TaxTMI 
TaxTMI 
2008 (9) TMI 416
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....he plain toffee unit. 3.1 That the CIT(A)/AO erred in holding that the losses of the plain toffee unit suffered in the asst. yrs. 1997-98 and 1998-99, which actually stood absorbed in those years, should first be notionally adjusted against the profits of the year under consideration for computing deduction allowable under s. 80-IA of the Act. 4. That the CIT(A) erred on facts and in law in confirming the set off of loss of the trading unit against the profits of the bubblegum unit and not against the profits of the plain toffee unit. 5. That the CIT(A) erred on facts and in law in confirming the assessment of interest income amounting to Rs. 2,96,816 and miscellaneous income to the extent of Rs. 38,916 of the bubblegum unit under the head 'Income from other sources' against the same being declared as business income by the appellant. 6. That the CIT(A) erred on facts and in law in confirming the denial of deduction under s. 80-IA of the Act on interest on employees loans amounting to Rs. 1,66,981 and on bank interest amounting to Rs. 1,29,834. 7. That the CIT(A) erred on facts and in law in confirming the denial of deduction und....
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.... against the computation of deduction allowable under s. 80-IA of the Act. 7. The learned Authorised Representative for the assessee submitted that the issue is covered directly by the judgment of Hon'ble Rajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd. (2004) 186 CTR (Raj) 141 : (2004) 271 ITR 311 (Raj), wherein it had been held that losses of earlier years already set off against income of previous year should not be reopened against for computing the deduction under s. 80-IA of the Act. The learned Authorised Representative pointed out that there is no merit in denying the deduction under s. 80-IA in respect of profits of plain toffee unit by notionally adjusting the absorbed losses relating to the earlier assessment years by invoking the provisions of sub-s. (5) of that section. The learned Authorised Representative further pointed out that the assessee was in intervenor before the Special Bench of Ahmedabad Tribunal in the case of Gold Mine Shares and Finance (P) Ltd. (ITA Nos. 4044 to 4049/Ahd/2003) [reported as (2008) 116 TTJ (Ahd)(SB) 705-Ed.). The learned Authorised Representative stressed that the Special Bench had grossly earned in not following the ....
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....entative for the Revenue submitted that the issue in the present case is squarely covered by the decision of Special Bench in the case of Asstt. CIT vs. Gold Mine Shares & Finance (P) Ltd. which in turn had referred to the judgment of Rajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd. 10. We have heard the rival submissions and perused the records. The assessee was an intervenor before the Special Bench in Asstt. CIT vs. Gold Mine Shares & Finance (P) Ltd. The issue before the Special Bench was as under: "Whether in view of the provisions of s. 80-IA(5) of the IT Act, 1961, the profit from the eligible business for the purpose of deduction under s. 80-IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years?" 11. The matter was considered at length by the Special Bench and it had also referred to the judgment of Rajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd. in para 40 of its decision. On elaborate consideration of the legal aspects and also after taking into consideration the arguments of th....
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....of the High Court or the Supreme Court, then Division Bench would be at liberty to take an independent view. The said decision is applicable in case there are any subsequent decisions of the High Court or Supreme Court after the Special Bench decision. In the facts of the present case before us the Special Bench has referred to the decision of Rajasthan High Court in Mewar Oil & General Mills Ltd. and has held that even where no losses of the eligible unit are carried forward after being set off against profits of that source in the year itself, it is the mandate of law that such losses of earlier years though already adjusted are once again to be notionally brought forward and set off against profits of the eligible unit, while computing deduction under s. 80-IA of the Act. 13. In line with the ratio laid down by the Special Bench in Asstt. CIT vs. Gold Mine Shares & Finance P. Ltd., we uphold the order of CIT(A) in directing the AO to notionally adjust the losses of plain toffee unit arising in asst. yrs. 1997-98 and 1998-99, though absorbed in those years against the profits of the year under consideration for computing the deduction allowable under s. 80-IA of the Act. The b....
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....s from the unit of its choice. The learned Authorised Representative further stated that the losses from trading unit were to be adjusted against the profits from plain toffee unit and not against the profits from bubblegum unit The learned Departmental Representative admitted that there were no specific provisions for set off of losses against business profits and s. 80AB of the Act provides that the deductions under Chapter VI-A are to be allowed against the gross total income. The learned Departmental Representative placed reliance on the order of CIT(A). 17. We have heard the rival submissions and perused the records. Under s. 28 of the IT Act profits and gains of a business carried on by the assessee during the year are includible as income of the assessee for the previous year. The assessee when carrying on different units of manufacturing and trading is duty bound to compute the profits of each unit and the total income of the assessee for the previous year include the profits from all such units being run by the assessee. In case any of the unit in which business is carried on by the assessee incurs loss, then the net profits i.e. after adjustment of the loss is includib....
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....999) 153 CTR (SC) 439 : (1999) 237 ITR 579 (SC) and Ashok Leyland Ltd. vs. CIT (1997) 138 CTR (SC) 287 : (1997) 224 ITR 122 (SC) by the AO. Accordingly, he recomputed the deduction under s. 80-IA of the Act by excluding the other income from the profits of the business eligible for the said deduction. The CIT(A) upheld the order of AO. 20. The learned Authorised Representative for the assessee submitted that the interest received on employees loan is assessable as business income following the ratio laid down by Delhi Bench of Tribunal in Maruti Udyog Ltd. vs. Dy. CIT (2005) 92 TTJ (Del) 987 : (2005) 92 ITD 119 (Del). The learned Authorised Representative further pointed out that such interest on employees loan is further eligible for deduction under s. 80-IA of the Act, placing reliance on the various decisions of the Tribunal. In respect of interest received from customers the contention of the learned Authorised Representative was that the said income is linked to the business and is taxable as business income and is also eligible for deduction under s. 80-IA of the Act following ratios laid down by various High Courts and the Tribunal. 21. The learned Authorised Represent....