2012 (11) TMI 314 - AT - Income Tax

Quantum of Deduction u/s 80-I revision u/s 263 - computation of gross total income - Held that - Gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. It is true that under Section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because Sub-Section 6 contemplates that only the profits 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 as defined in Section 80B(5) - 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 Order of the first appellate authority directing the AO to set off loss from windmill business against other heads of income of the assessee is justified and no interference is called for - In the result, the assessee s appeal is allowed by setting aside the 263 order.

Summary

Issues:
- Revisionary powers under section 263 of the Income-tax Act, 1961
- Application of section 80-IA of the Act
- Set off of losses under section 70(1) of the Act
- Interpretation of relevant legal provisions

Revisionary powers under section 263 of the Income-tax Act, 1961:
The appeal involved a challenge to the exercise of revisionary powers under section 263 of the Income-tax Act, 1961 by the Commissioner of Income-tax (CIT). The CIT had set aside the assessment order passed under section 143(3) as erroneous and prejudicial to the interests of revenue. The appellant contended that the CIT erred in exercising revisionary powers without satisfying the conditions of being erroneous and prejudicial to the revenue's interest. The appellant argued that the assessing officer had examined the issue and allowed the claim, indicating no non-application of mind. The Tribunal, after considering the arguments and submissions, found in favor of the appellant, setting aside the CIT's order.

Application of section 80-IA of the Act:
The case involved the application of section 80-IA of the Income-tax Act, specifically regarding the deduction claimed by the appellant. The Tribunal referred to a previous order in a similar case where it was held that the deeming provision in section 80-IA(5) cannot override section 70(1) of the Act. The Tribunal emphasized that the provisions of section 80-IA(5) are for quantifying relief under section 80-IA and cannot be stretched to compute total income under the Act. The Tribunal further highlighted that the appellant was entitled to set off the loss from the power generation business under section 70(1) of the Act. Citing relevant legal precedents and judgments, the Tribunal concluded that the appellant should be given the benefit of the set-off as claimed, and the order of the CIT was liable to be canceled.

Set off of losses under section 70(1) of the Act:
The issue of setting off losses under section 70(1) of the Act was crucial in the appeal. The Tribunal analyzed the provisions of section 70(1) in conjunction with section 80-IA and emphasized that once a set off is allowed under section 70(1) from income from another source under the same head, another deduction on the same count is not permissible. The Tribunal referenced relevant legal interpretations and judgments to support its decision that the appellant was entitled to set off the losses from one source against income from another source under the same head. By applying the legal principles and precedents, the Tribunal concluded that the order directing the set-off was justified, and no interference was warranted.

Interpretation of relevant legal provisions:
The Tribunal extensively analyzed and interpreted various legal provisions, including section 80-IA, section 70(1), and relevant precedents to determine the applicability of deductions and set-offs in the appellant's case. By referring to past judgments and legal interpretations, the Tribunal clarified the scope and limitations of the provisions under consideration. The Tribunal's decision was based on a thorough examination of the legal framework and established principles, ensuring a fair and just outcome for the appellant.