TaxTMI 
TaxTMI 
2025 (6) TMI 157
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.... Order, dated 06/04/2021, passed under Section 143(3) read with Section 143(3A) and 143(3B) of the Act. 2. The Revenue has raised the following ground in ITA No. 4119/Mum/2024: "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of deduction under Section 80IA(4) claimed in the return at Rs. 1,57,73,420/- but adjusted and disallowed u/s. 143(1) in appeal against order u/s. 143(3), ignoring the fact that the assessee had not appealed against adjusted of disallowance of deduction u/s. 80IA made u/s. 143(1) of the Act. 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of deduction u/s. 80IA claimed in the return at Rs. 1,57,73,420/- adjusted and disallowed u/s. 143(1) as the assessee had no business income included in the gross total income, specifically ignoring the fact that the net result of computation of the business income disclosed by assessee and included in the gross total income in the return was loss of Rs. 63,26,867/-. 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A....
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....case and hence Hon'ble CIT erred in upholding the computation of income and taxes thereon prepared by the Ld. AO." 5. The relevant facts in brief are that the Assessee filed return of income for the Assessment Year 2018-2019 on 04/10/2018 declaring income of INR.6,89,82,370/-. The case of Assessee was selected for scrutiny and notice under Section 143(2) of the Act was issued to the Assessee on 22/09/2019. During the pendency of the assessment proceedings the return filed by the Assessee was processed under Section 143(1) of the Act intimation, dated 02/02/2020, was issued to the Assessee. Subsequently, the Assessing Officer completed the assessment under Section 143(3) read with Sections 143(3A) and 143(3B) of the Act at income of INR.9,47,60,542/- after making addition/disallowance of INR.83,93,835/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules 1962 [for short 'IT Rules']. The Assessing Officer also increase the Book Profits computed under Section 115JB of the Act by the aforesaid disallowance of INR.83,93,835/- made under section 14A of the Act. 6. Being aggrieved the Assessee preferred appeal before the CIT(A) challenging the addition/disallowanc....
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....Year 2018-2019, the Assessee had claimed deduction of INR.1,57,73,420/- in respect of the aforesaid undertaking. While processing the income tax return under Section 143(1) of the Act, the deduction claimed by the Assessee was disallowed. 13. The Assessee did not prefer an appeal against intimation issued under Section 143(1) of the Act and opted to raise issue in appeal preferred against the Assessment Order, dated 06/04/2021, passed under Section 143(3) of the Act. 14. Before the CIT(A) it was contended on behalf of the Assessee that the Assessee is a listed company engaged in the business of dealing in shares and securities; real estate and power generation, and that the Assessee had earned following profits/losses from the same - (a) net profits of INR.1,57,73,420/- from power generation business, (b) net profits of INR.23,40,65,869/- from real estate business and (c) loss of INR.25,61,65,372/- from the business of dealing in shares and securities. Thus, the Assessee had suffered net loss of INR.63,26,083/- under the head 'Profits & Gains of Business & Profession' for the relevant previous year. After setting off the aforesaid loss with Net Capital Gains of INR.9,10,81,87....
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....Ltd. Vs. Assessing Officer, Income-tax, Mumbai [2008] 299 ITR 444(SC), dated 13/02/2008. Further, it was submitted by the Learned Departmental Representative, on a without prejudice basis, that since the computation under the head 'Profits & Gains of Business or Profession' had resulted into a loss, it cannot be said that the income of eligible undertaking was included in the Gross Total Income of the Assessee. Therefore, deduction as claimed by the Assessee under Section 80IA(1) of the Act could not have been allowed. 18. Per contra, the Learned Authorized Representative for the Assessee submitted that while completing assessment under Section 143(3) of the Act the Assessing Officer had determined the income after disallowing deduction claimed under Section 80IA of the Act. Therefore, the order passed under Section 143(1) of the Act stood merged with Assessment Order passed under Section 143(3) of the Act. Thus, the Assessee was justified in raising the ground in appeal preferred against the order passed under Section 143(3) of the Act. The Learned Authorized Representative for the Assessee contended that the adjustment regarding deduction claimed by the Assessee under Secti....
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....ns of the Act at INR.9,47,60,542/- as against Gross Total Income of INR.8,47,55,788/- computed by the Assessee. The difference of INR.1,00,04,754/- was on account of (a) denial of set off of brought forward Long Term Capital Loss of INR.16,08,703/- pertaining to Assessment Year 2014-2015 and (b) disallowance of INR.83,93,835/- made under Section 14A of the Act. There is no discussion in the body of the Assessment Order regarding the disallowance of deduction claimed by the Assessee under Section 80IA of the Act. However, in Computation Sheet, the Gross Total Income of the Assessee was computed at INR.9,31,51,839/- after allowing set off of the brought forward Long Term Capital Loss of INR.16,08,703/- from the Gross Total Income of INR.9,47,60,542/- computed in the body of the Assessment Order. Further, total deduction under Chapter VIA were computed at 'Nil' to arrive at taxable income of INR.9,31,51,839/-. Neither the Assessment Order nor the Computation Sheet attribute the denial of deduction claimed under Section 80IA of the Act to the variation made while processing returned of income under Section 143(1) of the Act. The starting point for computation of income is not the incom....
