1. The following question has been referred to this court by the Income-tax Appellate Tribunal, Ahmedabad, under section 256(1) of the Income-tax Act, 1961 :
"Whether in view of the facts and circumstances of the case the Tribunal was right in law in holding that the relief under
section 80HH of the Income-tax Act, 1961, should be considered after considering unabsorbed losses and depreciation ?"
2. The assessee installed Carbaryl plant in a backward area. In the assessment year 1976-77, the assessee claimed deduction of 20 per cent. on the profits derived from the said Carbaryl plant under section 80HH of the Act. The contention of the assessee before the Income-tax Officer was that for determination of the relief under section 80HH of the Act, the gross total income had to be worked out without deduction of unabsorbed losses and unabsorbed depreciation. The Income-tax Officer did not accept this contention and worked out the gross total income after deducting unabsorbed losses for the assessment year 1976-77 and unabsorbed depreciation. The assessee carried the matter in appeal before the Commissioner of Income-tax. The contention raised by the assessee found favour with the Commissioner of Income-tax. The contention raised by the assessee found favour with the Commissioner of Income-tax and, therefore, the appeal of the assessee was allowed. The Tribunal reversed the decision of the Commissioner of Income-tax it agreed with the view taken by the Income-tax Officer and, therefore, restored the order passed by the Income-tax Officer. The assessee, therefore, sought a reference to this court.
3. The contention raised by the assessee that gross total income was required to be worked out without deducting the unabsorbed losses and unabsorbed depreciation cannot be accepted in view of the decision of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 and the decision of this court in CIT v. Gautam Sarabhai [1981] 129 ITR 133. The Supreme Court has clearly held that unabsorbed losses and unabsorbed depreciation had to be deducted before arriving at the figures that would be exigible for the purpose of deduction under section 80HH.
4. Following the said judgments, we answer the question in the affirmative, that is, against the assessee and in favour of the Revenue. Reference is disposed of accordingly. No order as to costs.