Per I.P. Bansal, Judicial Member. - This is an appeal filed by the revenue and is directed against the order of CIT(A) dated 5th February, 2001 for assessment year 1998-99.

2. Ground No. 1 of the appeal reads as under :—

"1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in deleting the addition made on account of unutilized MODVAT credit of Rs. 25,93,773."

3. Both the parties admitted that this ground is admitted in favour of the assessee by the decision of Hon’ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 261 ITR 275¹. Therefore, we find no merit in this ground and the same is dismissed.

4. Ground No. 2 of the appeal reads as under :—

"On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in directing the Assessing Officer to allow deduction under section 80-I of Rs. 90,95,971 as claimed by assessee ignoring the fact that the deduction claimed pertain to three units as under and there was no profit in respect of 2nd and 3rd units after adjusting the set-off of brought forward losses of the same :

The source of assessee’s earning is income from following three industrial units. All of them are eligible for deduction under section 80-IA :—

1.Acidic Acid Unit, Malad

2.Distillery Unit, Walchandnagar

3.Bio Gas Unit, Walchandnagar

5. The Assessing Officer disallowed deduction on units mentioned at Serial Nos. 2 & 3 on the basis of interpretation of section 80-IA(7). As per Assessing Officer, unless particular industrial unit in a ‘tax holiday period’ (total number of years for which particular industrial unit is eligible for deduction under section 80-IA) earns profit is not eligible for deduction. Whereas before CIT(A), it is the case of assessee that section 80-IA is non obstante provision, therefore, provisions of sections 32, 70, 71 and 72 are not to be considered while calculating the deduction under section 80-IA of the Act. Each year is an independent year. The losses of industrial units (for which deduction has been denied) have already been set off in earlier years against the income of 3rd unit, therefore, denial of deduction in respect of these two units is unwarranted under the provisions of section 80-IA(7). The provision is beneficial provision, therefore, should be liberally interpreted. For this purpose, reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT v. Strawboard Mfg. Co. Ltd. [1989] 177 ITR 431¹. It was also pleaded that when two interpreta-tions are possible, the interpretation favourable to assessee should be followed and for this purpose, reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. Reliance was also placed on the decision of Hon’ble Supreme Court in the case of CIT v. Patiala Flour Mills Co. (P.) Ltd. [1978] 115 ITR 640 to place a proposition that Assessing Officer was not justified in setting- off of brought forward losses of earlier years of eligible units against the current year’s profit and gains of eligible units, particularly when, the losses of earlier years of these eligible units were already set off against the profits and gains of other units. The CIT(A), based on these arguments, allowed the claim of the assessee with his observations contained in para 8 of impugned order. For the sake of convenience, the same is reproduced below :—

"8. I have considered the facts of the case, the issues raised by the Assessing Officer and the arguments of the appellant. It is well-settled law that deduction under Chapter VI-A was to be allowed after the total income was computed under the other provisions of the Act. Section 80AB of the Income-tax Act states that notwithstanding anyt