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2020 (1) TMI 546 - AT - Income TaxDeduction u/s 80IA - whether loss of non-eligible units should be first adjusted with the profit of the eligible unit and deduction should be allowed in respect of net profit under the head profit and gain of the business/profession of the assessee? - whether any loss of non-eligible unit should be adjusted with the profit of the eligible unit for determining profit eligible for deduction under section 80IA? - HELD THAT - For computing deduction u/s 80IA profit of the eligible units have only to be considered subject to the upper limit of Gross total income. In view of the decision of SONA KOYO STEERING SYSTEMS LTD. 2010 (2) TMI 83 - DELHI HIGH COURT we set aside finding of the CIT(A) in the instant case to set off the loss of the other non-eligible unit against the profit of the eligible unit for computation of the deduction eligible under section 80-IA of the Act. I n the instant case, on perusal of Certificate No.10CCB in view of the facts appearing in the form No.10CCB, it needs verification, whether the loss making unit was also eligible for deduction under section 80-IA of the Act and if so the claim of deduction under section 80-IA of the Act has to be computed for both eligible units. CIT(A) has not adjudicated on the addition made by the AO in respect of the interest income which was not derived from the business of the eligible undertaking. In view of the complete financial information in respect of the two units of the assessee not available before us, in interest of the Justice, we feel it appropriate to set aside the order of the CIT(A) and restore the issue back to him for deciding afresh in accordance with law, after verification of financial statements of both the units of the assessee. It is needless to mention that both the parties, i.e., the assessee as well as the Assessee Officer shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes.
Issues Involved:
1. Validity of the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Restriction of the claim of deduction under Section 80IA of the Income Tax Act, 1961. 3. Computation of gross total income and eligibility for deduction under Section 80IA. Issue-wise Detailed Analysis: 1. Validity of the order of the Commissioner of Income Tax (Appeals) [CIT(A)]: The assessee contested that the CIT(A)'s order was flawed both in law and facts, and contrary to the evidence on record, principles of law, binding judgments, and relevant provisions of the Act. The CIT(A) had confirmed the Assessing Officer's action in restricting the deduction under Section 80IA to ?167,83,87,158/- against the claimed ?187,58,66,703/-. 2. Restriction of the claim of deduction under Section 80IA of the Income Tax Act, 1961: The assessee filed a return declaring a gross total income of ?187,58,66,703/- and claimed a deduction under Section 80IA for the same amount. The Assessing Officer restricted the deduction to ?167,83,87,158/- (income from "profits and gains of business or profession") and excluded ?19,74,79,545/- (income from other sources). The CIT(A) further reduced the allowable deduction by setting off the loss of ?35,52,96,120/- from another unit, affirming the deduction at ?167,83,87,158/-. 3. Computation of gross total income and eligibility for deduction under Section 80IA: The CIT(A) held that the profit of the eligible unit, after adjusting the loss from another unit, constituted the net amount eligible for deduction under Section 80IA. The CIT(A) referenced Section 80AB, which mandates that deductions under Chapter VIA must be computed in accordance with the provisions of the Act, including setting off losses. The CIT(A) cited the Supreme Court decision in IPCA Laboratory Ltd. v Deputy Commissioner of Income-tax [2004] 266 ITR 521 (SC), which clarified that deductions under Chapter VIA are only permissible to the extent that eligible profit forms part of the gross total income. Further Analysis and Tribunal's Decision: The Tribunal considered the arguments and submissions from both sides. The assessee argued that deduction under Section 80IA should be computed based on the profit of the eligible unit alone, as per Section 80-IA(5), and should be restricted to the gross total income as per Section 80A(2). The Revenue contended that losses from non-eligible units should be adjusted against the profit of the eligible unit before allowing the deduction. The Tribunal referred to the Delhi High Court decision in CIT v Sona Koyo Steering Systems Ltd [2010] 321 ITR 463, which supported the assessee's view that the profit of the eligible unit should be considered independently for deduction purposes. The Tribunal also noted that the CIT(A) had not adjudicated on the addition made by the Assessing Officer regarding interest income not derived from the eligible undertaking. Conclusion and Order: The Tribunal set aside the CIT(A)'s order and remanded the case back for fresh adjudication, directing verification of financial statements of both units of the assessee. The Tribunal emphasized the need to determine whether the loss-making unit was also eligible for deduction under Section 80IA and to compute the deduction accordingly. The appeal was allowed for statistical purposes, ensuring both parties are given adequate opportunity to present their case. Pronouncement: The order was pronounced in the open court on 10th January, 2020.
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