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JUDGMENT T.U. Mehta, J. -This reference raises some interesting, though somewhat complicated, questions regarding the mode in which and the fund from which deduction of 8% contemplated by section 80E(1) of the Income-tax Act, 1961 (as it stood at the relevant time), should be calculated. Short facts of the case are that the respondent-assessee is an electric supply company working at Cambay. The assessment in question relates to the assessment year 1967-68, accounting year for which is the financial year 1966-67. During the course of the assessment of the assessee's income, the question arose as regards the deduction of 8% contemplated by section 80E of the Act. Section 80E, prior to its amendment in the year 1968, stood as under: "80E. Deduction in respect of profits and gains from specified industries in the case of certain companies. -(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. (2) This section applies to- (a)an Indian company; or (b)any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, but does not apply to any Indian company referred to in clause (a ), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in section 108 and its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees." Corresponding section after the amendment is found at section 80-I. Since we are concerned with section 80E, as it stood at the relevant time, it is not necessary to refer to the new provisions of section 80-I. It is an admitted fact…

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