Separate computation of section 80-I deduction bars setting off one unit's loss against another unit's profit

For computing deduction under section 80-I of the Income-tax Act, the profit of the eligible industrial undertaking must be determined as if that undertaking were the only source of income, so the loss of one unit cannot be set off against the profit of another unit at the deduction stage. The gross total income under section 80-I(1), read with section 80B(5), is computed in accordance with the Act before Chapter VI-A deductions, but section 80-I(6) requires separate computation of the eligible unit's profits for quantifying the deduction. The Delhi HC noted that Synco Industries did not dilute the principle applied in Dewan Kraft System that losses of another eligible unit are not to be intermingled.

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Issues: Whether, for computing deduction under section 80-I of the Income-tax Act, 1961, the loss of one industrial unit could be set off against the profit of another unit before determining the quantum of deduction.

Analysis: Section 80-I(6) requires the profits of the eligible industrial undertaking to be computed as if that undertaking were the only source of income for the purpose of determining the deduction. Section 80-I(1), read with section 80B(5), operates at the stage of gross total income, which is to be computed in accordance with the Act before Chapter VI-A deductions. The decision in Synco Industries Ltd. did not dilute the principle accepted in Dewan Kraft System P. Ltd. that, for quantifying deduction under section 80-I(6), the eligible unit must be treated separately and the loss of another eligible unit is not to be intermingled.

Conclusion: The loss of one unit could not be set off against the profit of the other unit while computing deduction under section 80-I, and the issue was decided in favour of the assessee.

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