TaxTMI 
TaxTMI 
2020 (10) TMI 666
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....aw in holding that the losses of 80IC unit cannot be set off against the profit of the other non 80IC units? ii. Whether the Tribunal ought to have appreciated that loss of any line of business activity should be set off against the profit of the other lines of business/source of income under Sections 70 and 71 of the Income Tax Act, 1961? And iii. Whether the Tribunal was right in ignoring the provisions of Section 80B(5), which defines the gross total income as total income in accordance with the provisions of the Act before making any deduction under Chapter VIA?" 3. The assessee is carrying on business in the manufacture and sale of two and three wheelers. For the assessment year under consideration (AY 2008-09), the Assessing Officer computed the total income at Rs. 91,46,18,434/- and the total loss returned as per their revised return was Rs. 59,82,66,374/-. The assessee would state that they had incurred loss of Rs. 32,78,84,171/- from their Himachal Pradesh Unit, which was entitled to deduction under Section 80-IC of the Act and the same was set off by the assessee against the income from non 80-IC unit. The Assessing Officer while completing the assess....
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....ore and Hosur. The AO has referred to Section 80-IC(7) read with Section 80-IA(5) and has stated that the eligible income or loss of the Himachal unit cannot be set off against the profit of any other unit u/s 70(1) of the Act. He stated that the loss of the unit ought to be carried forward for set off against future income of the same unit. The ld. AR, on the other hand, argued that both income or loss of the eligible business as are includible in the gross total income from which deduction under Chapter VI-A are to be allowed. It is incumbent to include the loss of the eligible business with the income of other sources and other heads of income. I have considered the rival contentions. Benefit of deduction under Chapter VI-A can be given to the assessee if the claim is in accordance with law and not otherwise. The decisions of Hon'ble Supreme Court in Synco Industries Ltd. vs. AO & Another (299 ITR 444), A.M.Moosa vs. CIT (294 ITR 1) and CIT Vs. Shirke Construction Equipment Ltd. (291 ITR) are directly on the subject issue. The Hon'ble Supreme Court in the case of Synco Industries Ltd (supra) has clearly held that gross total income should include both profit and loss of ....
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....s not in accordance with the provisions of Chapter VI-A which is clear from the decisions referred above. The assessee is required to set off the loss against the income available in view of the provisions of sec.70 of the Act. Losses in respect of any source of income under any head of income, other than under the head capital gains, would be entitled to be set off against income from any other sources under the same head. The claim to set off the loss cannot be deferred to subsequent years as held by the Hon'ble Gujarat High Court in the case of CIT v. Milling Trading Co. P. Ltd., 211 ITR 690 (Guj.). Hence, the appellant has rightly set off the loss of the 80-IC unit against the income of other units. No deduction u/s.80-IC was also claimed as the "gross total income" was negative. 10.2.1. The issue can be viewed from another angle. The provisions of Section 80-IC provide for deduction in respect of certain undertakings or enterprises in certain special category states such as Himachal Pradesh, Uttaranchal, Sikkim and North Eastern states. The benefit available under the section is not in the nature of any exemption. In the instant case, the profits and gains derived....
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....f the unit from the profit of the unit in subsequent year(s)." 5. The Revenue, being aggrieved by the aforementioned order, filed appeal before the Tribunal and the grounds raised by the Revenue on this issue are as hereunder:- "6.2. The CIT(A) failed to appreciate that in the case of Shrike Construction, the Supreme Court dealt with set off of unabsorbed business losses of the earlier year against profits from exports and hence not applicable to the facts of the case. 6.3. The CIT(A) ought to have appreciated that in the case of Synco Industries Ltd., it is held that Gross Total income is required to be computed in manner provided under the Act, which presupposes that Gross Total Income shall be arrived at after adjusting losses of other division against profits derived from an individual undertaking eligible for deduction u/s 80HHC and 80IC. In the instant case, the assessee had incurred losses in the units entitled for deduction u/s 80IC and hence the above decision is not applicable. 6.4. The CIT(A) erred in relying on the Supreme Court's decision in the case of A.M.Moosa, wherein it was held that dedn. u/s 80HHC can be permitted only if there ....
