The deduction under section 80e of the Income-tax Act should be made from the profits and gains of the priority industry in computing the total income of the company, and it should not be allowed after allowing all deductions admissible in computing the business income under other sections of the Act.

( 1 ) THE learned judge set out the statement of the case which ran as follows] - The assessee is a public limited company which owns tea. Coffee and rubber plantations. The assessee further manufactures plastic bags and polythene pipes that are used for spraying, etc. The assessment year is 1966-67 for which the corresponding account year is the year ended March 31, 1966.

( 2 ) THE assessee claimed a deduction of an amount equal to 8% of the profits which were attributable in respect of an activity mentioned in The 5th Schedule to section 80e of the income-tax Act.

( 3 ) THE profits attributable to the business of tea plantation amounted to Rs. 1,18,214. On this amount the assessee claimed a deduction equal to 8%. The relief claimed by the assessee worked out to Rs. 9,457. As against this the Income-tax Officer, however, allowed only a sum of Rs. 5,608. The relief as claimed by the assessee and the relief admissible as per Income-tax Officer is as unde :

Item Appellant's Working Rs . Tea income liable to charge 1,18,214 Les : Relief under section 80e @ 8% ?? 9,457 1,08,757 Les : Loss in plastic business ? 48,105 ? 60,652

The Income-tax officer's working is as under : Item Income-tax Officer's Working Rs . Tea income liable to charge 1,18,214 Les : Loss in plastic business ? 48,105 Balance Les : Relief under section 80e @ 8% ?? 5,608 ? 64,501 ? 70,109

In so arriving at the amount of relief the Income-tax Officer has deducted from the tea business profit of Rs. 1,18,214, the amount of Rs. 48,105 which was the loss incurred by the assessee in its plastic manufacturing business.

( 4 ) THE assessee felt aggrieved by the order of the Income-tax officer and took up the matter in appeal before the Appellate Assistant Commissioner. It was, inter alia, contended that under section 80e the assessee was entitled to a deduction at the rate of 8% from the profits and gains of an activity specified in the list in the 5th schedule. The said deduction is not on the total income as determined, but is restricted to the profit which is attributable to the activity as specified in the 5th Schedule. Reliance in this context was placed on the decision of the Madras High Court in the case of Sivan Pillai's case their Lordships were concerned with the dividend that was declared by a company which was entitled for a relief under section 15c on the shareholder's assessment. He thus considered that the ration of the ratio of the decision was not applicable to the facts of the present case, in his view the nearest case in point was that of the National Electrical Industries Ltd. , decided by the Bombay High Court which appear at page 134 and which are as unde :

"apparently, by enacting section 15c the legislature has not prescribed for exclusion of a percentage from the head of profits of a new industrial undertaking in the computation of total income but has merely provided a partial exemption from payment of tax by newly established undertakings and, in the natural sequence of computation of tax, the amount of losses carried forward is liable to be deducted out of the income of the year of account and it is only after the question of tax is ascertained, exemption from payment to the prescribed extend will be given by the taxing authorities. "

( 5 ) THE Appellate Assistant Commissioner considered that section 80e (1) specifically provided that before allowance was made under this section the total income should be computed as in accordance with the other provisions of the Act. The total income, according to him, is computed by aggregating the profits and losses of different businesses carried on by an assessee. Section 80e (1), in his opinion, provides, as it does. That every allowance has to be made first and thereafter the allowances under section 80e (1) are taken into consideration. In that view of the matter, he confirmed the order of the Income-tax Officer.

( 6 ) THE assessee came up in further