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The Andhra Pradesh High Court in the case of Commissioner of Income-tax Vs. Visakha Industries Ltd. (251ITR471) held that the deduction u/s 80I/80HH is to be allowed with reference to the particular industrial undertaking and not with reference to the total income of the assessee. The department has a tendency to compute such deduction after set off of loss in one priority unit against profit from another priority unit.

In Synco Industries Ltd. v. CIT (254ITR608) the assessee running two priority undertakings incurred loss in one unit and the profit in another. The assessee claimed that the profit of each of such units are required to be determined in accordance with the provisions of the Act as if the only source of income of the assessee is the income from that unit. Making a note of sub section (6) in section 80I the Bombay High Court held that the right course is to first determine the quantum of such deduction on stand-alone basis. Thereafter if after such set off of the loss against profits from another unit there is a positive gross total income then consider the quantum arrived at in the first stage as admissible deduction. In fact in this case there is clear finding that there was no conflict in the views of the department and the assessee. The only conflict in this case was whether in case of negative GTI the deduction would still be admissible. Rightfully so the Court declined such contention.

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