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Issues Involved:
1. Whether the CIT(A) erred in confirming the action of the Assessing Officer in computing deduction under section 80-IA of the Act after considering the gross total income of both units of the assessee, which are separately eligible for deduction under section 80-IA of the Act. Detailed Analysis: Issue 1: Computation of Deduction under Section 80-IA Facts: - The assessee has two manufacturing units: Polymer Division and Dairy Division, both eligible for deduction under section 80-IA. - For assessment year 1998-99, Polymer Division had a profit of Rs. 1,94,57,205, while Dairy Division incurred a loss of Rs. 2,91,31,057, resulting in a net loss of Rs. 96,73,842. - For assessment year 2001-02, Polymer Division had a profit of Rs. 1,35,65,085, and Dairy Division had a loss of Rs. 4,70,70,122, resulting in a net loss of Rs. 3,36,05,036. Assessee's Claim: - The assessee claimed deductions under section 80-IA based on the profits of the Polymer Division alone, without setting off the losses from the Dairy Division. - The assessee argued that section 80-IA should apply to each undertaking independently. Assessing Officer's Decision: - The Assessing Officer disallowed the deductions, stating that deductions under Chapter VI-A are allowable only when the gross total income is positive. - The gross total income must be computed in accordance with the provisions of the Act, which includes setting off losses from one unit against the profits of another. CIT(A)'s Decision: - The CIT(A) confirmed the action of the Assessing Officer, leading the assessee to appeal to the Tribunal. Tribunal's Analysis: - The Tribunal considered various case laws cited by both parties. - The Tribunal noted that the cases cited by the assessee were not relevant as they dealt with situations where only one unit was eligible for deduction. - The Tribunal referred to the Supreme Court's decision in the case of IPCA Laboratory Ltd., which held that for deductions under section 80HHC, profits from both self-manufactured and trading goods must be considered, and if there is a loss, no deduction is allowed. - The Tribunal emphasized the provisions of sections 80A, 80AB, and 80B(5), which require gross total income to be computed in accordance with the Act, including setting off intra-head and inter-head losses. - The Tribunal concluded that since the assessee's gross total income, after setting off the losses of the Dairy Division against the profits of the Polymer Division, was nil, no deduction under section 80-IA could be allowed. Conclusion: - The Tribunal upheld the orders of the authorities below, confirming that the assessee was not entitled to deductions under section 80-IA for both assessment years, as the gross total income was negative after considering the results of both units. Result: - Both appeals filed by the assessee were dismissed.
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