JUDGMENT

PATHAK, J. :— These appeals are directed against the judgment of the Karnataka High Court disposing of two Income-tax References. The question in each Reference, which was answered by the High Court in favour of the assessee and against the Revenue, is whether in computing the profits for the purpose of deduction 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.

2. 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 profit