Section 10B and Section 70 permit intra-head set-off of export unit losses against domestic unit income without compulsory deduction claim.

Section 10B, as substituted from 1 April 2001, allows deduction for eligible export profits but does not bar intra-head set-off under Section 70. The restrictive language in Section 10B(6)(ii) applies to carry forward and set-off under Sections 72 and 74, not to aggregation of income and loss from different units under the same head. Where the assessee did not claim Section 10B deduction in the return and did not furnish Form 56G, the deduction could not be imposed compulsorily. Accordingly, losses of the export oriented unit were permissible for set-off against income of the domestic tariff area unit under Section 70.

---

---

Issues: Whether the assessee was entitled to set off losses of the export oriented unit against income of the domestic tariff area unit under Section 70 despite not claiming deduction under Section 10B and not filing the prescribed audit report.

Analysis: Section 10B, as substituted with effect from 01.04.2001, grants a deduction for eligible export profits but does not create a prohibition against set-off of losses under Section 70. The restrictive provision in Section 10B(6)(ii) concerns carry forward and set-off of specified losses under Sections 72 and 74 and does not exclude intra-head adjustment under Section 70. The assessee had not claimed Section 10B deduction in the return and had not furnished the prescribed audit report in Form 56G, so the deduction could not be imposed compulsorily. The income from the various units under the same head had therefore to be aggregated in accordance with Section 70, and the circular relied upon supported that approach.

Conclusion: The set-off of losses of the export oriented unit against the income of the domestic tariff area unit was permissible, and the assessee succeeded on the issue.

---