Section 80J profits must be computed under ordinary tax rules; absorbed losses and allowances cannot be adjusted again.

For deduction under section 80J, the profits of an eligible industrial undertaking must be computed under the ordinary provisions of the Income-tax Act, not on a separate or notional basis. Earlier years' losses, depreciation allowance and development rebate already fully absorbed against other business income cannot be reopened or adjusted again while arriving at the undertaking's profits for section 80J purposes. The carried forward deficiency is then dealt with under the mechanism prescribed by sub-section (3) against the profits referred to in sub-section (1), so the deduction is based on the actual computed profits of the undertaking as determined under the Act.

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Issues: Whether, for the purpose of deduction under section 80J of the Income-tax Act, 1961, the profits of a new industrial undertaking were to be computed after adjusting earlier years' losses, depreciation allowance and development rebate already absorbed against the assessee's other business income, and whether the carried forward deficiency under section 80J could be set off against the current year's profits.

Analysis: The statutory scheme of section 80J requires the profits or gains of the eligible industrial undertaking to be computed in the same manner as they are computed for determining total income chargeable to tax. The provision does not create a separate or fictional mode of computation for section 80J purposes. Where losses, depreciation allowance and development rebate of earlier years have already been fully set off against profits from other businesses under the Act, they cannot be adjusted again while computing the profits of the industrial undertaking under section 80J. The carried forward deficiency is then set off in the manner provided by sub-section (3) against the profits referred to in sub-section (1).

Conclusion: The profits of the cold storage undertaking for the assessment year 1970-71 were to be taken at Rs. 1,51,011 without re-adjusting prior years' absorbed losses, depreciation allowance or development rebate, and the assessee was entitled to deduction of the relevant capital-employment amount and carried forward deficiency under section 80J.

Final Conclusion: The appeal failed, and the assessee succeeded in claiming section 80J relief on the basis of the actual computed profits of the undertaking under the Act.

Ratio Decidendi: For section 80J, the profits of an eligible industrial undertaking must be computed under the ordinary provisions of the Act, and earlier losses or allowances already fully absorbed against other income cannot be re-opened or adjusted again when granting the section 80J deduction and set-off of deficiency.

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