2015 (10) TMI 243 - AT - Income Tax

Deduction u/ss.80HH & 80I allowed before setting off of loss of another division - Held that - There is no issue between the parties so far as facts of the case are concerned. The assessee claims section 80HHC and 80I deduction qua its profits derived from Mandali Undertaking whereas it has incurred losses from toilet soap division quoting case law of CIT vs. Modi Xerox 2010 (4) TMI 858 - Allahabad High Court , CIT vs. Emmbros Metal (P) Ltd. 2012 (10) TMI 61 - HIMACHAL PRADESH, HIGH COURT and CIT vs. Premier Explosives Ltd 2014 (10) TMI 708 - ANDHRA PRADESH HIGH COURT , to pray for acceptance of its appeal. We put a specific query to the parties as to whether or not the hon ble jurisdictional high court has decided this substantial question of law. The reply received is in negative. We proceed further and notice that hon ble Allahabad high court hereinabove has considered case law of Synco (2008 (3) TMI 13 - Supreme court ) and observes that two principles of law emerged therefrom. The first one is that for the purpose of computing gross income, losses of other units are to be taken into consideration. The second one is that the very course is not to be adopted whilst computing section 80HHC/80I deductions and the profits are to be considered as if the same are the only source of income of that unit. The Revenue fails to quote any distinction on facts or law. Therefore, we accept the assessee s legal submission on first aspect of the matter. We come to objection of the lower authorities on applicability of section 80A amendment (supra) and find that the same is only introduced by the Finance Act, 2009 with retrospective effect from 1.4.2003 and does not deal with the relevant issue of adjustment of losses. We further reiterate that the impugned assessment year is 1991-92. The assessee s sole substantive ground accordingly succeeds. - Decided in favour of assessee.

Summary

Issues involved:
Interpretation of sections 80HH and 80I for deduction eligibility without setting off losses from another division.

Detailed Analysis:

1. Background and Appeal Grounds:
The appeal pertains to A.Y. 1991-92 where the assessee claimed deductions under sections 80HH and 80I without adjusting losses from another division. The CIT(A) upheld the Assessing Officer's decision to set off losses against profits derived from the eligible undertaking.

2. Legal Arguments and Precedents:
The appellant argued that deductions under sections 80HH and 80I should be allowed before setting off losses, citing the decision in Canara Workshops P. Ltd. The appellant also referenced the case of Synco Industries Ltd. to support their position.

3. Judicial Interpretation and Tribunal Decision:
The tribunal considered the case law presented by both parties, emphasizing the importance of determining gross income without adjusting losses for claiming deductions under Chapter VI-A. The tribunal highlighted that the Finance Act, 2009 amendment to section 80A did not address the issue of adjusting losses and was not applicable to the A.Y. 1991-92.

4. Final Decision and Ruling:
After analyzing the legal submissions and precedents, the tribunal ruled in favor of the assessee, allowing the appeal and directing the Assessing Officer to grant deductions under sections 80HH and 80I without setting off losses from another division. The tribunal concluded that the Revenue failed to provide any distinction on facts or law to counter the assessee's legal arguments.

In conclusion, the tribunal's decision clarified the interpretation of sections 80HH and 80I regarding deduction eligibility, emphasizing that losses from another division should not be set off against profits derived from the eligible undertaking for claiming deductions.