TaxTMI 
TaxTMI 
2022 (4) TMI 1665
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.... set off of loss of 80IC entitlement units against the income of other units, which was not entitled for deduction u/s. 80IC of the Act. Thus, as per the order of Hon'ble High Court dated 29.9.2020 (supra), Ground No. 6 to 6.4 of Revenue in ITA No. 1782/Mds/2012 for A.Y. 2008-09 was restored to the file of the Tribunal for re-adjudication. For the sake of completeness Ground No. 6 to 6.4 of revenue are being reproduced below: "6. The CIT (A) erred in holding that loss of 80IC unit could be set off against the income of other units. 6.1 The CIT (A) ought to have appreciated that the decisions relied upon by him are distinguishable from the facts of the case. 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 arrive....
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....ppeal before the Commissioner of Income Tax (Appeals)-III, Chennai (for brevity "the CIT(A)"). The assessee contended that the income of the Himachal Pradesh Unit is an exempt unit, it is only entitled for deduction under Section 80-IC of the Act subject to the conditions contained in the respective Sections under Chapter VI-A. The assessee further contended that the same is includible in the total income and they are subject to the provisions of the Act for considering all incomes under different heads and different sources for aggregation including whenever necessary to adjust losses under different sources and under different heads as laid down in Sections 70 to 80 of the Act. Therefore, the assessee contended that from the gross total income thus arrived, deduction under Chapter VI-A is to be allowed. Reliance was placed on the decision in the case of CIT vs. Patiala Flour Mills Co. P. Ltd. [(1978) 115 ITR 640 (SC)]. Reliance was also placed on the note on clauses of Finance Act (No.2), 1980. The CIT (A) by order dated 29.06.2012, allowed the appeal in respect of the said issue. The finding rendered by the CIT (A) in paragraphs 10.2 and 10.2.1 is as follows:- "10.2. I ....
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....en a similar view and held that in determining business profit for deduction u/s 80-HHC, the unabsorbed business loss of earlier years u/s 72 should be set off The Hon'ble Supreme Court in A.M. Moosa (supra) has held that profit in sec 80-HHC(1) and (3) of the Act means positive profit and 'profit from such exports' has to be profits from export of self manufactures goods plus profits from export of trading goods. Deduction can be permitted only if there' is positive profit in export of both self-manufactured goods as well as trading goods. If there is loss in either of the two then that loss has to be taken into account for the purpose of computing the profits. Section 80-AB has been given an overriding effect over ail other Sections in Chapter VI-4 and sec 80-HHC would be governed by sec 80-AB. The ratio is fully applicable to cases covered under various sections in Chapter VI-A under the heading "C - deductions in respect of certain incomes". The income of various sources under the same head as well as under other heads are to be aggregated and the clubbing provisions contained in sections 60 to 64 and provisions for set off and carry forward of losses contained ....
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..... 80-IA (5) of the Act, which treats the eligible business as the only-source of the assessee. Reference may be made to the Circular No. 281, dated 22.09.1980 (131 ITR St 23) which explained the object of introduction of section 80-1 by the Finance (No. 2) Act, 1980 where similar provisions are enshrined. The relevant part is reproduced for ready reference and clarity: "Deduction in respect of profits and gains from industrial undertakings, etc., established after a certain date - New Section 80- 1......... 9.4........... (3) In computing the quantum of "tax holiday; profits in all cases, taxable income derived from the new industrial units, etc., will be determined as if such unit were an independent unit owned by an assessee who does not have any other source of income. In the result, the losses, depreciation and investment allowance of earlier years in respect of the new industrial undertaking, ship or approval hotel will be taken into account in determining the quantum of deduction admissible under the new section 80-1 even though they may actually have been set off against the profits of the assessee from other sources....." In....
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.... the income of other units. After considering the submissions of the assessee and also by considering various decisions, the Id. CIT (A) directed the Assessing Officer to allow carry forward and set off the losses of the unit from the profit of the unit in subsequent year(s). 31. Aggrieved, the Revenue is in appeal before the Tribunal. The Id. DR, by relying on the decision CIT v. KEI Industries Ltd. 373 ITR 574 (Delhi), has submitted that the findings of the Id. CIT (A) should be reversed. 32. On the other hand, the Id. Counsel for the assessee strongly supported the order passed by the Id. CIT(A). 33. We have heard both sides, perused the materials on record and gone through the orders of authorities below. With regard to set off of losses of 80IC unit against the profit of other units, we find that the Hon'ble Delhi High Court in the case of CIT v. KEI Industries Ltd.(supra) has held as under: "Loss suffered by the assessee in a unit entitled to exemption under section 10B of the Income-tax Act, 1961 cannot be set off against income from any other unit not eligible for such exemption. " 34. Respectfully following the ratio laid do....
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.... is erroneous, we deem it appropriate to set aside the order passed by the Tribunal and remand the matter for fresh consideration in accordance with law. 17. In the result, this tax case appeal is allowed, the order passed by the Tribunal dated 27.04.2016, is set aside and the matter is remanded to the Tribunal for fresh consideration. Liberty is granted to the assessee and the Revenue to place all contentions both factually and legally for the consideration of the Tribunal, which shall decide the issue by passing a reasoned order. In the above judgment, we have referred to some of the decisions relied on by the learned counsel on either side to indicate to the Tribunal that the legal position needs to be examined qua the facts of the assessee's case. For the above reasons, the substantial questions of law are left open. No costs." 7. Respectfully following the direction of Hon'ble High Court, the arguments of ld. representative of parties were heard on Ground No. 6 to 6.4 of the revenue. 8. Ld. CIT DR supporting the assessment order submitted that as per provisions of section 80IA(5), it is very much clear that eligible income or loss derived by this unit c....
