Section 10A income must be excluded before set-off; losses of eligible units cannot be adjusted against other unit profits.

The Delhi High Court followed its earlier Division Bench rulings and noted that income of a Section 10A-eligible unit must be excluded before inter-head and intra-head set-off provisions are applied. On that construction of the statutory scheme, losses of the eligible unit could not be set off against profits of other units while computing total income. The CBDT circular relied on by the assessee did not override the binding prior decisions or alter the statutory treatment of Section 10A income, so the set-off was treated as impermissible and the issue favoured the Revenue.

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Issues: (i) Whether the loss of a unit eligible for deduction under Section 10A could be set off against the profits of other units while computing total income.

Analysis: The Court followed its earlier Division Bench rulings and held that the income of an eligible Section 10A unit is to be excluded before the inter-head and intra-head set-off provisions are applied. The CBDT circular relied upon by the assessee did not displace the binding effect of the prior decisions, which had already considered the statutory scheme and the conflict of views among High Courts.

Conclusion: The set-off was held to be impermissible and the issue was decided in favour of the Revenue.

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