TaxTMI 
TaxTMI 
2020 (1) TMI 546
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....sing officer in restricting the claim of deduction u/s 80IA to Rs. 167,83,87,158/- against the appellant claim of deduction u/s 80IA of the Act of Rs. 187,58,66,703/- in complete disregard of the fact that in view of provisions of section 80-IA(5) of the Income Tax Act, 1961 the profit from the eligible business for the 2. Briefly stated facts of the case are that the assessee filed return of income on 28/09/2012, declaring total income at Nil, wherein it declared gross total income of Rs. 1,87,58,66,703/- and thereafter claimed deduction under section 80IA of the Income-tax Act, 1961 (in short 'the Act') amounting to Rs. 1,87,58,66,703/-. The case was selected for the scrutiny assessment. During the scrutiny assessment, the Assessing Officer observed that the gross total income of Rs. 1,87,58,66,703/- of the assessee constituted of income under the head "profit and gains of business or profession" of Rs. 1,67,83,87,158/- and income from other sources of Rs. 19,74,79,545/-. According to the Assessing Officer, the assessee was entitled for deduction under section 80-IA of the Act in respect of the income under the head of 'profits and gains of business or profession, amounting to....
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....e profit of the eligible unit which was included in the GTI is what had been left after the loss of the other unit had been set off. Hence, as per the provision of section 80AB, it is only the net amount of Rs. 167.84 crores which constitutes the profit 'derived from' the eligible unit. Consequently, it is only that sum which is eligible for deduction u/s 80-lA of the Act. The appellant's computation is amounting to setting off the loss of the other business unit against the Income from Other Sources (which is a different 'head' altogether) and preserving the profit from the eligible unit for claiming deduction u/s 80-IA. This, manner is not sanctioned by the scheme of the Act as discussed above Another way of looking at it is that the appellant has by so manipulating the aggregation and set off in this manner, claimed deduction u/s 80-IA in respect of the Income from other Sources also (Rs. 19.75 crores) over and above the profit from business (Rs. 168 crores). In so far as the deduction is available only in respect of profit derived from the eligible business, the deduction to the extent of Rs. 19.75 crores claimed by the appellant is not allowable. 4.6. The over....
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....of Rs. 167.84 crores (out of the total profit of Rs. 203.37 crores of the eligible unit) was included in the gross total income, the AO was correct in restricting deduction u/s 80-IA to that extent only and, consequently, in adding Rs. 19.75 crores to the returned income. The addition made by the AO is confirmed. This ground of appeal is ruled against the appellant." 3. Before us, the Ld. counsel of the assessee filed a paper-book containing pages 1 to 62 and submitted that the assessee has claimed deduction under section 80IA in respect of the profit of eligible unit to the extent of gross total income available as per section 80A(2) of the Act. The Ld. counsel in support of his contention relied on the decision of the Hon'ble Delhi High Court in the case of CIT versus Sona Koyo Steering Systems Ltd reported in (2010) 321 ITR 463 . 4. The Ld DR supported the order of the lower authorities and submitted that deduction under section 80IA has been rightly restricted to the net income under the profit and gains of the business of the assessee. 5. We have heard rival submissions and perused the relevant material on record. The assessee is a company of Government of National Ca....
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....eligible unit and deduction should be allowed in respect of net profit under the head profit and gain of the business/profession of the assessee. 5.3 In view of the arguments raised before us, the dispute is whether any loss of non-eligible unit should be adjusted with the profit of the eligible unit for determining profit eligible for deduction under section 80IA of the Act. The Section 80IA(1) prescribe for deduction for an amount equal to 100% of the profit and gains derived from the eligible business undertaking. Further, section (5) of the section 80-IA prescribe that while computing the profit in gains of the eligible business under subsection (1), the source of income of the eligible business has only to be considered for deduction. For ready reference, the subsection (5) of section 80-IA is reproduced as under: "80-IA (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subseque....
