2007 (2) TMI 149 - HC - Income Tax

Deduction u/s 80IA -The losses of other unit of an assessee-company not set off with the profit of another unit which is eligible for the deduction u/s 80IA, hence AO order was set aside by tribunal and also upheld by the HC

Summary

Issues:
1. Interpretation of Section 80-IA of the Income Tax Act for deduction eligibility.
2. Correct computation of deduction under Section 80-IA for different business units.
3. Application of sub-section 7 of Section 80-IA for determining deduction.

Issue 1: Interpretation of Section 80-IA of the Income Tax Act for deduction eligibility:
The case involved the interpretation of Section 80-IA of the Income Tax Act, 1961, regarding the eligibility and computation of deductions for different business units of an Assessee. The provision allows for deductions for profits and gains derived from eligible businesses of industrial undertakings. The key contention was whether the entire profit from an eligible business should be allowed as a deduction under this section.

Issue 2: Correct computation of deduction under Section 80-IA for different business units:
The Assessing Officer had adjusted the profits and losses of different business units of the Assessee while computing the deduction under Section 80-IA. Specifically, the officer had restricted the deduction by mixing the profits of the Kalamb unit with those of units in Delhi and Noida. This adjustment was challenged as being in disregard of the provisions of sub-section 7 of Section 80-IA, which mandates a separate computation for eligible businesses.

Issue 3: Application of sub-section 7 of Section 80-IA for determining deduction:
The court analyzed sub-section 7 of Section 80-IA, which provides a special method for computing profits and gains entitled to deduction under this section. It states that during the tax holiday period, the eligible business should be treated as the only source of income for the Assessee. The court emphasized that the Kalamb unit, being the only eligible unit for deduction, should be considered as an independent source of income for computing deductions under Section 80-IA.

In conclusion, the court upheld the decisions of the lower authorities, emphasizing that the deduction claimed by the Assessee under Section 80-IA was in accordance with the provisions of the Act. The court dismissed the appeals, stating that there was no substantial question of law to be considered, and no error was found in the view taken by the Tribunal. The judgments cited by the Appellant were deemed inapplicable to the facts of the case.