Section 10A deduction to be computed before set-off of brought forward losses and unabsorbed depreciation

Under the amended Section 10A scheme, profits of the eligible undertaking are to be excluded from total income before setting off brought forward losses and unabsorbed depreciation. The earlier view on the unamended provision was distinguished, and the later jurisdictional High Court ruling was followed for this computation approach. The practical effect is that deduction under Section 10A is worked out first, without first reducing the eligible profits by prior-year losses or unabsorbed depreciation.

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Issues: Whether deduction under Section 10A of the Income-tax Act, 1961 was to be computed without first setting off brought forward losses and unabsorbed depreciation.

Analysis: The amended scheme of Section 10A was applied. The earlier view taken on unamended provisions was distinguished, and the later jurisdictional High Court ruling was followed. On that basis, the profits of the eligible undertaking were required to be excluded from the total income before adjustment of brought forward losses and unabsorbed depreciation.

Conclusion: The issue was decided in favour of the assessee, and the Assessing Officer was directed to allow deduction under Section 10A without setting off brought forward losses or unabsorbed depreciation.

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