2019 (7) TMI 91 - HC - Income Tax

High Court sets aside Tribunal decision, restores Commissioner's order on Section 80IB deduction

M/s. Sundaram Fasteners Limited Versus The Commissioner of Income Tax

The High Court allowed the appeal, setting aside the Tribunal's decision and restoring the Commissioner of Income Tax (Appeals) order regarding the ... Deductions u/s 80 IB - profits are independently determinable for all the four units of the appellant - AO aggregated the income of all the units before considering eligible deduction u/s 80 IB - HELD THAT:- The Assessing Officer failed to consider that the gross total income of the assessee before deduction was ₹ 78,90,64,628/-, whereas in the case of Synco Industries Ltd. [2008 (3) TMI 13 - Supreme Court] The factual position was different. In the said case, the Assessing Officer, noticed that the gross total income of assessee therein before deductions under Section 80 IB is nil. Therefore, the appeal filed by the assessee is allowed and the order passed by the Tribunal dated 17.12.2008 is set aside and the order of CIT (Appeals) is restored and the substantial questions of law are answered in favour of the assessee. Issues:1. Interpretation of Section 80IB of the Income Tax Act for deduction claim.2. Justification of denying relief under Section 80IB by the Tribunal.Issue 1: Interpretation of Section 80IB for deduction claimThe High Court considered the appeal filed under Section 260-A of the Income Tax Act challenging the order of the Income Tax Appellate Tribunal regarding the deduction under Section 80IB for the assessment year 2004-05. The substantial questions of law were whether the assessee could claim deduction under Section 80IB when profits were independently determinable for all units and whether relief should have been independently determined. The Tribunal reversed the order of the Commissioner of Income Tax (Appeals) in computing the deduction under Section 80IB. The High Court referred to the decision of the Bombay High Court and the subsequent decision of the Supreme Court which emphasized that the gross total income must be determined after adjusting losses, and if it turns out to be 'Nil,' the assessee would not be entitled to deductions under Chapter VI-A of the Act.Issue 2: Justification of denying relief under Section 80IBThe High Court noted that the Tribunal failed to consider a crucial decision passed by the Supreme Court before making its order. The Court highlighted a similar case before the High Court of Delhi where it was clarified that while computing the deduction under Section 80IB, the loss of one eligible industrial undertaking should not be set off against the profit of another eligible industrial undertaking. The Court emphasized that the gross total income must be determined after adjusting losses, and if it is 'Nil,' the assessee would not be entitled to deductions under Chapter VI-A. The High Court found that the Tribunal was correct in reversing the order of the Commissioner of Income Tax (Appeals) based on these legal principles.In conclusion, the High Court allowed the appeal filed by the assessee, setting aside the Tribunal's order and restoring the order of the Commissioner of Income Tax (Appeals). The substantial questions of law were answered in favor of the assessee, highlighting the importance of correctly interpreting the provisions of Section 80IB and considering the gross total income before determining deductions under Chapter VI-A of the Income Tax Act.