1. This appeal has been filed by assessee against order dated 22- 4-1982 of Commissioner (Appeals). This appeal relates to assessment year 1977-78. relevant previous year was calendar year 1976. assessee is company deriving income from business in manufacture and sale of silk fabrics. 2. first ground in this appeal relates to computation of relief under section 80HH of Income-tax Act, 1961 ('the Act'), due to assessee. assessee manufactures silk in backward area qualifying for relief under section 80HH. place of manufacture is organised as branch having its own branch accounts. goods produced were sold by head office. head office maintains separate account. There is very small portion of purchase and sale by head office apart from sale of goods received from branch. dispute in this appeal does not relate to question as to whether assessee is entitled to relief under section 80HH. Admittedly, assessee is entitled to such relief and same was being given to assessee in earlier years. Again, there is no dispute about fact that relief under section 80HH should be confined to profits from manufacturing activities of branch and should not extend to profits from small trading activities of head office of goods not manufactured by assessee. assessee has no grievance on this account. dispute in this appeal relates to question as to whether profit of manufacturing unit is to be computed for purpose of relief under section 80HH, after deducting relief under section 35B of Act or before deducting relief under section 35B. Here again, there is no dispute that actual expense incurred by assessee for export markets development allowance has to be deducted while computing profit of manufacturing unit for purpose of relief under section 80HH. assessee admits this. case of assessee before ITO was that relief under section 80HH should be calculated on profit of manufacturing unit before deducting extra weighted deduction of one-third of actual expenses. ITO did not agree with contention of assessee. In fact, he disallowed entire claim of assessee under section 80HH. 3. assessee appealed to Commissioner (Appeals), who allowed relief under section 80HH on profit of manufacturing unit computed after deducting extra weighted relief under section 35B. assessee is in appeal before Tribunal against said decision of Commissioner (Appeals). 4. Shri K.D. Singhania, learned representative for assessee, took m e through orders of ITO as well as Commissioner (Appeals) and explained facts as recorded above. He also took me through provisions of section 80HH and pointed out that relief under that section is to be granted on 'profits and gains derived from industrial undertaking'. He urged that profits and gains of business are to be understood in normal commercial sense, especially when it has not been specifically defined in Act. According to him, profits of manufacturing unit can be calculated in commercial sense after deducting only actual expenses incurred for export markets development. notional deduction given under section 35B is not real expense. That allowance is relevant for arriving at taxable income; but it is not relevant for arriving at commercial profits of manufacturing unit. He relied on decision of Supreme Court in case of Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 for proposition that reliefs under various sub-sections of section 80 of Act have to be given on gross amount and not after deducting any expenses, real or notional, therefrom. 5. Shri S. Das Gupta, learned representative for department, on other hand, supported order of Commissioner (Appeals). He stated that 'gross total income' has been defined under section 80B of Act. Gross total income has to be arrived at after giving all allowances outside Chapter VIA of Act. Hence, relief under section 35B has to be deducted even when computing income of manufacturing unit, which is separate source of income. It is only net income so computed that had to be included in total income. Hence, he urged that claim of assessee has been rightly rejected. 6. I have considered contentions of both parties as well as facts on record. I find force in contentions raised for assessee. phrase 'profits and gains derived from industrial undertaking' has not been defined in Act. Hence, its meaning has to be understood in general commercial sense. In order to arrive at profit from undertaking, only actual expenses are deducted. Notional expenses are not deducted. This is accountancy principle followed in commercial world. Hence, profits of undertaking can mean only amount arrived at after deduction of actual expenses only and without deduction of notional expenses like relief under section 35B. This relief has been given for encouraging exports. This is really not expense that goes out of pocket of assessee. Hence, this amount cannot go to reduce commercial profit, though it may reduce taxable profit. As has been held in case of Cloth Traders (P.) Ltd., once reference to 'the profits and gains of business' is made, then it should mean gross figure and not net figure included for purpose of taxation. I am aware of amendment to law by introduction of section 80AB in Act, but said section came into force only with effect from 1-4-1981. I am now concerned with assessment year prior to date from which section 80AB came into force. introduction of section 80AB in statement also supports view that ratio of Cloth Traders (P.) Ltd.'s case will apply to section 80HH also. Hence, I hold that claim of assessee deserved acceptance and so I direct that relief under section 80HH should be allowed on profits of manufacturing unit before deducting extra weighted deduction allowed under section 35B. 7. next ground in appeal states that relief under section 80J of Act should have been allowed in accordance with decision in case of Century Enka Ltd. v. ITO [1977] 107 ITR 909 (Cal.), i.e., on gross assets of unit without deducting any liability therefrom. I have heard both parties in matter. I find that validity of recent retrospective amendment to section 80J is now under consideration of Supreme Court. Hence, I vacate orders of Commissioner (Appeals) as well as ITO on this point and restore this matter to file of ITO to be decided afresh in accordance with law as finally settled by Supreme Court after giving reasonable opportunity of being heard to assessee. 8. last ground in this appeal states that disallowance of interest under section 40A(8) of Act should have been calculated on net disallowable expenditure of interest. I find that this matter does not arise out of disallowable expenditure of interest. I find that this matter does not arise out of order of Commissioner (Appeals) and so I reject this ground as incompetent. 9. In result, appeal is partly allowed. *** BIHAR MERCANTILE UNION PVT. LTD. v. INCOME TAX OFFICER