Section 10A deduction must be computed first on eligible profits before set-off of past losses and depreciation.

Deduction under section 10A is computed at the stage of determining profits of the eligible undertaking, before any set-off of brought forward losses or unabsorbed depreciation from earlier years. The eligible current profits are first identified and the deduction allowed on that basis; only the balance, if any, is then available for adjustment against past losses or depreciation. The provision was treated as pari materia with section 10B, and this approach was applied to accept the assessee's claim on the computation issue.

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Issues: Whether deduction under section 10A was to be computed before setting off brought forward losses and unabsorbed depreciation relating to earlier years.

Analysis: The deduction under section 10A is to be allowed at the stage of computing profits of the eligible undertaking. The brought forward losses and unabsorbed depreciation cannot be adjusted first so as to reduce the deduction admissible on the current eligible profits. The provision was treated as pari materia with section 10B, and the assessee's claim was held to be governed by the principle that the eligible deduction is worked out first and only thereafter any remaining profits are subjected to adjustment of past losses or depreciation.

Conclusion: The deduction under section 10A was required to be computed on the eligible profits before adjustment of brought forward losses and unabsorbed depreciation, and the assessee's stand was accepted on this issue.

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