Chapter VI-A deductions cannot repeat earlier allowances already absorbed in total income computation for industrial undertaking profits.

Prior losses, depreciation and development rebate of a newly established cold storage undertaking, having already been adjusted in earlier assessments, could not be set off again when computing deduction under section 80J. The deduction had to be worked out on the undertaking's profit as reflected in the gross total income of the relevant year, without a second adjustment of amounts already allowed under the Act. Development rebate already deducted in computing total income could not be reduced again from the undertaking's profit for Chapter VI-A purposes. The assessee's claim to the section 80J deduction was therefore upheld.

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Issues: (i) Whether the assessee was entitled to deduction under section 80J of the Income-tax Act, 1961 on the profits of the newly established cold storage undertaking without again setting off the losses, depreciation and development rebate of earlier years already adjusted in the respective assessments; (ii) Whether the development rebate of Rs. 41,174, already deducted while computing gross total income, could again be reduced from the profit of Rs. 47,027 for the purpose of deduction under section 80J(1).

Issue (i): Whether the assessee was entitled to deduction under section 80J of the Income-tax Act, 1961 on the profits of the newly established cold storage undertaking without again setting off the losses, depreciation and development rebate of earlier years already adjusted in the respective assessments.

Analysis: The prior losses, depreciation and development rebate of the cold storage undertaking had already been taken into account in computing the total income of the earlier years. The scheme of section 80J did not permit a second adjustment of those amounts against the profits of the undertaking for the later year. The deduction had therefore to be worked out on the profit of the undertaking as reflected in the gross total income of the relevant year, subject to the statutory framework governing section 80J.

Conclusion: The question was answered in the affirmative, in favour of the assessee and against the revenue.

Issue (ii): Whether the development rebate of Rs. 41,174, already deducted while computing gross total income, could again be reduced from the profit of Rs. 47,027 for the purpose of deduction under section 80J(1).

Analysis: Gross total income is the total income computed in accordance with the Act before making deductions under Chapter VI-A. Since the development rebate had already been allowed in computing the total income, it could not be deducted again from the profit derived from the industrial undertaking while working out the section 80J deduction. The profit of the undertaking for that purpose remained Rs. 47,027.

Conclusion: The question was answered in the affirmative, in favour of the assessee and against the revenue.

Final Conclusion: The reference was decided for the assessee on both questions, and the assessee's claim to section 80J deduction was upheld without a ive second adjustment of the development rebate already allowed in the computation of total income.

Ratio Decidendi: Where a statutory allowance has already been adjusted in computing total income, it cannot be again reduced while determining deduction on the profits of the same undertaking under section 80J; gross total income for Chapter VI-A purposes is computed after the Act's normal allowances, but before Chapter VI-A deductions.

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