JUDGMENT judgment of court was delivered by S. Ravindra Bhat J.-The question of law framed in this case is as follows: "Whether learned Income-tax Appellate Tribunal was correct in holding that loss suffered by assessee in unit entitled for exemption under section 10B of Income-tax Act, 1961, can be set off against income from any other unit not eligible for such exemption ?" brief facts of this appeal under section 260A of Income-tax Act, 1961 (hereinafter "the Act"), are as follows. M/s. Kei Industries Ltd. (hereinafter "the assessee") is public limited company, engaged in business of manufacturing cables, wires and stainless steel wires selling them to public sector companies and electricity board. It filed its return of income on September 29, 2008, declaring Rs. 1,49,18,516 as income for year under consideration. It was assessed under provisions of section 143(3) of Act. Assessing Officer ("the AO") during assessment proceedings, noticed that: (i) assessee had hundred per cent. export oriented undertaking (100 per cent. EOU) at Plot Nos. A-280 to 283, RIICO Industrial Area, Chopanki, Distt. Alwar (Rajasthan); was registered as economic oriented undertaking in Noida Special Economic Zone and eligible for deduction under section 10B of Act. This was first year of operation of this unit. (ii) However, there was loss of Rs. 2,00,29,769 from this unit which assessee had set off against income of other units. assessee was asked to explain as to why set off of this loss should not be disallowed, as income of this unit was exempt from tax. In response, assessee furnished its detailed submissions, which, however, were rejected by Assessing Officer who was of opinion that as section 10B was in Chapter III of Act under heading "Incomes which do not form part of total income", legislative intent was clear that such income was exempt. Assessing Officer also held that such being case, losses of unit, too could not be set off against income of any other unit(s). Consequently, loss of Rs. 2,00,29,769 from Chopanki unit was not allowed to be set off from income of other units. Aggrieved, assessee preferred appeal to Commissioner of Income-tax (Appeals) (hereafter "the CIT (A)"). Commissioner of Income-tax (Appeals) confirmed Assessing Officer's position and findings holding that: "4.5 Thus, it may be seen that provisions of clause (ii) of subsection (6) of section 10B provide for carry forward and set off of losses pertaining to 100 per cent. export oriented units eligible for deduction under said section. Therefore, if what learned counsel (for assessee) is arguing is to be accepted, then provisions of clause (ii) of sub-section (6) shall become redundant. It has to be appreciated that when there is specific provision for carrying forward and set off of losses sustained by unit eligible for deduction under section 10B, there is no occasion for Assessing Officer to take liberal view and allow deduction of loss sustained by such unit against income from other business not enjoying any tax benefits. There are decisions holding that losses sustained by eligible units are to be set off against income of such eligible units in subsequent years and, thereafter, only to allow deduction of balance profit. 5.6 In case of CIT v. Himatasingike Seide Ltd. [2006] 286 ITR 255 (Karn), hon'ble Karnataka High Court has held that'section 10B cannot be read in isolation of other provisions. It is only exemption provision. It may be true that even after taking into consideration unabsorbed depreciation, assessee may get exemption but none less it could not take only portion of depreciation just to suit its income for purposes of nil liability and adjust balance of unabsorbed depreciation against other business income once again to show nil liability. intention of Legislature was to provide 100 per cent. exemption only for export income and not for other income... interpretation of statute has to be meaningful and acceptable and it cannot be against intentions of legislation...' 5.8 When facts of present case analysed in light of provisions of sub-section (3) to sub-section (6) of section 10B, more particularly, clause (ii) of sub-section (6) and ratio laid down by hon'ble Karnataka High Court and Income-tax Appellate Tribunal, Chennai, losses of eligible units are to be set off against profits of such eligible units in subsequent years." Income-tax Appellate Tribunal, which assessee approached, allowed appeal. In doing so, it essentially relied on ruling of Division Bench of Bombay High Court in CIT v. Galaxy Surfactants Ltd. [2012] 343 ITR 108 (Bom). impugned order, inter alia, held that: "11. We have heard both sides in detail. We find that decision of hon'ble Bombay High Court in case of CIT v. Galaxy Surfactants Ltd. cited supra, is applicable to facts of assessee's case. In that case, facts were as follows (page 110 of 343 ITR): 'The assessee has hundred per cent. export oriented unit (EOU) which is entitled to deduction under section 10B. previous year relevant to assessment year 2005-06 was first year of production in unit. During year under consideration, assessee disclosed total profit of Rs. 16.82 crores from business. From this profit, loss of Rs. 5.56 crores sustained by hundred per cent. export oriented unit was reduced. loss in export oriented unit was principally on account of current depreciation