2021 (6) TMI 824 - HC - Income Tax

ITAT Dismisses Revenue Appeal: Industrial Units Must Be Treated Independently for Section 80IA Deductions.

The ITAT, Chennai, in I.T.A.No.1196/Mds/2009, dismissed the Revenue's appeal regarding the entitlement of deduction under Section 80IA of the Income Tax ... Deduction u/s 80IA - claim to be allowed to a single Industrial Unit OR all the units taken together - Whether Tribunal was right in law in holding that the assessee is entitled deduction under section 80IA of the Act, even though where a company apart from his regular business and in the business of generation and distribution of power, owning more than one Industrial Undertaking? - HELD THAT:- Having regard to the submissions made by the learned counsel on either side, following the ratio laid down by the Hon'ble Division Bench of this Court in the Judgment reported in Commissioner of Income Tax, Coimbatore v. M/s.Bannari Amman Sugars Ltd. [2019 (3) TMI 14 - MADRAS HIGH COURT] the question of law is decided against the Revenue and in favour of the assessee. Issues:Challenge to order passed in I.T.A.No.1196/Mds/2009 regarding Assessment Year 2006-2007 on the file of the Income Tax Appellate Tribunal, Chennai.Analysis:1. The appeal raised a substantial question of law regarding the entitlement of deduction under section 80IA of the Act for a company owning multiple Industrial Undertakings. The key issue was whether the deduction under Section 80IA should be allowed to a single Industrial Unit or to all units taken together.2. The appellant, the revenue, argued that the substantial question of law was covered against them by a previous judgment of the Division Bench of the Court. The Division Bench's judgment emphasized that each unit, including a CPP, should be seen independently as separate and distinct for the purposes of granting deduction under section 80IA of the Act. The judgment referred to provisions of section 80IB(5) and highlighted the importance of treating each unit independently for deduction purposes.3. The Division Bench's judgment further referenced a Supreme Court case involving an assessee managing multiple units with some earning profits and others facing losses. The Supreme Court clarified that profits derived from one industrial undertaking cannot be set off against losses from another. The judgment emphasized the need to compute the quantum of deduction under Section 80-I(6) by treating profits derived from an industrial undertaking as the only source of income. It highlighted the distinction between Section 80-I(6) dealing with deduction computation and Section 80-I(1) addressing the treatment of deductions to arrive at the total income of the assessee.4. Both parties agreed that the appeal should be decided in line with the Division Bench's judgment, leading to the dismissal of the Tax Case Appeal in favor of the assessee. The judgment concluded that where an assessee has profits from multiple eligible units, the profits or losses from these units must be considered collectively. Only if the resultant figure is positive can the assessee be entitled to the claim under Chapter VIA.5. Ultimately, the Court decided the question of law against the Revenue and in favor of the assessee based on the precedent set by the Division Bench's judgment. The Tax Case Appeal was dismissed with no costs incurred.