Eligibility for claiming deduction U/s 80IA of the income tax.

[RAJAGOPALAN R]

OUR MAIN BUSINESS IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA OF THE IT Act. ONLY THE PORTION OF THE BUSINESS/UNDERTAKING COVERED FOR THE ELIGIBLE PERIOD FOR AVAILING DEDUCTION UNDER THE ACT HAVE TO BE CALCULATED SEPARATELY FOR CLAIMING DEDUCTION U/S 80IA. FOR THAT P&L a/C AND BALANCE SHEET OF EACH UNDERTAKING NEEDS TO BE PREPARED SEPARATELY. SINCE WE HAVE VERY LARGE NUMBER OF SMALL/MINI UNDERTAKINGS IT IS NOT PRACTICABLE TO PREPARE AND AUDIT THE P&L OF EACH UNDERTAKING SEPARATELY. IN SUCH CASES IS THERE ANY OTHER METHOD TO CALCULATE AND AUDIT THE UNDERTAKING FOR CLAIMING DEDUCTION U/S 80IA. IN MTNL VS. ACIT (2010) 38 SOT 24 (DELHI) HAS STATED ABOUT APPORTIONING OF TOTAL INCOME PROPORTIONATELY ON THE BASIS OF TOTAL UNDERTAKING VIS A VIS NEW UNDERTAKING CAN BE ADOPTED IN THIS CASE. KINDLY SUGGEST

[Rama Krishana]

In my view the profit of each undertaking which is eligible for deduction / exemption u/s 80IA should be computed separately. There is no exception to this rule. But, where the certain expenses or income are not ascertainable correctly, a reasonable formula can be ascertained to distribute the income or expenditure. Though I have not read the case of MTNL vs. ACIT as referred in the query, but as per the scheme of the act, no court can grant exemption without computation of profit of each undertaking separately.

AI Summary

Deduction for eligible undertaking requires separate profit computation, with reasonable apportionment only when precise allocation is impracticable. Claimants must compute the profit of each eligible undertaking separately and prepare a distinct profit and loss account and balance sheet for each; where specific income or expenses cannot be precisely ascertained, a reasonable apportionment formula may be used to distribute income and expenditure for purposes of claiming the deduction, but allocation must be supportable and auditable.