which was set off against profits of export oriented unit. After reducing loss sustained by export oriented unit against profits of other units, assessee disclosed net taxable income of Rs. 10.76 crores. Assessing Officer held that deduction under section 10B has to be given in respect of profits of undertaking independently. Assessing Officer held that loss sustained by eligible unit could not be set off against income of other units. Commissioner (Appeals) confirmed order of Assessing Officer. In appeal, Tribunal... held that there was no justification in action of Revenue in denying set off of loss of export oriented unit against profits of other units as claimed by assessee." On these facts, hon'ble Bombay High Court has decided issue as under (page 113 of 343 ITR): "Section 70 provides for setting off of loss from one source falling under any head of income (other than capital gain) against income from any other source under same head. Section 71 provides for setting off of loss sustained with reference to one head of income against income from another head (save and except for capital gains). Under section 72, provision has been made for carry forward and setting off of loss sustained against head of profits and gains of business or profession. Under section 72, where loss which has been sustained under head of profits and gains of business or profession cannot be set off against income under any head of income under section 71 so much of loss as has not been set off or entire loss where there is no income under any other head can be carried forward in manner which is indicated in provision. Section 72 which provides for carry forward of business loss comes into operation only when provisions of sections 70 and 71, as case may be, are exhausted. There is no provision in section 10B by which prohibition has been introduced by Legislature in setting off of loss which is sustained from one source falling under head of profits and gains of business against income from any other source under same head. On other hand, there is intrinsic material in section 10B to indicate that such prohibition was not within contemplation of Legislature. Sub-section (7) of section 10B provides that provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to undertaking referred to in section as they apply for purposes of undertaking referred to in section 80-IA... similar provision corresponding to sub-section (5) of section 80-IA is to be found in sub-section (6) of section 80-I. Under sub-section (5) of section 80-IA which begins with overriding non obstante provisions, profits and gains of eligible business to which sub-section (1) applies are for purposes of determining quantum of deduction to be computed as if such eligible business were only source of income of assessee during previous year relevant to initial assessment year and to every subsequent assessment year. provision akin to sub-section (5) of section 80-IA or for that mailer akin to sub-section (6) of section 80-I has not been introduced by Legislature when it enacted section 10B. fact that unabsorbed depreciation can be carried forward to subsequent year does not militate against entitlement of assessee to set off loss which is sustained by eligible unit against income arising from other units under same head of profits and gains of business or profession. Legislature not having introduced statutory prohibition, there is no reason to deprive assessee of normal entitlement which would flow out of provisions of section 70." Revenue argues that decision of Income-tax Appellate Tribunal cannot be sustained. It was argued that Galaxy Surfactants (supra) noted previous ruling of same High Court in Hindustan Unilever Ltd. v. Deputy CIT [2010] 325 ITR 102 (Bom) and yet did not give much importance to fact that unlike other provisions, section 10B income was exempt and did not fall within description of "income" which could be assessed or enter field of taxation for relevant year. It was submitted that CIT v. Himatasingike Seide Ltd. [2006] 286 ITR 255 (Karn), Karnataka High Court decision stated law correctly and was followed by Commissioner of Income-tax (Appeals). Learned counsel for Revenue argued that in absence of provision which enabled inclusion of tax-free income (under section 10B) for purposes of computation, assessee which derives income from such undertaking cannot set off such loss in respect of income liable for taxation. Learned counsel urged that this court should follow its previous Division Bench precedent in CIT v. TEI Technologies P. Ltd.(ITA Nos. 347 of 2011 and 2067 of 2010; decided on August 27, 2012; reported in [2014] 361 ITR 36 (Delhi). Counsel for assessee argued that impugned judgment of Income-tax Appellate Tribunal is sound and should not be upset. He relied on decision of Bombay High Court in Galaxy Surfactants (supra) and submitted that previous ruling in Hindustan Unilever Ltd. (supra) also ruled that section 10B is in nature of deduction. Counsel highlighted that textually, section 80A(4) of Act affirms that provisions of section 10A and section 10B are in nature of deductions. Section 80A(4) reads as follows: "(4) Notwithstanding anything to contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under heading'C.