2015 (1) TMI 1458 - HC - Income Tax

Revision u/s 263 - deduction u/s 80-IB is different on the gross amount after adjusting the loss - HELD THAT - Though, the word used in business at Section 80-IB, the careful reading makes it clear that, business has to be understood with reference to the business referred in Sections 3 and 2 of the 11(a) and 11(b) where the reference is to industrial undertaking only. In substance it makes no difference. The judgment of the Apex Court in the case of Synco Industries Ltd. V. Assessing Officer (Income-Tax) And Another 2008 (3) TMI 13 - SUPREME COURT squarely applies to the facts of this case, on which, the reliance is placed by the Tribunal and held 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 one has to read the expression 'gross total income' as defined in Section 80B(5).

Summary

Issues:
Appeal challenging Tribunal's order under Section 263 of the Income-tax Act regarding deduction under Section 80-IB in the case of a company engaged in poultry and cattle feed manufacturing.

Analysis:
The appeal was filed by the revenue challenging the Tribunal's decision to set aside the Commissioner's order under Section 263 of the Income-tax Act. The Commissioner had interfered with the assessment order passed by the Assessing Authority regarding the deduction claimed under Section 80-IB by the assessee company. The Commissioner considered the assessment order erroneous and prejudicial to the revenue's interest as the deduction under Section 80-IB was claimed without adjusting the loss suffered in the rearing division. The matter was remanded back to the Assessing Authority for re-computation.

The assessee appealed to the Tribunal, which relied on the judgment of the Supreme Court in Synco Industries Ltd. v. Assessing Officer (Income-Tax) and held that profits of eligible units should be computed without adjusting the loss from the rearing division against them. The Tribunal allowed the appeal, stating that the assessee was correct in quantifying deductions under Section 80-IB without adjusting the said loss. The revenue, aggrieved by this decision, filed the current appeal.

The substantial question of law before the court was whether the Tribunal was correct in holding that the loss sustained in the rearing division should not be adjusted against the profits of eligible units before granting deduction under Section 80-IB of the Act. The revenue contended that both units are eligible businesses, and while computing the deduction under Section 80-IB, it should be done after adjusting the income of the loss-making unit. On the other hand, the assessee supported the Tribunal's decision.

The court analyzed the provisions of Section 80-IB and observed that the word "business" in the section had to be understood with reference to industrial undertakings. Citing the judgment in Synco Industries Ltd., the court held that the Tribunal's decision was in accordance with law. The court found no infirmity in the Tribunal's order and ruled in favor of the assessee, dismissing the appeal filed by the revenue.