2012 (8) TMI 463 - HC - Income Tax

Deduction u/s 80IC - assessee having 3 units; 2 located in Delhi and third at Baddi, Himachal Pradesh, latter being eligible for benefit u/s 80IC - Revenue contending adjustment of losses of Delhi unit against profit of Baddi unit before providing deduction u/s 80IC - Held that - Section 80-IA(5) begins with a non-obstante clause, providing that quantum of deduction is to be computed as if the industrial undertaking were the only source of income of the assessee during the relevant years. Section-80IC(5) and Section-80IC(7) expressly provides that provisions contained in sub-section (5) and subsections (7) to (12) of section 80-IA shall, so far as may be, applied to the eligible undertaking or enterprises under this section, meaning thereby that same provision would be applicable in section 80-IC. Therefore, each unit will be considered independently and adjustment of losses of Delhi Unit is not required while computing the eligible profit in respect of Baddi Unit for granting deduction u/s 80-IC. See Dewan Kraft Systems (P) Ltd(2007 (2) TMI 149 - HIGH COURT , DELHI) - Decided in favor of assessee.

Summary

Issues:
1. Application of Section 80IC for deduction in respect of the unit in Baddi, Himachal Pradesh without adjusting losses incurred by Delhi units.
2. Interpretation of Section 80IA (5) and Section 80IC (7) for computing eligible profits.
3. Whether the assessee can carry forward losses of the Delhi units.

Analysis:
1. The case involved the Revenue appealing against the Tribunal's decision to grant the benefit of Section 80IC to the sum of Rs. 86,76,687/- in respect of the unit in Baddi, Himachal Pradesh without adjusting the losses incurred by the Delhi units. The Assessee had three units, with two in Delhi and one in Baddi. The Assessing Officer adjusted the losses of the Delhi units against the profits of the Baddi unit to arrive at the profit eligible for deduction under Section 80IC. The CIT (A) accepted the appeal applying relevant court decisions, leading to the ITAT dismissing the Revenue's appeal based on the independent treatment of each unit as held in previous court rulings.

2. The ITAT's decision was based on the interpretation of Section 80IA (5) and Section 80IC (7), which were considered in line with previous court judgments. The ITAT referred to the meaning of gross total income under Section 80-B(5) and the conditions enumerated in sub-section (6) of Section 80IA. It was held that each industrial unit should be treated separately for the purpose of deduction under Section 80IA or 80IC, and the provisions of Section 80IA were applicable to Section 80IC as well. The Court upheld the ITAT's decision, citing similar reasoning in a previous Division Bench ruling.

3. The Court clarified that the question of carrying forward losses of the Delhi units was a matter for the Assessing Officer to consider separately. It was emphasized that the deduction under Section 80IC cannot exceed the gross total income computed by the Assessing Officer, as per Section 80A (2). The Court dismissed the appeal, stating that no substantial question of law arose for consideration in this case.