-Deductions in respect of certain incomes', where, in case of assessee, any amount of profits and gains of undertaking or unit or enterprise or eligible business is claimed and allowed as deduction under any of those provisions for any assessment year, deduction in respect of, and to extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed profits and gains of such undertaking or unit or enterprise or eligible business, as case may be." Counsel also submitted that another judgment of Bombay High Court in CIT v. Black and Veatch Consulting P. Ltd. decided on April 9, 2012 [2012] 348 ITR 72 (Bom) affirms that in fact section 10B is in nature of deduction and not exemption. Consequently, losses of taxliable unit can be set off against profits or income of section 10B unit. It was submitted that Karnataka High Court decision in Himatasingike Seide Ltd. (supra) was rendered in context of claim for depreciation and not set off. Lastly, it was argued that it would be irrational to say that losses cannot be carried forward or set off against incomes which are not tax exempt because facility of carry forward adjustment is available for limited period. Analysis and conclusions Section 2(45) of Income-tax Act defines total income as "the total amount of income referred to in section 5, computed in manner laid down in this Act". Section 4 provides for charge of income-tax. Section 5 defines scope of total income. Section 5(1) states that subject to provisions of Act, total income of any previous year of person who is resident includes all income from whatever source derived which-(a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year. Chapter III provides for incomes which do not form part of total income and Chapter IV deals with computation of total income. Sections 10A and 10B of Act were inserted in 1981 and 1988 respectively; they continued with some amendments till March 31, 2001. Section 10A, as enacted by Finance Act, 1981, read as under: "10A. Special provision in respect of newly established industrial undertakings in free trade zones.-(1) Subject to provisions of this section, any profits and gains derived by assessee from industrial undertaking to which this section applies shall not be included in total income of assessee." Likewise, section 10B, inserted by Finance Act, 1988, read as under: "10B. Special provision in respect of newly established hundred per cent. export oriented undertakings.-(1) Subject to provisions of this section, any profits and gains derived by assessee from hundred per cent. export oriented undertaking (hereafter in this section referred to as undertaking) to which this section applies shall not be included in total income of assessee." Finance Act, 2000, substituted sections 10A and 10B. Substituted section 10A reads as follows: "10A. (1) Subject to provisions of this section, deduction of such profits and gains as are derived by undertaking from export of articles or things or computer software for period of ten consecutive assessment years beginning with assessment year relevant to previous year in which undertaking begins to manufacture or produce such articles or things or computer software, as case may be, shall be allowed from total income of assessee...." Substituted section 10B (by Finance Act, 2000) reads as under: "10B. (1) Subject to provisions of this section, deduction of such profits and gains as are derived by hundred per cent. exportoriented undertaking from export of articles or things or computer software for period of ten consecutive assessment years beginning with assessment year relevant to previous year in which undertaking begins to manufacture or produce articles or things or computer software, as case may be, shall be allowed from total income of assessee..." What assessee argued successfully in this case was that income from section 10B unit is in nature of deduction, rather than exemption. If this section 10B unit is in nature of deduction, rather than exemption. If this contention is accepted, certain inevitable consequences would follow. Under scheme of Act, income computed under various heads-in accordance with provisions of Chapter IV of Act has to be aggregated in terms of Chapter VI of Act. Consequently, first step would be that income/loss from various sources, i.e., eligible and ineligible units, under same head are to be aggregated in terms of section 70 of Act. In second step, income from one head is aggregated with income or loss of other head under section 71 of Act. In third step, after giving effect to sections 70 and 71 of Act, if there is any income (where there is no brought forward loss to be set off in terms of section 72 of Act) and same is eligible for deduction in terms of Act, same shall be allowed in computing total income of assessee. In last step, if after aggregation of income in accordance with provisions of sections 70 and 71 of Act, there is loss (in respect of assessment year 2001-02 and any subsequent year) from eligible unit, it shall be eligible for carry forward and set off under section 72 of Act. Likewise, any loss from ineligible unit can be carried forward and may be set off against profits of eligible unit or ineligible unit, as case may be, in accordance with provisions of section 72. In TEI Technologies (supra), this court noticed legislative history of various provisions, including those relating to exemptions and, inter alia, Chapter III. court then took note of retrospective