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....isions of Chapter-VI-A or sections 10A, 10B, etc of the Act, the same shall be allowed in computing the total income of the assessee". Ld. counsel for the assessee further drew our attention towards para 29 at page 23 of the Tribunal order and submitted that in view of CBDT Circular dated 16.7.2013, the Tribunal was not correct and justified in holding that the set off of loss is not allowable as per section 70(1) of the Act. Ld. counsel for the assessee has placed on the following decisions: "1. Synco Industries Ltd vs AO, 299 ITR 444 (SC) 2. CIT vs Mohan Brewaries and Distilleries Ltd., 92 CCH 17 (Che) 3. CIT vs KEI Industries Ltd., 373 ITR 574 (Del) 4. CIT vs Galaxy Surfactants Ltd., 343 ITR 108 (Del) 5. TCA No. 448 of 2019 remanding the matter in ITA No. 1782/Mds/2012 11. Ld. counsel by referring to para 7 of the decision of Hon'ble Supreme Court in the case of Synco Industries Ltd(supra) submitted that sub-section (1) of section 80A of the Act lays down that while computing the total income of an assessee, deductions specified in section 80C to 80U shall be allowed from his gross total income. He further explained that ....
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....order of the ld. CIT (A) may kindly be upheld by dismissing ground of the revenue. Last but not least, the ld. counsel has also placed reliance on the decision of Hon'ble Supreme Court in the case of Mohan Brewaries and Distilleries Ltd (supra),and the decision of Hon'ble Supreme Court in the case of Rajapalayam Mills Ltd vs CIT (1978) 115 UTR 777 (SC), wherein, the issue was that loss of unit entitled to deduction under Chapter VI-A, which has been set off against such income in the respective year, cannot be notionally carried forward and thus, set off has to be allowed in the same year against the income of non-entitled unit. Therefore, the first appellate order also hold fields on this count that loss of eligible unit cannot be carried forward to be set off against the profits of same unit in the subsequent years. Finally, ld. counsel submitted that as per direction of Hon'ble Madras High Court in the judgment dated 20.9.2020 and case laws relied on by the assessee cited above, the findings arrived at by the ld. CIT (A) may kindly be upheld by dismissing the ground No. 6 to 6.4 of the revenue. 15. On careful consideration of the rival submissions, first of all, we note ....
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.... incentives". This Court also placed reliance on the decision reported in (2004) 271 ITR 311 (Raj) (CIT V. Mewar Oil and General Mills Ltd.), and came to the conclusion that once the losses and other deduction have set off against the income of the previous year, it should not be reopened again for the purpose of computation of current year income under Section 80I or 80IA of the Income Tax Act and the assessee should not be denied the admissible deduction under Section 80IA of the Income Tax Act." 17. Now, we take respectful cognizance of the decision of Hon'ble Supreme Court in the case of M/S Yokogawa India Ltd.,(supra), which was rendered on 16.12.2016 much after the order of the Tribunal dated 27.4.2016, which has been set aside by the Hon'ble Madras High Court remitting the issue to this Bench. In the said judgment, Hon'ble Supreme Court in paras 15 to 18 held 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 comp....
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....n." 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesai....
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....isions of section 70 of the Act. In this judgment, in the second part of para 6, Their Lordships clearly held that entitlement of the assessee to set off a loss which is sustained by an eligible unit against the income arising from other units under the same head of profits and gains of business or profession. The legislature not having introduced a statutory prohibition, there is no reason to deprive the assessee of the normal entitlement which would flow out of the provisions of section 70. 19. From respectful, vigilant and careful reading of judgment of Hon'ble Madras High Court dated 29.9.2020 (supra) which remanded the issue to this Bench of the Tribunal, we clearly observe that agreeing with the contention of the assessee/appellant, Their Lordships has remanded for fresh consideration by granting opportunity to both the parties to place all contentions both factually and legally for consideration of the Tribunal. Their Lordships in last operating para 17 also expressed that after referring to some of the decisions relied on by the learned counsel on either side to indicate to the Tribunal that the legal position needs to be examined qua the facts of the assessee's case. ....
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....x-liable income." 22. On respectful, careful and vigilant reading of conclusions drawn by Hon'ble High Court, we note that Their Lordships has adjudicated a reverse situation by holding that the tax exemption of the assessee eligible u/s. 10B could not have been set off against the loss from tax liable income. The factual matrix of the present case is different as the assessee incurred loss from unit eligible for deduction u/s. 80IC of the Act and claim of set off of the same against profits accrued to it from non-eligible or tax liable units which was denied by the AO and allowed by the ld. CIT(A). Therefore, we respectfully observe that the benefit of the judgment of Hon'ble Delhi High Court in the case of KEI Industries Ltd.,(supra), is not available for the revenue in the present case as the issue decided therein was quite distinct and different from the issue to be adjudicated in the present case. 23. Respectfully following the judgment of Hon'ble Supreme Court in the case of Synco Industries Ltd (supra), judgment of Hon'ble Madras High court in the case of Mohan Brewaries and Distilleries Ltd (supra) and Hon'ble Bombay High Court in the case of Galaxy Surfactants Ltd (s....