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....e of any such finding, the order is deemed to be termed as a "non speaking order". 8. It is the endeavour of Mr.M.Swaminathan, learned Senior Standing Counsel appearing for the Revenue to vehemently and vociferously support the impugned order as most of the submissions have not been recorded by the Tribunal, but appears to be reasons which are now sought to be substituted to support the ultimate conclusion of the Tribunal in allowing the Revenue's appeal. The cardinal principle is that the order passed by a quasi judicial authority or a Tribunal should stand or fall by the reasons assigned therein and fresh reasons cannot be supplanted at a later point of time when there is a challenge to such order. The only exception which comes to our mind is when legal issue arise for consideration where constitutional validity of provision is challenged etc., especially the order passed by the Tribunal can never be purely a question of law because the law has to be applied to the facts of the case especially when the Tribunal is the last fact finding authority in the hierarchy of authorities provided by the Income Tax Department. Therefore, we have no hesitation to hold that the impugne....
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....e two divisions while considering the question of grant of deductions under Section 80-I of the Act, cannot be accepted. This plea raised by the appellant/assessee was considered by the Hon'ble Supreme Court and decided in favour of the assessee with the following reasoning:- "7. Section 80A, as originally inserted by the Finance Act, 1965 with effect from 1.4.1969 dealt with a different topic altogether viz., deductions in respect of life insurance premia, annuities, contributions and provident fund etc. The present Section came on the statute book by way of substitution of Chapter VI A by the Finance (No. 2) Act, 1967, w.e.f. 1.4.1968. This Section has witnessed several consequential amendments from time to time by way of insertions, substitutions or omissions. Sub-Section (1) of Sections 80A lays down that while computing the total income of an assessee, deductions specified in Sections 80C to 80U shall be allowed from his gross total income. This Section has introduced a new concept of 'gross total income' as distinguished from the 'total income' i.e., the net or taxable income. Clause (5) of Section 80B defines the expression 'gross total incom....
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....ority undertaking. While computing the quantum of deduction under Section 80-I(6) the Assessing Officer, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, this Court finds that the non-obstante clause appearing in Section 80-I(6) of the Act, is applicable only to the quantum of deduction, whereas, the gross total income under Section 80B(5) which is also referred to in Section 80I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of Section 80A(2) of the Act nugatory and therefore the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under Section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because Sub-Section 6 contemplates that only the profits shall be taken i....
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....ty of the decision in KEI Industries Ltd. (supra), as the Tribunal had straight away accepted the submissions of the Revenue in that regard. Further, the learned counsel relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Yokogawa India Ltd., [(2017) 391 ITR 0274 (SC)] and relied upon paragraphs 15 and 16 of the judgment, which read as follows:- "15. Sub-section 4 of Section 10A which provides for pro rata exemption, necessarily involving deduction of the profits arising out of domestic sales, is one instance of deduction provided by the amendment. Profits of an eligible unit pertaining to domestic sales would have to enter into the computation under the head "profits and gains from business" in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any referenc....
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....minathan at great length. 14. It is submitted by Mr.M.Swaminathan, learned Senior Standing Counsel that the decision in KEI Industries Ltd. (supra) was rightly relied on by the Tribunal while allowing the appeal filed by the Revenue, as the conditions contained in Section 80-IC and that of Section 10B are pari materia and the legal principle has been rightly applied by the Tribunal to say that the loss suffered by the assessee in an unit is entitled to exemption under Section 10B of the Act cannot be set off against the income from any other unit not eligible for such exemption. 15. In our understanding, the submission of Mr.M.Swaminathan, learned Senior Standing Counsel is to substitute Section 10B with Section 80-IC in the decision of KEI Industries Ltd. (supra) to arrive at a conclusion. The question would be, can it be done especially, when the Tribunal has not assigned any reasons as to how it came to the conclusion that the decision in KEI Industries Ltd (supra) would squarely apply to the assessee's case and above all, why the finding returned by the CIT(A) was erroneous. One more factor which is relevant to point out is the decision rendered by the Hon'ble Sup....