hereby declared that income which has been included in total income of person on basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on basis that it is received or deemed to be received by him in India." Coming to expression "gross total income", it is indicated in subsection (5) of section 80B of Act as under: "(5)'gross total income' means total income computed in accordance with provisions of this Act, before making any deduction under this Chapter." Section 80AB of Act mandates that any deduction, that is required to be made or allowed under any provisions included in this Chapter under heading "C.-Deductions in respect of certain incomes" in respect of any income, of nature specified in that section, which is included in gross total income of assessee, shall be, from income of that nature. provision reads: "80AB. Deductions to be made with reference to income included in gross total income.-Where any deduction is required to be made or allowed under any section included in this Chapter under heading'C. Deductions in respect of certain incomes' in respect of any income of nature specified in that section which is included in gross total income of assessee, then, notwithstanding anything contained in that section, for purpose of computing deduction under that section, amount of income of that nature as computed in accordance with provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be amount of income of that nature which is derived or received by assessee and which is included in his gross total income." deductions in favour of exporter of manufactured goods is provided under section 80HHC. It occurs under heading "C". When respondent sought deduction of amount referable to that section, at threshold itself, from corresponding income, assessing authority objected to it and insisted that it should be done only at end. In way, question as to whether deduction must be from "total income" or "gross total income" becomes relevant. From perusal of definitions of expressions "gross total income" and "total income", it becomes clear that gross total income is nothing but total income, before any deductions under Chapter VI-A are made. If Act provides for deduction of any amount from gross total income, it is axiomatic that deduction of that nature must take place at first instance and, thereafter, other deductions can be made. From point of view of assessee, stage, at which deduction is to be made, would make substantial difference. If deduction components, such as current or carried forward depreciation and whether fresh or unabsorbed losses are to be made at threshold assessee would stand to lose. If, on other hand, deduction of such amounts is made after other deductions, he would stand to benefit. In given case, he may be able to carry forward unabsorbed loss or depreciation, if deduction is made at stage where income gets down sized on account of deduction of other amounts. close scrutiny of Part C of Chapter VI-A of Act itself discloses that Parliament was clear in its mind as to stage of deductions to be made. For example, under section 80HHA deduction in respect of profits and gains from newly established small-scale industrial undertakings in certain areas is to be made while determining total income which is part of gross total income. language employed in section 80HHB of Act is somewhat different. No reference is made to total income. All profits and gains from projects outside India are to be made from gross total income. So is case with deductions under section 80HHBA. In contrast, deductions made under section 80HHC, which are in respect of profits retained from export business, deduction is required to be made from total income. This distinction is worth being taken note of. Once deductions under section 80HHC are to be made from total income, there may not be any justification to insist that it shall be first of all deductions. If that were to be so, Parliament would have employed expression "gross total income" under section 80HHC also, instead of expression "total income". Even if one goes by requirement under section 80AB of Act, emphasis is to ensure that deduction, which is referable to particular source of income, must not cut into other incomes. use of expression "total income" in section 80HHC of Act adds strength to that. When law requires that deduction of amounts are required to be made from corresponding total income, inescapable conclusion is that deduction must take place at threshold before left over total income referable to that activity merges in other head, of income of assessee. It is, thereafter, that other deductions, such as depreciation and unabsorbed losses, are to be effected. We derive support to this conclusion from judgment of Supreme Court in Shirke Construction's case (supra) and Williamson Financial Services' case (supra). Further, once deduction is to be made from total income, in contra distinction to "gross total income", assessee must be given facility, as to stage of deduction. Law provides assessee, freedom to arrange his affairs in manner, which is beneficial to him, as long as same is not prohibited by or is contrary to any provision of enactment. For aforesaid reasons, we find that this appeal is devoid of merits and is, accordingly, dismissed. There shall be no order as to costs. Miscellaneous petitions pending, if any, in this appeal shall stand closed. *** Commissioner of Income-tax v. Sri Krishna Drugs Ltd