In Brief
This case concerns the interpretation of Section 80HH of the Income Tax Act, 1961, which grants deductions for newly established industrial undertakings. The core issue is whether the 20% deduction applies to gross profits and gains or to net income after depreciation and investment allowance. The Supreme Court held that Section 80HH uses the term 'profits and gains' (distinct from 'income'), and when read with Section 80A, the deduction must be calculated from gross profits and gains, before deductions under Sections 30-43D. The Court overruled the earlier Motilal Pesticides judgment, which had incorrectly applied reasoning from Section 80M cases. The Court also clarified that Section 80AB cannot apply retrospectively to the assessment years in question, as it was prospective from 1st April, 1981. All appeals were allowed."
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