Section 80-I deduction must be computed on assessed income after excluding development rebate and weighted export expenditure.

Section 80-I deduction had to be computed on the profits and gains finally assessed under the Income-tax Act, after excluding development rebate and weighted export expenditure already allowed in the assessment. The reasoning treated section 80E as an analogous provision and applied the principle that amounts required to be deducted in arriving at assessable business income cannot be ignored when fixing the base for a special deduction. On that basis, the assessee could not claim the deduction on the higher figure and the issue was resolved in favour of the Revenue.

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Issues: Whether, for the purpose of deduction under section 80-I of the Income-tax Act, 1961, the assessee was entitled to compute the qualifying profits after excluding development rebate and weighted export expenditure already allowed in the assessment.

Analysis: The relevant scheme of section 80-I required the deduction to be computed with reference to the profits and gains attributable to the priority industry as finally assessed under the Act. The Court treated section 80E, as interpreted by the Supreme Court, as an analogous provision and applied the principle that items which must be deducted in arriving at assessable business income cannot be ignored when determining the base for the special deduction. The reasoning was reinforced by the view that development rebate and similar allowances have to be taken into account before calculating the quantum eligible for deduction.

Conclusion: The deduction under section 80-I had to be worked out on the assessed income after excluding development rebate and weighted export expenditure, and not on the higher figure claimed by the assessee. The question was answered in favour of the Revenue.

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