Section 10A deduction must be computed independently for the eligible undertaking before general set-off rules apply.

Section 10A deduction is to be computed independently for the eligible undertaking at the stage of determining that undertaking's profits, rather than only after aggregation of the assessee's total income. The profits and gains of the undertaking must be worked out separately, and the deduction allowed immediately thereafter, before the general set-off and carry forward provisions under Sections 70, 72 and 74 are applied. Export turnover and total turnover for Section 10A are confined to the undertaking itself and are not linked to the assessee's other business units. The issue was answered in favour of the assessee.

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Issues: Whether deduction under Section 10A is to be computed at the stage of computing the gross total income of the eligible undertaking or only at the stage of computation of the assessee's total income, and whether the deduction is to be confined to the eligible undertaking without reference to other business units of the assessee.

Analysis: The decision follows the settled position that Section 10A, as amended, operates as a deduction provision in respect of the eligible undertaking itself. The profits and gains of such undertaking are required to be computed independently, and the deduction is to be allowed immediately after determining those profits. The set-off and carry forward provisions under Sections 70, 72 and 74 are not applied before the Section 10A deduction. The contemporaneous circular was also relied upon to support the understanding that the export turnover and total turnover for Section 10A are those of the undertaking and have no material relationship with the assessee's other businesses.

Conclusion: Deduction under Section 10A is to be allowed at the stage of computing the eligible undertaking's income, and the issue is answered in favour of the assessee.

Ratio Decidendi: Section 10A deduction must be computed independently for the eligible undertaking before applying the general aggregation and set-off provisions for the assessee's total income.

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