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Section 80J of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established industrial undertakings, etc. - Assessment year 1979-80 - Whether deduction under section 80J could be allowed on commercial profits, i.e., profits computed before deducting depreciation and investment allowance allowable under Act - Held, yes FACTS The assessee claimed relief under section 80J based on commercial profits and not profits computed after deduction of depreciation and investment allowance as allowable under the provisions of the Act. The Tribunal relying upon its orders for the earlier years allowed this claim. On reference: HELD The assessee may have several units from which the assessee derives income and, therefore, the gross total income of the assessee would include the income from all these units. When one of the units is an industrial undertaking envisaged by section 80J, a deduction is given from the profits and gains derived from such industrial undertaking and this deduction is calculated at the rate of 6 per cent per annum. If there is no profit and gain from such a unit, the benefit of this deduction will not be available. In a given case the depreciation and investment allowances pertaining to one unit may be deducted out of the gross total income of the assessee. There is no restriction in the Act that the deduction pertaining to the depreciation and investment allowances regarding one unit, be deducted only from the income of that unit. Section 80J is a beneficial provision intended to encourage establishment of new industrial undertakings as a means of accelerating economic growth and development This beneficial provision could not be interpreted restrictively which would affect the purpose behind the enactment of the said provision. Section 80J nowhere compels the computation of the profits and gains earned from an industrial undertaking, by treating it as a separate entity for all purposes without reference to commercial expediency and practice. In these circumstances, the Tribunal was justified in upholding the claim of the assessee. CASE REVIEW CIT v. Gwalior Rayon Silk Manufacturing Co. Ltd. [1992] 196 ITR 149 (SC) and CIT v.…

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