Section 80J deduction must follow prior-year loss and depreciation set-off before Chapter VI-A relief

Section 80B(5) requires gross total income to be computed after making all relevant set-offs under the Act, and only then can Chapter VI-A deductions be granted. Applying that scheme, carried-forward business losses and unabsorbed depreciation from earlier years must first be adjusted before computing deduction under section 80J. The High Court reiterated the earlier binding view that section 80J relief cannot be claimed on income before those prior-year adjustments, and the issue was answered in favour of the Revenue.

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Issues: Whether deduction under section 80J could be allowed before setting off carried-forward business loss and unabsorbed depreciation of earlier years.

Analysis: Section 80B(5) defines gross total income as the total income computed in accordance with the Act before making any deduction under Chapter VI-A. The scheme of the Act requires that all relevant set-offs and computations be made first, and only thereafter can deductions under Chapter VI-A be granted. Earlier binding decisions had already held that unabsorbed depreciation and carried-forward business losses must be adjusted before computing the deduction under section 80J, and the same approach was reiterated here.

Conclusion: Deduction under section 80J was not allowable before setting off earlier years' carried-forward loss and unabsorbed depreciation, and the answer was in favour of the Revenue.

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