TMI Blog1986 (7) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 a loss in the sum of Rs. 15,30,688 for the assessment year 1966-67. For the assessment year 1966-67, the assessee disclosed profits from the industry of automobile ancillaries in the following detail: Rs. 1. Manufacture of springs at Mangalore 7,54,107 2. Manufacture of springs at Nagpur 9,61,808 3. Manufacture of hubs and brake drums 41,214 17,57,129 The assessee claimed relief under section 80E at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company." It is not disputed that the assessee is a company to which section 80E applies. The question is, whether, for the purpose of granting relief under section 80E, the loss suffered by the assessee in the manufacture of alloy steels can be set off against the profits arising from the manufacture of automobile ancillaries. It is apparent that section 80E provides 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which find places in the list in the Fifth Schedule and can, therefore, be described as priority industries. It is urged by the learned Additional Solicitor General, appearing for the Revenue, that on a true application of section 80E, the profit in the industry of automobile ancillaries must be reduced by the loss suffered in the manufacture of alloy steel, and reference has been made to a number of cases to which we shall presently refer. After giving the matter careful consideration, we do not find it possible to accept the contention. It seems to us that the object in enacting section 80E is properly served only by confining the application of the provisions of that section to the profits and gains of a single industry. The deduction of eight per cent. is intended to be an index of recognition, that a priority industry has been set up and is functioning effic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttributable to that industry of the balancing charge worked out under sub-section (2) of section 41 as well as items of unabsorbed depreciation and unabsorbed development rebate carried forward from earlier years. It appears from the facts of that case that the balancing charge as well as the unabsorbed depreciation and unabsorbed development rebate related to the particular industry itself. The only business carried on by the assessee there was generation and distribution 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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