2011 (3) TMI 475 - HC - Income Tax

Court rules on set-off of losses for computing deductions under Income-tax Act

Bajaj Motors (P.) Ltd. Versus Commissioner of Income-tax, Faridabad

The court dismissed the appeal, ruling in favor of the Revenue's interpretation that losses from one unit should be set off against profits from another ... Deduction u/s 80-I - The Assessing Officer while computing the same took into account loss of the assessee in another manufacturing unit. It was held that the benefit under section 80-I was referable to total income which was required to be worked out after taking into account the loss, if any - Decided against the assessee Issues:1. Interpretation of section 80-I of the Income-tax Act, 1961 regarding the deduction of profits and losses from different units.Detailed Analysis:Issue 1: Interpretation of section 80-I regarding deduction of profits and losses from different unitsThe case involved an appeal by the assessee under section 260A of the Income-tax Act, 1961 against the order passed by the Income-tax Appellate Tribunal, Delhi Bench. The primary question raised was whether the loss incurred in one independent unit should be set off against the profits of another unit for computing the deduction under section 80-I of the Act. The Tribunal held that section 80AB of the Act, with the non obstante clause, overrides any conflicting provisions, and the deduction under section 80-I should be computed after setting off losses from one unit against profits from another. The assessee argued that the benefit under section 80-I should not consider losses from another unit, relying on various judicial precedents. However, the Revenue contended that the deduction under section 80-I must be calculated with reference to the total income after excluding losses as per sections 80AB, 80A(2), and 80B(5).The court analyzed the relevant provisions of the Income-tax Act, including sections 80A(2), 80AB, 80B(5), and 80-I. It referred to previous judgments such as Distributors (Baroda) P. Ltd. and H. H. Sir Rama Varma, emphasizing that the deduction under section 80-I should be based on gross total income as defined in the Act. The court highlighted that the judgment in Canara Workshops did not consider section 80AB. The court agreed with the interpretation in Macmillan Co. of India Ltd. that excluding losses from the computation of deductions under section 80-I would be against statutory provisions. The court also mentioned that the judgments relied upon by the assessee did not consider section 80AB, making them distinguishable. Ultimately, the court dismissed the appeal, ruling in favor of the Revenue's interpretation that losses from one unit should be set off against profits from another unit for computing the deduction under section 80-I.In conclusion, the court's detailed analysis focused on the legislative intent behind section 80AB and the statutory provisions governing the computation of deductions under section 80-I. The judgment emphasized the importance of considering gross total income and the applicability of section 80AB in determining the deduction for industrial undertakings.