TaxTMI 
TaxTMI 
TaxTMI 
2019 (1) TMI 531
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....the following grounds of appeal : 1. That the order passed under section 250(6) of the Income Tax Act, 1961 by the learned Commissioner of Income Tax (Appeals) Shimla in Appeal No. IT- /447/2013-14/SML, dated 24.03.2017 is contrary to law and facts of the case. 2. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals), gravelly erred in upholding the action of the Id. Assessing Officer in holding that the appellant is not entitled to 100% deduction under section 80IB in respect of Baddi unit on account of substantial expansion made by appellant during the 7th year for which deduction is allowable as per Section 80IC of the Income Tax Act, 1961. 3. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in upholding the action of the Id. Assessing Officer in restricting the deduction under Section 80IC of the Income Tax Act, 1961 at 30% as against 100% in respect of Baddi unit claimed by the appellant as the substantial expansion was done by the appellant which fact has not been controverted by the Id. Assessing Officer. 4. That in the facts and circumstances of the case, the Id. C....
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....nd other related cases. 7. Before us, ld. counsel for the assessee fairly conceded that the issue was now settled and covered against the assessee by the decision of the Hon'ble Apex Court in the case of CIT Vs M/s Classic Binding Industries & Ors. in Civil Appeal No. 7208 and others of 2018 dated 20.08.2018. 8. In view of the above, we find no reason to interfere in the order of the ld. CIT(A) and the ground of appeal No. 2 & 3 raised by the assessee is, therefore dismissed. 9. In ground No. 4, the assessee has challenged the action of the CIT(A) in upholding the order of the AO that for the purposes of quantification of deduction u/s 80IC, the loss of one priority unit is to be set off against the profit of the other priority unit. 10. The brief facts relating to the issue are that the assessee had two manufacturing units eligible for deduction u/s 80IC, one in Baddi and the other at Rudrapur. While the Baddi unit had shown profits of Rs. 1,39,26,245/-, the Rudrapur unit had shown loss of Rs. 45,34,8923/-. The assessee had claimed deduction with respect to the profit of the Baddi unit only while the AO held that the profits of the Baddi unit had to be set off with the los....
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....d that while the decision in the case of Him Teknoforge (supra) was rendered in the context of Section 80IA, the assessee's in the present case were claiming deduction u/s 80IC of the Act and the two sections were differently worded with Section 80IA allowing deduction on the profits of the business while Section 80IC allowed deduction on the profits of enterprise/undertaking. The ITAT held, therefore the deduction u/s 80IC was undertaking specific. The relevant findings of the ITAT at paras 12 to 22 are as under : 12. We have heard the contentions of both the parties carefully and have even carefully gone through the orders of the Hon'ble Jurisdictional High Court in the case of Him Teknoforge Ltd. (supra) which have been heavily relied upon by the Revenue in support of the order of the lower authorities on the proposition that the profits and losses of all the eligible undertakings are to be netted and on the balance of profits the deduction is to be calculated u/s 80IC of the Act. 13. The facts before the Hon'ble Jurisdictional High Court were that the assessee was having separate units, some of which were entitled to benefit in terms of section 80HH and 80IA of....
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....ce with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.]" 15. Reading the same, the Hon'ble High Court held that there can be no manner of doubt that only income from a priority undertaking is to be taken into consideration while making the deduction and the profits or losses of non priority undertakings are not to be considered. Going further, the Hon'ble High Court held that if there were more than one priority undertaking, the profits and losses of all the priority undertakings had to be clubbed together and deduction was to be calculated on the profits remaining. While laying down this proposition the Hon'ble High Court stated that though the Hon'ble Apex Court in the case of CIT(Civil) Madras Vs. Canara Workshops Pvt. Ltd. (1986) 61 ITR 120 has clearly held that no clubbing of profits and losses of priority undertaking shall to be done for calculating the quantum of eligible deduction, the later decisions of the Hon'ble Apex Court in IPCA Laboratories Ltd. Vs. DCIT (2004)....
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....nding clause and there being no such corresponding clause provided for in section 80HHC the provision of section 80AB would override the provisions of section 80HHC of the Act. This is a very important observation of the Hon'ble High Court and it is from this that a distinction can be drawn vis-à-vis deduction claimed u/s 80IC of the Act, which is the fact in the present case. For clarity the relevant provisions of section 80IA & 80IC of the Act are being reproduced hereunder: "80-IA [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of profits and gains derived from such business for ten consecutive assessment years.]" "(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of subsection (1) apply sha....
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....culated as provided for in section 80IC(7) of the Act, as per which for the purpose of determining the quantum of deduction the eligible undertaking is to be treated as the only source of income of the assessee during the previous year, thus treating each eligible undertaking or enterprise as a separate unit for the purpose of calculating deduction. 18. Even otherwise as correctly pointed out by the Ld.Counsel for the assessee, while the decision in the case of Him Teknoforge Ltd. (supra) was rendered in the context of section 80IA, the assessee in the present case has claimed deduction u/s 80IC and the relevant provisions of two sections which deal with the calculation of quantum of deduction are differently worded in the two sections having an impact of the interpretation of the same. 19. Section 80IA(5) states that the profits and gains of eligible "business" shall be computed as if such eligible "business" were the only source of income of a during previous years. Thus section 80IA(5) applies to eligible "business", the meaning for which can be gathered from section 80IA(1) wherein business carried out by eligible undertaking have been referred to as eligible business. Se....
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.... the Ld. counsel for assessee, the section provides for different rates of deduction of profits for different years in case of specific undertakings and if netting of profits and losses of all eligible undertakings are resorted to, as laid down in the decision of Him Teknoforge Ltd. (supra), in a situation where the different eligible units are entitled to different rates of deduction of profits, it would be difficult to determine the rate to be applied to the remaining profits since there is no section or provision in the entire Act dealing with such a situation. We therefore, agree with the Ld. counsel for assessee that the decision in the case of Him Teknoforge Ltd. (supra) having been rendered in the context of section 80IA does not apply in the present case which deals with deduction u/s 80IC of the Act and since as per section 80IC it is the profit on each undertaking which is to be treated as separately, the profits and losses of all the eligible undertakings are not to be netted for the purpose of calculating deduction u/s 80IC and are to be taken on a stand alone basis. 22. In view of the above, we direct the A.O. to allow deduction to the assessee u/s 80IC with respect....