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.... Another: 299 ITR 444 (SC). The learned counsel for the appellant, however, fairly submitted that there is a decision of a Division Bench of this court in the case of Commissioner of Incometax v. Dewan Kraft Systems P. Ltd: 297 ITA Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.4 of 11 ITR 305 (Delhi) which has considered the pari materia provisions of Section 80-IA(7) of the said Act and has held against the revenue. The learned counsel submits that though the decision of the Delhi High Court is against him, the latter decision of the Supreme Court in the case of Synco Industries Ltd. (supra) is clearly in his favour and, therefore, the question ought to be answered in favour of the revenue and against the assessee. 7. On the other hand, the learned counsel appearing on behalf of the assessee, submitted that the decision of this court in C.I.T. v. Dewan Kraft Systems (supra) is clearly in favour of the assessee and there is nothing in the Supreme Court decision in Synco Industries Ltd. (supra) which would enable us to detract from that position. Consequently, he submitted that the question be answered in favour of the assessee and against the revenue. ....
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....e, clear that while computing gross total income, the deductions referred to in Chapter VI-A, which includes Section 80-I, are not to be considered. The gross total income of the assessee has to be computed after making all other adjustments of losses and carry forward losses ignoring the deductions available under Chapter VI-A. There is no dispute with this proposition. 12. It is further clear from a plain reading of the aforesaid provisions that the deduction under Section 80-I is to be made in case the gross total income includes any profits and gains derived from an industrial ITA Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.6 of 11 undertaking, etc.., in case such profits and gains are included in the gross total income of the assessee. The deduction in the case of a company, in view of the proviso to Section 80-I (1), is to be given to the extent of 25% of such profits and gains of such an industrial undertaking. It is also clear that in view of Section 80-I (6), which begins with a non-obstante clause, the quantum of deduction is to be computed as if the industrial undertaking were the only source of income of the assessee during the relevant years. In other ....
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....t considered the concept of gross total income and came to the conclusion, following its earlier decision in CIT v. Kotagiri Industrial Co-operative Tea Factory Ltd: 224 ITR 605, that the gross total income has to be computed in accordance with the Act after adjusting the losses, etc. and that, if the gross total income so determined is positive, then the question of allowing deductions under Chapter VI-A would arise, but not otherwise. While doing so, the Supreme Court further made it clear that the gross total income must be determined by setting off business losses of earlier years before ITA Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.8 of 11 allowing deduction under Chapter VI-A and that if the resultant income is "Nil‟, then the assessee cannot claim any deduction under Chapter VI-A. While coming to the aforesaid conclusion, the Supreme Court was also confronted with an argument which had been raised on the basis of the provisions of Section 80-I(6) that the profits of one industrial undertaking cannot be set off against the losses suffered by the other industrial undertaking. The Supreme Court was of the view that the provisions of Section 80-I (6) were only fo....
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....80-I(1), which also refers to gross total income one has to read the expression "gross total income" as defined in Section 80B(5). Therefore, this court is of the opinion that the High Court was justified in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was "nil" the assessee was not entitled to claim deduction under Chapter VI- A which includes Section 80-I also. 14. The proposition of law, emerging from the above discussion is that the gross total income of the assessee has first got to be determined after adjusting losses, etc., and if the gross total income of the assessee is "nil" the assessee would not be entitled to deductions under Chapter VI-A of the Act." (underlining added) 15. From the above extract, it is apparent that the Supreme Court did not at all hold that while computing the deduction under Section 80-I(6), the loss of one eligible industrial undertaking is to be set off against the profit of another eligible industrial undertaking. All that the Supreme Court said was that in computing the gross total income of the assessee, the same has to....
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.... AO in respect of the interest income which was not derived from the business of the eligible undertaking. In view of the complete financial information in respect of the two units of the assessee not available before us, in interest of the Justice, we feel it appropriate to set aside the order of the ld. CIT(A) and restore the issue back to him for deciding afresh in accordance with law, after verification of financial statements of both the units of the assessee. It is needless to mention that both the parties, i.e., the assessee as well as the Assessee Officer shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes. 6. In the result the appeal of the assessee is allowed for statistical purposes. Order is pronounced in the open court on 10th January, 2020. ============= Document 1 PRAGATI POR COP ATION LIMITED ASSESSM EAR 2012-2013 CONSOLIDATED 801A OTHER INCOME FROM BUSINESS Net Profit as per Profit & Loss A/c Less: Other Income(Interest from Banks) Add: Depreciation for the purpose of P&L A/c* Add: Income tax on perquisites paid by employer- u/s ....