delivered the opinion of the Court.

Elgee, Inc., a corporation organized under the laws , of Puerto Rico and engaged in the manufacture of accessories and ornaments for the hair, enjoys a tax exemption under the provisions of the Industrial Tax Exemption Act of 1948, No. 184 of May 13, 1948, 13 L.P.R.A. §§ 221-238. Among the grants of industrial tax exemption it enjoys exemption from “taxes on the income which [it] . . . may derive-from the operation of said exempted industry” (§ 4(a) (2), 13 L.P.R.A. § 225(a)(2)).1 During the taxable year which *404ended on January 10, 1958, that corporation realized a net profit of $86,487.22 in its exempted industrial operations, and also realized a taxable net income of $5,068.46 from rent received from the lease of part of the building where its business is established. On this account it paid income tax of $1,064.37.

During 1959 the taxpayer sustained a net loss amounting to $33,987.55 in the exempted industrial operations, and it therefore filed an amended return for the previous year in which it made retroactive and claimed this net loss as a deduction, on the authority of §§ 23(s) (l)2 and 122(a)3 of the Income Tax Act of 1954, 13 L.P.R.A. §§ 3023 (s) (1) and 3122(a). It therefore applied for refund of the sum paid as tax on the taxable net income determined in the previous year. The Secretary of the Treasury disallowed the refund sought. Appellant corporation resorted to the Superior Court which finally upheld the administrative decision.

The only question for decision in this appeal is whether the taxpayer may claim as a deduction from its taxable net income for 1958 the net operating loss sustained during the following year. Otherwise stated, whether for the purposes of deducting such loss the exempted profits realized during the taxable year in which the loss is claimed may be considered as part of the income. If the first proposition *405should prevail, the refund sought should be allowed since the loss of $33,957.85 would exceed the taxable net income of $5,068.46;4 if, on the contrary, we adopt the second proposition, the disallowance of the refund would be upheld, since the exempted profits of $86,487.22 would absorb entirely the loss sustained.

The grant of industrial tax exemption is limited specifically to the income derived by the taxpayer from the operation of an exempted industry.5 Although it is not expressly defined in the Act of 1948, we may adopt the definition of industrial development income contained in § 2(a) of the Industrial Incentive Act of 1954,13 L.P.R.A. § 242 (a), and which, for present purposes, would be “the net income derived from the production of manufactured product that gives rise to the exemption of an exempted business.” Of course, it is still income received by the taxpayer whose duty it is to report it to the Secretary of the Treasury. In this connection, in § 13 of the Tax Exemption Act of 1948, 13 L.P.R.A. § 234, every beneficiary of the exemption shall be under the obligation to present annually a return of the operations of the exempted industry, independently of any other return which he may be required to file in connection with his nonexempt activities or income, and also to keep separately the accounting records of the exempted industry.6 *406In the present case it seems clear that both the profits realized in 1958 and the loss sustained in 1959 are not shown in the returns filed by appellant reporting its nonexempt income.7

There is nothing in the Act, nor has appellant indicated it, authorizing that the loss be charged first against the taxable income before making it retroactive. The fact is that in 1958 the taxpayer realized a net income of $92,555.68, and, construing both acts jointly, it is more logical to conclude that the loss sustained in 1959 should be deducted from the total net income and not merely from the taxable net income.

Furthermore, as stated by the Solicitor General, although § 23 (s) (1) supra authorizes the deduction from the gross income of the net operating loss computed under § 122(a) supra, for the purpose of determining the taxable net income, it is no less true that § 24 (a) (5), 13 L.P.R.A. § 3024 (a) (5), expressly provides that “In computing net income no deduction shall in any case be allowed in respect of: . . . (5) An amount otherwise allowable as a deduction which is allocable to one or more classes of income . . . wholly exempt.” Appellant insists that this section is not applicable because it *407did not have exempt income in 1959. However, the same section provides that the amount otherwise allowable as a deduction which is allocable to exempt income shall not be deductible, “whether or not any amount of income of that class or classes is received or accrued.” See, in general, 4 Mertens, Law of Federal Income Taxation, § 25.128, especially p. 185 of the 1962 Cum. Supp.

The judgment rendered by the Superior Court, San Juan Part, on December 7, 1961 will be affirmed.8