Judgment :- SETHURAMAN J. The following question has been referred under s. 256(1) of the I.T. Act, 1961, at the instance of the Commissioner of Income-tax, Madras : "Whether, on the facts and in the circumstances of the case, it has been rightly held that the assessee would be entitled to relief under section 80-I of the Income-tax Act, 1961, on the gross income before adjustment of carried forward losses of the earlier years as well as set off of deficiencies under section 80J carried forward from the earlier years ?" * The assessment years under considerations are 1970-71 and 1971-72. The assessee-company made a claim under s. 80-I for relief of a sum of Rs. 61, 659 for 1970-71 and Rs. 13, 90, 885 for 1971-72. The ITO negatived the claim for 1970-71, as according to him the total income of the company was nil after considering the losses of the earlier years. For the assessment year 1971-72, he restricted the claim for relief under s. 80-I only in respect of a sum of Rs. 2, 81, 015 being the profits and gains of the assessee from business after setting of the losses as well as deficiencies under s. 80J brought forward from the earlier year and adjusted against the sum of Rs. 13, 90, 885. The AAC, on appeal, held that for the assessment year 1971-72 the relief should be granted before the deduction of the business losses brought forward from the earlier years but after the deduction of the unabsorbed depreciation of the prior years. For the assessment year 1971-72 also, the AAC accepted the assessee's contention that the amount of relief under s. 80-I should be computed with reference to the profits and gains of the priority industry before setting of the losses and deficiencies under s. 80J carried forward from the earlier years. The department appealed against these orders before the Tribunal and the Tribunal held that the AAC was right in directing that the relief under s. 80-I should be worked out before setting off the losses brought forward from the earlier years and also the deficiencies under s. 80J brought forward from the earlier years. It is this order of the Tribunal that has given rise to the present reference.Unfortunately, the question, as framed, appears to be erroneous as far as the assessment year 1970-71 is concerned. It is this order of the Tribunal that has given rise to the present reference.Unfortunately, the question, as framed, appears to be erroneous as far as the assessment year 1970-71 is concerned. For that year, the only relief that is liable to be considered is the relief under s. 80-I. The Supreme Court in Cambay Electric Supply industrial Co. v. CIT considered the claim for computation of the relief under s. 80E , which corresponds to s. 80-I. It was held that in computing profits of the assessee for the purpose of deduction provided under s. 80E , items of unabsorbed depreciation and unabsorbed development rebate carried forward from earlier years will have to be deducted before arriving at the figure on which the percentage contemplated by s. 80E is to be computed. Applying this judgment of the Supreme Court, the question has to be answered as follows : The assessee would be entitled to relief under s. 80-I only on the income after adjustment of carried forward losses of the earlier years. With reference to the assessment years 1971-71, apart from the adjustment of the carried forward losses, there is also the question as to the admissibility of the relief under s. 80J before arriving at the quantum for application of s. 80-I. Section 80B(5) defines gross total income as meaning the total income computed in accordance with the provisions of this Act before making any deduction under this Chapter or under s. 280-O. Section 80J falls within the Chapter and, therefore, the relief under s. 80J cannot be adjusted before arriving at the income on the basis of which s. 80-I has to be worked out. In this view, the question for the assessment year 1971-72 has to be answered as follows : The assessee would be entitled for relief under s. 80-I on the gross total income after adjustment of carried forward losses of the earlier years but before the adjustment of the deficiencies under s. 80J carried forward from the earlier years. There will be no order as to costs.