2016 (7) TMI 409 - HC - Income Tax

Computation of deduction under Section 80-IA - whether Assessing Authority has to calculate income of individual undertakings of assessee on the basis of unabsorbed business loss etc. in respect of each individual unit or it should be collectively ? - Held that - In the present case, one Polymer Unit of the assessee has shown profit while Dairy Unit has shown loss and deduction was applied after absorbing loss of Dairy Unit. The approach of Revenue is clearly erroneous and contrary to the law laid down in Commissioner of Income-Tax and another Vs Modi Xerox Ltd. (2010 (4) TMI 858 - Allahabad High Court ) wherein held that under section 80-I(6) of the Act for the purposes of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) of the Act contemplates that only the profits shall be taken into account as if it was the only source of income - for the purposes of computation of gross total income the losses of other units are to be taken into account but for the purposes of calculating the deduction of industrial undertaking, the loss sustained in another unit cannot be taken into account and only the profit shall be taken into account as if it was the only source of income of that unit. In view of above, question formulated above is answered in favour of Assessee and against Revenue

Summary

Issues:
Calculation of deduction under Section 80-IA of the Income Tax Act, 1961 for individual undertakings.

Analysis:
The High Court considered two appeals related to Income Tax Assessments for different years, arising from a common judgment passed by the Income Tax Appellate Tribunal. The main issue for consideration was whether the Assessing Authority should calculate the income of individual undertakings of the assessee on a collective basis or separately for each unit while computing the deduction under Section 80-IA of the Income Tax Act, 1961.

The appellant relied on a Division Bench judgment of the Court in a similar case involving Sections 80-I and 80HH. The Court in the referenced case had held that the income of each industrial undertaking eligible for deduction should be determined after adjusting unabsorbed business loss, investment allowances, and depreciation. The Court emphasized that the deduction under Sections 80-HH and 80-I should be allowed based on the profits and gains derived from each industrial undertaking, not collectively.

In the present case, the appellant's Polymer Unit showed a profit while the Dairy Unit showed a loss. The Revenue's approach of applying the deduction after absorbing the loss of the Dairy Unit was deemed erroneous and contrary to the legal precedent established in the Division Bench judgment. The Court ruled in favor of the assessee, setting aside the Tribunal's order and directing a fresh order to be passed in accordance with the law.

The Court's decision was based on the interpretation of relevant provisions of the Income Tax Act and previous judicial rulings, emphasizing that the income derived by each industrial undertaking should be considered independently for the purpose of computing deductions under Section 80-IA. The judgment clarified the correct method of calculating deductions and highlighted the importance of assessing profits and losses of individual units separately to determine eligibility for deductions under the Act.

Both appeals were allowed in favor of the assessee, highlighting the significance of correctly interpreting and applying the provisions of the Income Tax Act to ensure fair and accurate assessment of deductions for industrial undertakings.