- (1.) In this reference under Section 256(1) of the I. T. Act, 1961, the following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the purposes of allowing a deduction under Section 80-I the words 'such profits' occurring in that section mean 'the profits and gains attributable to any priority industry' without deducting therefrom any loss arising in any other business activity under Section 70 or Section 71 of the Income-tax Act, 1961 ?"
(2.) This reference relates to the assessment for the assessment year 1971-72. The ITO dealt with the claim for deduction under Section 80-I of the I.T. Act, 1961. He observed in his order, inter alia, as follows : "Deduction : Under Section 80-I Theassessee claimed relief Under Section 80-I amounting to Rs. 1,23,301 calculated @ 8% on a profit of Rs. 15,53,761 attributable to priority industry. But the gross total income was determined at Rs. 3,78,573 as above. It appears that the gross income calculated by the assessee (sic). This indicates that the priority income was offset by loss from non-priority business and the gross total income as computed above represents net priority income. Hence, relief Under Section 80-I is allowed @ 8% on Rs. 3,78,573. Rs. 30,286 Total income : 3,48,287 Rounded off to : 3,48,290
(3.) There was subsequently an appeal and then a further appeal to the Tribunal. One of the grounds raised by the revenue in the appeal before the Tribunal against the order of the AAC allowing the assessee's contention related to the mode of computation of relief under Section 80-I of the I.T. Act, 1961. The Tribunal in its order on this aspect observed, inter alia, as follows : "The second ground relates to the mode of computation of the relief Under Section 80-I of the Income-tax Act, 1961. The assessee claimed to have made a profit of Rs. 15,53,761 in its priority industry and suffered losses in its other business activities. After setting of the losses in the other activities against the profit of Rs. 15,53,761 in the priority industry, the ITO arrived at the figure of Rs. 3,78,573, which, according to him, was the assessee's gross total income and also the net income from the priority industry. He held that deduction at 8% under Section 80-I was allowable only on that net profit of Rs. 3,78,573 but not on the figure of Rs. 15,53,761.";