Business deductions cannot be denied merely because depreciation leaves no positive income under the Income-tax Act.

Deductions under sections 35D and 43B cannot be denied merely because business income becomes nil after set-off of depreciation. The relevant computation provisions require income to be assessed under the statutory scheme for business profits, and admissible deductions remain allowable unless the Act expressly restricts them. As no provision made positive income a precondition for these deductions, the absence of positive profit did not justify disallowance. The assessee was therefore entitled to the relief allowed by the first appellate authority.

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Issues: Whether deductions under section 35D and section 43B of the Income-tax Act could be denied merely because there was no positive income after set-off of depreciation.

Analysis: The disallowance was made solely on the ground that no positive profit remained after allowing depreciation. The relevant statutory provisions do not prescribe positive income as a condition for allowing deductions under sections 35D and 43B. Business income is to be computed in accordance with the scheme of sections 28 to 44D, and admissible deductions must be allowed subject only to the express restrictions contained in the Act. No such restriction existed for the deductions claimed on the facts of the case.

Conclusion: The deductions could not be denied merely for absence of positive income, and the assessee was entitled to the relief granted by the first appellate authority.

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