Chapter VI-A deductions require prior set-off of unabsorbed depreciation before section 80P relief is computed.

Chapter VI-A deductions are available only after gross total income is computed under the Act, so unabsorbed depreciation and unabsorbed development rebate must be set off before relief under section 80P is allowed; the contrary claim was rejected. The article also notes that the section 80J issue, involving computation of capital employed without deducting liabilities, was not finally decided because the retrospective amendment was under challenge before the Supreme Court, so the matter was remanded for fresh consideration in light of that outcome.

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Issues: (i) Whether relief under section 80P could be allowed before setting off unabsorbed depreciation and unabsorbed development rebate of earlier years. (ii) Whether the claim for relief under section 80J, based on computation of capital employed without deduction of liabilities, required reconsideration.

Issue (i): Whether relief under section 80P could be allowed before setting off unabsorbed depreciation and unabsorbed development rebate of earlier years.

Analysis: The computation of total income under the Act must first be made in accordance with the provisions outside Chapter VI-A. The definition of gross total income requires the total income to be worked out before any deduction under Chapter VI-A. Unabsorbed depreciation and development rebate, as well as carried forward losses where applicable, enter into the computation of business income and total income before any Chapter VI-A deduction is considered. The binding Gujarat authorities relied on by the Revenue were followed, and the contrary view was not accepted.

Conclusion: The claim for deduction under section 80P before adjustment of unabsorbed depreciation and development rebate was rejected, and the issue was decided against the assessee.

Issue (ii): Whether the claim for relief under section 80J, based on computation of capital employed without deduction of liabilities, required reconsideration.

Analysis: The retrospective amendment affecting section 80J was stated to be under challenge before the Supreme Court, and the matter was therefore not finally determined on merits by the Tribunal. The Tribunal directed reconsideration by the appellate authority in the light of the Supreme Court's decision in the pending writ petitions.

Conclusion: The issue was remanded for fresh decision.

Final Conclusion: The appeal failed on the section 80P question but was sent back for reconsideration on the section 80J question, resulting in a partial allowance of the appeal.

Ratio Decidendi: Deductions under Chapter VI-A are allowable only after computing gross total income in accordance with the Act, so unabsorbed depreciation and development rebate must be adjusted before allowing relief under section 80P.

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