2012 (11) TMI 507 - AT - Income Tax

Deduction u/s 80IA - denial of claim - assessee also claimed deduction u/s.80HHC - Held that - The gross total income of the assessee is at 8, 03, 26, 598 lakhs after adjusting the losses suffered by it in the eligible as well as profits of the non-eligible units. There are no brought forward losses or unabsorbed depreciation. The claim of deduction under section 80-IA was in respect of eligible unit 4.14 MW wind energy division at 4, 72, 28, 143 and the deduction u/s.80HHC was claimed in respect of other units at 15, 51, 440. Even if both the deductions are added the sum total is obviously less than the gross total income. Thus CIT(A) erred in interpreting the relevant provision when he held that the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA - The assessee is allowed deduction under section 80-IA on the profit derived by it from eligible unit 4.14 MW wind energy unit at 4, 72, 28, 143. In the case of Meera Cotton & Synthetic Mills (P.) Ltd. Versus Assistant Commissioner of Income-tax Ward 9(2) Mumbai 2009 (2) TMI 506 - ITAT MUMBAI after considering the decision of the Hon ble Supreme Court in the case of M/s Synco Industries Ltd Versus Assessing Officer 2008 (3) TMI 13 - SUPREME COURT clearly held that the stage at which set off has to be done is only after aggregation of income under all heads. The CIT(A) did not agree with this reasoning of the ITAT which is held to be bad as the CIT(A) being an authority lower in the tier of authorities under the Act to that of the ITAT is bound to follow the decision of the ITAT and cannot refuse it without any valid reasons - in favour of assessee.

Summary

Issues Involved:
1. Whether the deduction under section 80IA of the Income Tax Act should be allowed unit-wise without adjusting losses from other units.
2. The applicability of the Supreme Court judgment in Synco Industries Ltd. v. Assessing Officer to the current case.
3. The binding nature of the ITAT's previous decisions on the CIT(A).

Issue-wise Detailed Analysis:

1. Deduction under Section 80IA:
The assessee, engaged in the manufacture and sale of aluminum extrusion and generation of wind energy, claimed a deduction under section 80IA for its Wind Mill I unit. The Assessing Officer initially allowed this deduction. However, upon revision, the CIT directed a fresh assessment, leading to the AO setting off the losses from Wind Mill II and III against the profits of Wind Mill I, thereby disallowing the deduction under section 80IA. The CIT(A) upheld this disallowance, citing that the issue was contentious and referencing a Supreme Court decision in Synco Industries Ltd. that mandated the adjustment of losses before determining the gross total income for deductions under Chapter VI-A.

2. Applicability of Synco Industries Ltd. Judgment:
The CIT(A) relied on the Supreme Court's decision in Synco Industries Ltd., which held that deductions under Chapter VI-A should be allowed from the gross total income after adjusting intra-head and inter-head losses, as well as brought forward unabsorbed losses and depreciation. The CIT(A) argued that this binding precedent required the adjustment of losses from other units before allowing the deduction under section 80IA.

3. Binding Nature of ITAT's Previous Decisions:
The assessee argued that the ITAT, in its own case for the assessment year 2006-07, had allowed the deduction under section 80IA unit-wise without adjusting losses from other units. The ITAT had also considered similar cases, such as Meera Cotton & Synthetic Mills (P.) Ltd., where it was held that the deduction should be allowed on the profits of the eligible unit without reducing the losses of other units. The CIT(A) did not follow this ITAT decision, arguing that different High Courts had varying views, and thus the ITAT's decision was not binding.

ITAT's Decision:
The ITAT, upon hearing the appeal, reiterated its stance from the previous cases, including Meera Cotton & Synthetic Mills (P.) Ltd., distinguishing it from Synco Industries Ltd. The ITAT held that the gross total income should be computed after adjusting all losses, but the deduction under section 80IA should be allowed on the profits of the eligible unit without reducing the losses of other units. The ITAT emphasized that the CIT(A) was bound to follow the ITAT's previous decisions and had erred in disregarding them.

Conclusion:
The ITAT allowed the appeal, granting the deduction under section 80IA on the profits derived from the eligible Wind Mill I unit without adjusting the losses from Wind Mill II and III. The ITAT's decision underscored the importance of following binding precedents and clarified the interpretation of section 80IA in light of the specific facts of the case.