amendment in 2003 (page 47 of 361 ITR): "The Finance Act, 2003, made significant changes both with prospective and retrospective effect from assessment year 2001-02. significant retrospective amendment was one which was made in sub-section (6) of section 10A. This sub-section contained provisions for ensuring that assessee who enjoys tax holiday under section 10A does not enjoy any other tax concession. This aspect was earlier taken care of by sub-section (4), but when entire section was substituted and recast by Finance Act, 2000, with effect from April 1, 2001, sub-section (4) became sub-section (6) but essence and substance of provisions of these sub-sections remained same. effect was that from April 1, 2001 (assessment year 2001-02) once tax holiday ended, bar or prohibition on enjoying other tax benefits such as carry forward and set off of loss and unabsorbed depreciation, etc., came into force. rationale behind both sub-section (4) and sub-section (6) is not far to seek. Legislature obviously wanted to ensure that if profits from eligible undertaking are allowed to enjoy benefits of section 10A, they should not enjoy any further reliefs or benefits which are available under provisions of Act. We have already referred to this aspect when we referred to paragraph 6.6 of Circular No. 308, dated June 29, 1981 (see [1981] 131 ITR (St.) 119) which explained sub-section (4) of section 10A when section was introduced by Finance Act, 1981. same rationale holds good for sub- section (6) also. If profits of eligible undertaking do not enter field of taxation for particular period known as tax holiday period, it stands to reason that when profits enter field of taxation after period of tax holiday, those profits should not be reduced or set off by other reliefs provided in Act such as brought forward losses, brought forward unabsorbed depreciation, etc. mandate of these sub-sections is that all such allowances and reliefs would be deemed to have been exhausted during tax holiday period itself and no part thereof would survive for consideration after tax holiday period. amendment made by Finance Act, 2003, to sub-section (6) with retrospective effect from April 1, 2001, made significant departure from legislative thinking outlined above. It provided that from assessment year 2001-02, right to carry forward losses will be recognised. result of this retrospective amendment is that even bar on claiming benefits of carried forward losses and allowances after period of tax holiday is over was lifted and from assessment year 2001-02, irrespective of fact that profits from eligible unit do not enter field of taxation, assessee would be still entitled to claim those allowances and reliefs against profits of eligible undertaking. This has resulted in position that double benefit has been conferred on eligible profits from assessment year 2001-02, which section initially did not want to confer." TEI Technologies (supra) also noted that section 10A, even after substantial amendment by Finance Act, 2000, was retained in Chapter III of substantial amendment by Finance Act, 2000, was retained in Chapter III of Act despite change in language of sub-section (1). court ruled that "it was open to Legislature to transpose section from Chapter III to Chapter VI-A of Act which is titled "Deductions to be made in computing total income". In this context, court approved line of reasoning of Karnataka High Court in CIT v. Yokogawa India Ltd. [2012] 341 ITR 385 (Karn) which held as follows (page 396): "Parliament was aware of various restricting and limiting provisions like section 80A and section 80AB which was in Chapter VI-A which do not appear in Chapter III. fact that even after its recast, relief has been retained in Chapter III indicates that intention of Parliament it is to be regarded as exemption and not deduction. Act of Parliament in consciously retaining this section in Chapter III indicates its intention that nature of relief continues to be exemption. Chapter VII deals with incomes forming part of total income on which no income-tax is payable. These are incomes which are exempted from charge, but are included in total income of assessee. Parliament, despite being conversant with implications of this Chapter, has consciously chosen to retain section 10A in Chapter III." court then took note of various provisions which dealt with computation of total income, viz., section 2(45); section 14 and section 80B(5) ("gross total income") and held that (page 52 of 361 ITR): "The position that emerges from harmonious reading of these provisions is that assessee is required to pay income-tax on his total income of previous year. determination of total income is last point before tax is charged and once total income is determined or quantified, there is absolutely no scope for making any further deduction, having regard to provisions referred to above. If this is true legal position, as we think it to be, then it is not possible to understand sub-section (1) of section 10A as providing for a'deduction'. of profits of eligible unit'from total income of assessee'. definition of expression'total income' given in section 2(45) cannot be imported into interpretation of sub-section (1) having regard to context in which it is used and scheme of Act relating to charge of tax. It has to be kept in mind that definition