2015 (7) TMI 1185 - AT - Income Tax

Gross Total Income computation for availing deduction u/s 80IB - whether the loss of one unit of business need not be adjusted against the profit of other unit of business in order to arrive at GTI? - Held that - Legal issue raised by the revenue is squarely covered in favour of the assessee by various decisions of the Tribunal as well by that of the Delhi High Court in the case of Sona Koyo Steering Systems Ltd. 2010 (2) TMI 83 - DELHI HIGH COURT wherein held that S. 80-I deduction is allowable without setting off loss of other units as each unit is to be treated as a separate and independent unit u/s 80-I (6) of the I.T. Act and the deduction has to be computed as if the industrial undertaking was the only source of income of the assessee. It is only those industrial undertakings which have a profit or gain which have to be considered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The loss of one such industrial undertaking cannot be set off against the profit of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee u/s 80-I (1). As subsection (5) of section 80-IA is almost identically worded as section 80-I(6) CIT(A) therefore correctly applied the law laid down by the Hon ble Delhi High Court in the case of Sona Koyo Steering Systems Ltd (supra). Also see case of Meera Cotton & Synthetic Mills Ltd 2009 (2) TMI 506 - ITAT MUMBAI as held that deduction u/s 80IB is to be allowed with reference to profits of a particular undertaking and that the loss suffered in other eligible unit of the assessee can not be set off against the profits of eligible unit in question while calculating the amount of deduction u/s 80IB of the Act. - Decided against revenue

Summary

Issues:
- Whether the loss of one unit of business should be adjusted against the profit of another unit of business to arrive at the Gross Total Income for availing deduction u/s 80IB.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) dated 11.10.2013. The Revenue contended that the loss of one unit of business should be adjusted against the profit of another unit of business to determine the Gross Total Income for claiming deduction under section 80IB. However, the assessee argued that each unit should be treated as a separate and independent entity under section 80-I(6) of the Income Tax Act. The assessee relied on various decisions of the Tribunal and the Delhi High Court, particularly the case of Sona Koyo Steering Systems Ltd., where it was held that the deduction under section 80-I is allowable without setting off losses of other units. The court emphasized that only profitable industrial undertakings should be considered for computing the deduction, and loss-making units should not impact the calculation.

The Tribunal noted that section 80-IA(5) is similar to section 80-I(6) and provides that profits and gains of an eligible business should be computed as if it were the only source of income for the assessee. The Tribunal also highlighted section 80-IB(13), which applies the provisions of section 80-IA(5) to eligible businesses under section 80IB. The Tribunal agreed with the CIT(A) that the law laid down by the Delhi High Court in the Sona Koyo Steering Systems Ltd. case was correctly applied. Additionally, the Tribunal referred to a decision of a co-ordinate bench in the case of Meera Cotton & Synthetic Mills Ltd., where it was held that deduction under section 80IB should be based on the profits of a specific undertaking without offsetting losses from other eligible units.

The Tribunal found no legal basis presented by the Revenue to challenge the established proposition. Consequently, the Tribunal upheld the CIT(A)'s findings on the legal issue in question and dismissed the Revenue's appeal. The order was pronounced in the open court on 29.07.2015.