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TMI Blog1986 (7) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under section 80E of the Income-tax Act, 1961, the loss incurred by the assessee in the manufacture of alloy steels could not be set off against the profits of the manufacture of automobile ancillaries. The assessee is a public limited company engaged in the manufacture of automobile spares. The products manufactured by it are covered by the list in the Fifth Schedule to the Income-tax Act. During the previous year relevant to the assessment year 1966-67, the assessee commenced another activity, the manufacture of alloy steels, which was also an industry included in the Fifth Schedule. The assessee sustained a loss in the alloy steel industry during the previous years relevant to the assessment years 1966-67 and 1967-68. It claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax. But on second appeal, the Income-tax Appellate Tribunal accepted the contention of the assessee that a deduction was permissible at 8 per cent. on the entire profits of the automobile parts industry included in the total income without deducting therefrom the losses in the alloy steel manufacture. It directed the Income-tax Officer to recompute the relief under section 80E. At the instance of the Revenue, the Appellate Tribunal referred the case for each of the two assessment years 1966-67 and 1967-68, to the Karnataka High Court for its opinion on the following question of law : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in computing the profits for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides for the grant of a rebate when computing the total income of a company carrying on the business of generating or distributing electricity or any other form of power or of constructing, manufacturing or producing any one or more of the articles or things specified in the list in the Fifth Schedule. Popularly, the list is known as the list of priority industries. A perusal of the entries in the list makes it clear that they are concerned with articles or things which are regarded as of primary importance in the industrial and economic development of the country. Some of them form part of the industrial and economic base of the country while others enter into the industrial and economic infrastructure considered necessary or desirable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit to be worked out ? First, it must be a company to which section 80E applies, that is to say, a company which satisfies the requirements of sub-section (2) of section 80E. Second, the total income as computed in accordance with the Income-tax Act, 1961, without taking into regard the provisions of section 80E, should include profits and gains attributable to the business or the industry mentioned in the section. Third, from the profits and gains attributable to such business or industry, a deduction has to be allowed of an amount equal to eight per cent. of such profits and gains and effect must be given to this deduction when computing the total income of the company. The assessee in this case carries on two industries, both of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in our opinion, to undermine the object of the section. An example will illustrate this. An industry entitled to the benefit of section 80E could have its profits wholly wiped out on adjustment against a heavy loss suffered by another industry, and, thus, be totally denied the relief which should have been its due by virtue of its profits. In our opinion, each industry must be considered on its own working only when adjudging its title to the deduction under section 80E. It cannot be allowed to suffer because it keeps company with some other industry in the hands of the assessee. To determine the benefit under section 80E on the basis of the net result of all the industries owned by the assessee would be, moreover, to shift the focus fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of electricity at Cambay. The balancing charge arose because during the relevant accounting period, the assessee had sold some of its machinery and buildings. The unabsorbed depreciation and development rebate also appear to relate to the same business. There is no indication that any of them related to a business or industry distinct from that whose profits and gains formed the subject of computation under section 80E. Our attention has been invited by the Revenue to Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120 (SC). That is a case in which the Constitution Bench of this court was called upon to consider the scope of section 80M of the Income-tax Act. We do not see how that case is in any way relevant to the case be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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