section would not apply if context requires otherwise; in other words, if scheme of Act relating to charge of income-tax clearly makes it impossible for any deduction to be allowed once total income is determined, then it would be futile to still insist on applying definition of expression'total income' under section 2(45) to interpretation of sub-section. In other words context in which expression 'total income' is used in sub-section requires us to abandon definition of that expression as per section 2(45)." TEI Technologies (supra) also noticed that though there was divergence of opinion between Karnataka and Bombay High Courts as to whether section 10A or section 10B were in nature of exempt income or deductions, there was agreement in both opinions as to manner of computation and that (page 58 of 361 ITR): "... such profits have to be eliminated at first stage itself, that is, as soon as they are computed, suggesting that it is exemption provision. It was held that eligible profits are not to be subjected to adjustment under section 72 of Act, and brought forward loss from unit eligible for relief under section 10B cannot be adjusted against profits from other three eligible units, which in effect reiterates position that loss does not enter field of taxation just as profits also do not enter field. This, with respect, lends support more to view that section 10A and section 10B are in nature of exemption provisions, rather than provisions for deduction." At this stage, it would also be necessary to recollect Supreme Court's judgment in CIT v. Williamson Financial Services [2008] 297 ITR 17 (SC), which was taken note of in TEI Technologies (supra). In Williamson Financial Services (supra), Supreme Court held that (page 30 of 297 ITR): "At this stage, we have to analyse Chapter III which deals with incomes which do not form part of total income. Section 10 groups in one place various incomes which are exempt from tax. incomes enumerated in section 10 are not only excluded from taxable income of assessee but also from his total income. exemption embodied in section 10 can be divided into two categories, namely, exemption to which certain classes of income from their very nature are entitled and second category concerns exemption which character of assessee entitles him to claim. In first category is agricultural income whereas in second category of exempted income is income of local authorities and diplomatic officers. We are concerned with first category. In addition to above two categories there is third kind of income. These incomes are wholly or partly tax-free incomes on account of special deductions under Chapter VI-A. We are essentially concerned with these tax- free incomes... As stated above, there is vital difference between income not chargeable to tax and not includible in total income (for example, agricultural income) and income which forms part of total income but which is made tax-free. Deductions under Chapter VI-A fall in category of tax-free incomes. In fact, history shows that some of incomes in Chapter VI-A have been transferred from Chapter VII to Chapter VI-A. Chapter VII has been deleted. However, at relevant time Chapter VII referred to incomes forming part of total income on which no tax was payable. That is why we have stated that there is difference between'exempted incomes' and'tax-free incomes'. This distinction is of some importance. As stated above, section 5 provides what the'total income' shall include. Chapter III refers to'incomes which do not form part of total income'. Chapter IV deals with'computation of total income'. It classifies the'income' under different heads and deductions to be made in respect of each of different heads of income. In Income-tax Act, expression 'income includible in total income' has definite connotation. Similarly, expression'deduction and allowances' have particular connotation. Therefore, on one hand we have'agricultural income' which is neither chargeable nor includible in total income and on other hand we have'incomes' under Chapter VI-A which are part of total income but which are tax-free." This court in TEI Technologies (supra) also ruled out that by virtue of section 80A(4) position is any different. It was held that even if section 10A/section 10B are treated as exemption provisions, section 80A(4) cannot defeat that interpretation. object of section 80A(4) was explained as ensuring that "double benefit does not result to assessee in respect of same income, once under section 10A or section 10B or under any of provisions of Chapter VIA and again under any other provision of Act". It was held that even if section 10A or section 10B is construed as exemption provisions, "it is still possible to invoke sub-section and ensure that assessee does not obtain deduction in respect of exempted income under any other provision of Act. only object of sub-section is to ensure that there is no double benefit arising to assessee in respect of same income". In this case, this court is of opinion that TEI Technologies (supra) applies. tax-exempt income of assessee, eligible under section 10B could not have been set off against losses from tax-liable income. Accordingly, question of law framed is answered in favour of Revenue and against assessee. appeal is, therefore, allowed. *** Commissioner of Income-tax v. Kei Industries Ltd