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.... ITR 444 (SC). We find that in the said judgement it was held as under: "11. The above discussion makes it very evident that pre-dominant majority of the High Courts have taken the view that while working out gross total income of the assessee the losses suffered have to be adjusted and if the gross total income of the assessee is 'nil' the assessee will not be entitled to deduction under Chapter VI-A of the Act. It is well settled that where the pre-dominant majority of the High Courts have taken certain view on the interpretation of certain provisions, the Supreme Court would lean in favour of the predominant view. Therefore, this Court is of the opinion that the High Court was justified in holding that gross total income must be determined, by setting off against the income, the business losses of earlier years, before allowing deduction under Chapter VI-A and if the resultant income is 'nil', then the assessee cannot claim deduction under Chapter VI-A. 12. The contention that under section 80-I (6) the profits derived from one industrial undertaking cannot be set off against loss suffered from another and the profit is required to be computed a....
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....its shall be taken into account as if it was the only source of income. However, section 80A(2) and section 80B (5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the non-obstante clause in section 80-I(6) cannot restrict the operation of sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier section 80-I(6) deals with actual computation of deduction whereas section 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and therefore while interpreting section 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." (Emphasis Supplied) 23. It is evident that the Hon'....
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.... income." As stated above, Section 80AB was inserted in the year 1981 to get over a judgment of this Court in Cloth Traders (P.) Ltd. (supra). The Circular dated 22-9-1980 issued by the CBDT makes it clear that the reason for introduction of Section 80AB of the Act was for the deductions under Part C of Chapter VI-A of the Act to be made on the net income of the eligible business and not on the total profits from the eligible business. A plain reading of Section 80AB of the Act shows that the provision pertains to determination of the quantum of deductible income in the 'gross total income'. Section 80AB cannot be read to be curtailing the width of Section 80-IA. It is relevant to take note of Section 80A(1) which stipulates that in computation of the 'total income' of an assessee, deductions specified in Section 80C to Section 80U of the Act shall be allowed from his 'gross total income'. Sub-section (2) of Section 80A of the Act provides that the aggregate amount of the deductions under Chapter VI-A shall not exceed the 'gross total income' of the Assessee. We are in agreement with the Appellate Authority that Section 80AB of the Act which....
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....le business'. With respect to the facts of this Appeal, there is no dispute that the deduction quantified under section 80-IA is Rs. 492,78,60,973/-. To make it clear, the said amount represents the net profit made by the Assessee from the 'eligible business' covered under sub-section (4), i.e., from the Assessee's business unit involved in generation of power. The claim of the Assessee is that in computing its 'total income', deductions available to it have to be set-of against the 'gross total income', while the Revenue contends that it is only the 'business income' which has to be taken into account for the purpose of setting-off the deductions under sections 80-IA and 80-IB of the Act. To illustrate, the 'gross total income' of the Assessee for the assessment year 2002-03 is less than the quantum of deduction determined under section 80-IA of the Act. The Assessee contends that income from all other heads including 'income from other sources', in addition to 'business income', have to be taken into account for the purpose of allowing the deductions available to the Assessee, subject to the ceiling of 'gross tot....
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....he Act. Section 80- I(6), which is in pari materia to section 80-IA(5), is as follows: "80-I(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under subsection (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." It was held in Synco Industries (supra) that for the purpose of calculating the deduction under section 80-I, loss sustained in other divisions or units cannot be taken into account as sub-section (6) contemplates tha....
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....m' in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act." (Emphasis Supplied) 25. In view of the above, we accept the contention of the Assessee that deduction under Section 80IA of the Act is to be allowed from the Gross Total Income and the same cannot be restricted to income computed under the head 'Profits & Gains of Business or Profession'. Further, the scope of Section 80IA(5) of the Act is restricted to the determination of quantum of deduction by treating the eligible business as the only source of income. 26. We also reject the contention of the Revenue that in the present case the income of the eligible undertaking does not form part of Gross Total Income for the simple reason in case the profits from the eligible business are excluded from the computation of Gross Total Income, the loss under the head ....
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....8393835/- The appellant in its submission stated that certain investments had been made into mainly growth option mutual funds which does not carry any dividend/ exempt income. The appellant further submitted that no disallowance is warranted in case of investment in subsidiary companies as strategic investment. Further the appellant also stated that no 14A disallowance is warranted u/s 115JB of the Act. The appellant relied on Vireet Investment. 6.2.1 The submission of the appellant is examined and the case laws are perused. The appellant on its own had made a Suo-moto disallowance of Rs. 4667450/- u/s 14A r.w.r. 8D of the Rules. The Hon'ble ITAT Mumbai in 102 taxmann.com 98 in case of Olive Bar & Kitchen Pvt. Ltd held that where assessee had made Suo-moto disallowance of expenses under section 14A read with rule 8D, and where the Assessing Officer made further disallowance impugned further disallowance not sustainable. Further, the Hon'ble ITAT Mumbai in case of Asian Paints Ltd. in 160 taxmann.com 402 held that disallowance made by Assessing Officer under section 14A read with rule 8D without recording any satisfaction regarding claim of assessee in respect of e....
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....TD 27 (Delhi -Trib) (SB) wherein it was held that only investments yielding exempt income during the relevant previous year shall be taken into consideration for the purpose of computing the average value of investment for the purpose of Rule 8D of the IT Rules. Therefore, the action of the CIT(A) deleting the additional disallowance made by the Assessing Officer under Section 14A read with Rule 8D while computing taxable income under normal provision of the Act and while computing 'Book Profits' for the purpose of Section 115JB of the Act does not call for any interference. 36. During the course of hearing it was contended on behalf of the Revenue that the CIT(A) had granted relief to the Assessee without appreciating the fact that the amendments made to Section 14A of the Act by way of Finance Act 2022 were clarificatory in nature and therefore, all investments whether resulting in exempt income or not should have been taken into consideration while determining opening/closing balance of investment. We find that the issue under consideration is no longer res integra. We note that Hon'ble Delhi High Court has, in the case of Principal Commissioner of Income-tax (Central) vs. Er....