Law:

Section:

Section 80E of the Income-tax Act, 1961 - Deductions - Profit and gain from priority industry - Assessment year 1967-68 - Whether earlier years' losses and unabsorbed depreciation cannot be set off against profits and gains attributable to priority industries before granting rebate under section 80E - Held, yes FACTS The assessee-company, a priority industry mentioned in Schedule V to the Act, Item 8, claimed deduction of 8 per cent on the income returned under section 80E. The ITO set off the business losses of the earlier years and the unabsorbed depreciation of the earlier years and arrived at the assessable income as "nil". The ITO held that as there was no positive income available for assessment to tax, a deduction under section 80E was not contemplated. The AAC held that it was not the residuary or the total income, but the entire income from the priority industries which had gone into the computation of the total income that would be the criterion for determining the rebate admissible and, therefore, the assessee would be entitled to the rebate claimed under section 80E. The Tribunal upheld the order of the AAC. On reference : HELD The language of section 80E makes it clear that so long as the total income, as computed in accordance with the other provisions of the Act includes any profits and gains attributable to the priority industries, the assessee would be entitled to a rebate of 8 per cent, on the said profits and gains attributable to the priority industries. Neither the residuary income nor the total income has any bearing on the question. As a matter of fact, the language of section 80E will itself show that there is no scope for setting off of the earlier years' losses or losses arising out of other business activities of the assessee against the profits and gains attributable to the priority industries. In the instant case, the ITO set off against the profits and gains of the priority industries, the losses of the earlier years as well as a portion of the unabsorbed depreciation of the earlier years. The ITO was not entitled to do the same. The view of the Central Board of Direct Taxes that losses of the earlier years should be set off before…

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