Section 80HH deduction must follow overall business losses, not isolate one profitable unit for computation.

The Madras High Court held that deduction under section 80HH of the Income-tax Act must be computed only after setting off losses from the assessee's other units, and the profit of one eligible unit cannot be isolated for a standalone deduction. Applying the earlier decision on the same point, the Court upheld the Revenue's position and found that the Tribunal was not justified in cancelling the Commissioner's revisionary computation under section 263. The operative principle is that overall business results, not the profit of a single unit, govern the deduction calculation.

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Issues: Whether the deduction under section 80HH had to be computed with reference to the profits of the eligible unit alone or only after setting off the losses of the assessee's other units, and whether the Commissioner's revisionary order under section 263 was ?

Analysis: The assessee had multiple units, some incurring losses and one yielding profit. The controversy was whether the profitable unit at Hosur could be treated in isolation for computing deduction under section 80HH. Following the earlier decision on the same point, the Court held that deduction under section 80HH is allowable only after setting off the losses and cannot be computed by ignoring the overall business result.

Conclusion: The question was answered in favour of the Revenue and against the assessee; the Tribunal was not justified in cancelling the Commissioner's computation.

Ratio Decidendi: Deduction under section 80HH of the Income-tax Act, 1961 must be computed only after setting off the losses of the assessee's other units, and not by isolating the profit of one unit.

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