Chapter VI-A deduction must follow gross total income computation first; nil-income denial fails where total income is positive.

Deduction under Chapter VI-A, including Section 80IB, must be computed only after determining gross total income under Section 80B(5) and adjusting losses and other income components. The non obstante element in the deduction provision does not displace the statutory requirement to arrive at gross total income first. On the facts, the assessee's gross total income was not nil, so denial of the deduction on a nil-income basis was unsustainable. The Madras High Court also noted that the Tribunal overlooked the settled Supreme Court position and the appellate authority's reasoning, and restored the deduction granted to the assessee.

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Issues: Whether deduction under Section 80IB of the Income-tax Act, 1961 could be computed unit-wise without first aggregating the assessee's income and adjusting losses, and whether the Tribunal was justified in denying the deduction on the basis adopted by the Assessing Officer.

Analysis: The Court applied the principle that, while computing deductions under Chapter VI-A, the gross total income must first be determined in accordance with Section 80B(5) after adjusting losses and other relevant income components. The non obstante feature governing the computation of deduction for an eligible undertaking does not override the requirement of arriving at the gross total income under the Act. On the facts, the assessee's gross total income before deduction was not nil, and the factual basis on which denial was upheld in the cited precedent was absent. The Tribunal also failed to notice the binding position already settled by the Supreme Court and the reasoning adopted by the appellate authority.

Conclusion: The assessee was entitled to the deduction under Section 80IB on the facts of the case, and the Tribunal was not justified in reversing the relief granted by the Commissioner of Income Tax (Appeals).

Final Conclusion: The appeal succeeded and the appellate relief in favour of the assessee stood restored.

Ratio Decidendi: Deduction under Chapter VI-A must be worked out after determining gross total income in accordance with the Act, and a denial based on a nil-income situation is unsustainable where the assessee's gross total income is otherwise positive.

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