Judgment :- N. V. BALASUBRAMANIAN J. At the instance of the Revenue, the Appellate Tribunal has stated a case and referred the following common question of law for the assessment years 1979-80 and 1980-81 under section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), for our consideration "Whether, on the facts and in the circumstances of the case, the deduction under section 80HH has to be computed by taking a proportion of a gross profit from the new industrial undertaking in the backward area and should be given as a deduction from such gross income of the assessee similar to the deductions under other sections, viz., 30 to 43A, in computing the income from business under section 29 of the Income-tax Act, 1961 ?" The assessee is a company engaged in the manufacture and sale of industrial belts. The assessee, admittedly, is a newly established industrial undertaking set up in a backward area. The assessee, in the course of assessment proceedings for the assessment year 1979-80 disclosed the income from the business of manufacture and sale of industrial belts as Rs. 8, 91, 590 and claimed the deduction under section 80HH of the Act at 20 per cent. thereof amounting to Rs. 1, 01, 582. The Income-tax Officer, however, held that the business loss, unabsorbed investment allowance and the depreciation carried forward from the earlier years should first be deducted and the deduction under section 80HH of the Act should be allowable only on the net income of the business. Consequently, the net income was arrived at Rs. 14, 284 and the result of the computation was that for the assessment year 1979-80, there was a net taxable income of Rs. 18, 650 as against net loss of Rs. 72, 662, and granted deduction under section 80HH of the Act on the net income. The Income-tax Officer also disallowed the carried forward loss of Rs. 72, 670 as claimed by the assesseeThe assessee preferred an appeal to the Commissioner of Income-tax (Appeals) and the Commissioner (Appeals) held that the set-off of earlier losses has necessarily to be made in the computation of income for the purpose of determining the relief under section 80HH of the Act and, therefore, the order of the Income-tax Officer was legally correct. The assessee preferred a further appeal before the Income-tax Appellate Tribunal, and the Tribunal following its earlier order in the case of Veeraraghava Textiles in I. T. A. Nos. 67 to 70 (Mds) of 1981, dated November 30, 1981, held that the priority according to which the allowance will be allowed is as under 1. First allow current depreciation and compute profit from business 2. Set-off current losses 3. Sections 80H, 80HH, 80HHA deductions, if any, if there is profit 4. Current section 80J if there is profit/section 80-I deduction whichever lapses first 5. Carried forward section 80J from profit if any for successive years 6. Carried forward development rebate under section 33(2)(ii) for successive years 7. Current development rebate under section 33(2)(ii) 8. Carried forward development allowance under section 33A(2)(ii) for successive years 9. Current development allowance under section 33A(2)(i) 10. Carried forward investment allowance under section 32A(3)(i) for successive years 11. Current investment allowance under section 32A(3)(i) 12, Carried forward business loss under sections 72 and 73 13. Unabsorbed depreciation under section 32(2) 14. Other deductions under Chapter VIA The Appellate Tribunal further found that the object behind section 80HH of the Act is to encourage establishment of industries in backward areas and the object would be completely lost if the past losses were set off, because in a nascent industry, such a net result would be negative figure and it would lead to a situation that the assessee may not get any encouragement by way of tax deduction. The Tribunal after noticing the budget speech of the Finance Minister and also the fact that the deduction under section 80HH of the Act will be given only for a period of 10 years, held that the deduction under section 80HH of the Act should be given oil the gross profit of the newly established industrial undertaking without setting off the earlier losses provided in the Act for the computation of business income. In so far as the assessment year 1980-81 is concerned, the Appellate Tribunal directed the Income-tax Officer to recompute the relief depending upon the computation of income for the earlier assessment year 1979-80. It is this order of the Appellate Tribunal which is the subject-matter of the present tax case referenceMr. In so far as the assessment year 1980-81 is concerned, the Appellate Tribunal directed the Income-tax Officer to recompute the relief depending upon the computation of income for the earlier assessment year 1979-80. It is this order of the Appellate Tribunal which is the subject-matter of the present tax case referenceMr. C. V. Rajan, learned counsel for the Revenue, brought to our notice an earlier decision of this court in the case of CIT v. Rockweld Electrodes India Ltd. and an unreported decision of this court in T.C. Nos. 2121 to. 2124 of 1984, dated February 17, 1997---since reported in CIT v. Veeraraghava Textiles (P.) Ltd. wherein this court has held that the assessee would be entitled to deduction under section 80J of the Act only after setting off the earlier losses carried forward or unabsorbed depreciation of the earlier years. This court also held that the Tribunal was not correct in holding that the deduction under Chapter VIA has to be allowed before deducting carried forward business losses or unabsorbed depreciation of the earlier years Mr. Janarthana Raja, learned counsel for the assessee, however, submitted that other High Courts have diametrically taken an opposite view. For that, he placed reliance on the decision of the Orissa High Court in CIT v. Tarun Udyog the decision of the Karnataka High Court in CIT v. Siddaganga Oil Extractions Pvt. Ltd. the decision of the Madhya Pradesh High Court in CIT v. K. N. Oil Industries and the decision of the Rajasthan High Court in CIT v. Loonkar Tools Pvt. Ltd. On the other hand, he fairly brought to our notice the decision of the Rajasthan High Court in CIT v. Vishnu Oil and Dal Mills the decision of the Andhra Pradesh High Court in CIT v. Venkateswara Transmission Ltd. the decision of the Kerala High Court in CIT v. Kerala Solvent Extractions Ltd. and the decision of the Gujarat High Court in Paushak Ltd. v. CIT wherein the other High Courts have taken a view similar to one that was taken by this court in Rockweld Electrodes India Ltd.'s case 1995 (215) ITR 358, 1995 (128) CTR 152, 1995 (128) CTR(Mad) 152. Since this court has taken a view that under section 80B(5) of the Act, the gross total income should be computed in accordance with the provisions of the Act before granting deduction under Chapter VIA of the Act, we are of the view that the earlier decision of this court would apply to the grant of deduction under section 80HH of the Act as well. Accordingly, we hold that the Tribunal was not correct in holding that the deduction under section 80HH of the Act should be granted on the gross profit of the newly established industrial undertaking set up in a backward area without following the procedures indicated in section 80B(5) of the Act. Accordingly, we answer the common question of law referred to us in the negative and in favour of the Revenue. There will be no order as to costs.