Law:

Section:

Section 80E [as it stood prior to 1-4-1968 (now section 80-1)] of the Income-tax Act, 1961 - Deductions - Priority industries - Whether deduction under section 80E is to be allowed from profits and gains earned by an industry without reducing such profits by setting off loss suffered by other industry owned by assessee - Held, yes Facts The assessee-company was engaged in the manufacture of automobile spares. The products manufactured by it were covered by the list in the Fifth Schedule to the Act. During the previous year relevant to the assessment year 1966-67, the assessee commenced another activity, the manufacture of alloy steels, which was an industry included in the Fifth Schedule. During the relevant assessment years while the assessee. had profits from industry of automobile ancillaries, it had loss from alloy steel industry. The ITO held that the assessee would be entitled to deduction under section 80E on the profits from the manufacture of automobile parts only after setting off the loss in alloy steel manufacture. The Tribunal however, accepted the contention of the assessee that a deduction was permissible on the entire profits of the automobile parts industry included in the total income without deducting therefrom the losses in the alloy steel manufacture. The High Court confirmed the Tribunal's order. On appeal: Held It is obvious from the object underlying, the enactment of section 80E and the terms in which it provides relief that the intention of the Parliament in enacting the provision was to encourage the setting up of industries concerned with the generation or distribution of electrical and other energy and the construction, manufacture or production of articles or things specified in the list in the Fifth Schedule. The intention went further. By making a provision for a rebate year after year on the industry making profits and gains during the year, the intention also was to provide an incentive for promoting efficiency in the industry. The object in enacting section 80E is properly served only by confining the application of the provisions of that section to the profits and gains of a single industry. It was never intended that the…

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