AJIT K. SENGUPTA, J. ( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, the following question of law has been referred to this court for the assessment year 1976-77 :"whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that carry forward of deficiency is not permissible under Section 80j (3) of the Income-tax Act, 1961, when the assessee-company suffered loss in the new industrial undertaking and consequently in disallowing the assessee's claim for carry forward of the deficiency for the assessment year 1976-77 ?" ( 2 ) SHORTLY stated, the facts are that the assessee claimed relief under Section 80j for Unit No. 2 which had commenced production in the year under reference. The Income-tax Officer allowed the said deduction under Section 80j although the industrial undertaking suffered loss. ( 3 ) THE assessee preferred an appeal before the Commissioner of Income-tax (Appeals) against the several determinations made by the Income-tax Officer in the order of assessment. The Commissioner of Income-tax (Appeals) was of the view that since deduction under Section 80j (1) of the Act could not exceed the gross total income as defined in Section 80b (5) of the Act, the assessee was not entitled to deficiency being computed or being carried forward. He thought it fit to rectify the said error in law and to withdraw the benefit wrongly allowed by the Income-tax Officer. He gave an opportunity to the authorised representative of the assessee to make a submission on the matter. After hearing the submission of the authorised representative of the assessee, the Commissioner of Income-tax (Appeals) held that the Income-tax Officer erred in computing the deficiency for the assessment year 1977-78 and in allowing it to be carried forward to the subsequent assessment years. The aggrieved assessee filed an appeal to the Tribunal and the Tribunal was of the view that the carry forward of deficiency is not permissible in case of loss in the industrial undertaking. ( 4 ) THE short question which calls for determination is whether the assessee is entitled to carry forward the deficiency under Section 80j (3) when the assessee-company suffered loss in a new industrial undertaking. According to the Tribunal, section 80j (3) does not mention anywhere about the contingency of loss occurring in the industrial undertaking. ( 4 ) THE short question which calls for determination is whether the assessee is entitled to carry forward the deficiency under Section 80j (3) when the assessee-company suffered loss in a new industrial undertaking. According to the Tribunal, section 80j (3) does not mention anywhere about the contingency of loss occurring in the industrial undertaking. According to the Tribunal, three contingencies are possible, namely : (a) where profits and gains fall short of the "relevant amount of capital employed during the previous years", (b) where there are no such profits and gains, and (c) where loss occurs in the industrial undertaking. ( 5 ) THE Tribunal held that the section makes provision for two contingencies only and not for the third contingency. ( 6 ) WE are unable to accept the reasoning of the Tribunal. We have examined the provisions in the Finance (No. 2) Bill, 1967, by which section 80j was sought to be introduced by deleting section 84. Section 80j was enacted differently from the provision in the Bill. The Finance (No. 2) Bill, 1967, as well as the Notes on Clauses do not show that it was the intention of the Legislature not to allow carry forward of the deficiency when the industrial undertaking suffered loss. ( 7 ) SECTION 80j (3) contemplates that, even though the undertaking may not have earned profits and gains, yet the claim for the deduction of relevant amount at the rate of 6% of the capital employed is to be carried forward till it is adjusted against profits and gains of subsequent year (s) up to a limit of seven years. It permits the adjustment of the claim for deduction as against profits and gains of subsequent year (s) in cases of shortfall or deficiency. ( 8 ) THE contention of the Revenue that section 80j (3) does not contemplate* any contingency like loss for the purpose of carry forward of deficiency cannot be accepted. If this contention is accepted, the whole object of the section would be made nugatory. It is now well-settled that profits and gains would also include negative figure (loss ). It may be mentioned that this court in the case of Indian Aluminium Co. Ltd. v. CIT [1980] 122 ITR 660, considered the question whether the assessee could claim set off of the deficiency relating to earlier years against the profits of the current year. It is now well-settled that profits and gains would also include negative figure (loss ). It may be mentioned that this court in the case of Indian Aluminium Co. Ltd. v. CIT [1980] 122 ITR 660, considered the question whether the assessee could claim set off of the deficiency relating to earlier years against the profits of the current year. In other words, the question was whether, in a case where the assessee, admittedly, had suffered loss but did not make any claim for carry forward of deficiency and no deficiency was carried forward, in the subsequent years, such deficiency could be allowed against the profits of the year in which such claim was made. This decision would show that the contingency of a loss being suffered by an industrial undertaking is one of the normal and usual incidents of the business which cannot be ignored in construing the provisions of Section 80j (3 ). The "deficiency" referred to in Section 80) is the amount by which the profits and gains derived by an assessee from the eligible undertaking and Included In its gross total Income for any assessment year within the "tax holiday" period falls short of the amount calculated at six per cent, per annum on the capital employed in the eligible undertaking during the previous year relevant to that assessment year. Where there are no profits and gains, or where there is a loss for any such assessment year, the deficiency in relation to that assessment year is to be taken to be an amount calculated at six per cent, per annum on the capital employed in the undertaking during the relevant previous year. ( 9 ) WE may add that, in paragraph 7 of Circular No. 5-P, dated October 9, 1967, issued by the Central Board of Direct Taxes, it was clarified that deficiency is required to be computed even when the new industrial undertaking suffers a loss. ( 10 ) WE are, therefore, unable to sustain the view of the Tribunal that where an industrial undertaking suffers loss, it is not entitled to the carry forward of the deficiency under Section 80j (3 ). ( 11 ) FOR the reasons aforesaid, the question in this reference is answered in the negative and in favour of the assessee and against the Revenue. There will be no order as to costs.