2023 (4) TMI 275 - AT - Income Tax

Deduction u/s.80IA - computation of eligible profit for the purpose of deduction - AO has allowed deduction u/s.80IA by setting off loss of one eligible unit to profit of another eligible unit and quantified net profit eligible for deduction - HELD THAT - We find that this issue is squarely covered by the decision of Yakogawa India Ltd. 2016 (12) TMI 881 - SUPREME COURT as held that while computing the quantum of deduction u/s.80IA(6) AO, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at deduction under Chapter VI of the Act. For the purpose of calculating deduction, loss sustained in one of the units is not to be taken into account, because, sub-section (6) contemplates that only the profit shall be taken into account as if it was the only source of income. The stage of deduction of profits gains of the business of an eligible undertaking has to be made independently, and therefore, immediately after the stage of determination of profits gains, and therefore, AO the Ld.CIT(A) completely erred in re-computing deduction u/s.80IA by setting off loss of one eligible unit to profit of another eligible unit. We direct the AO to allow deduction claimed u/s.80IA without setting off loss of another eligible unit. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment involves the computation of total income for the assessment year 2014-15 and the interpretation of provisions related to deduction under section 80IA of the Income Tax Act, 1961.

Computation of Total Income:
The appellant raised grounds of appeal regarding the computation of total income for the assessment year 2014-15, specifically related to the treatment of income and losses from different divisions. The appellant argued that the loss incurred in one division should not be deducted again from the income of units eligible for deduction under section 80IA. The appellant referred to a previous decision to support this argument.

Interpretation of Section 80IA:
The judgment delves into the interpretation of section 80IA(6) of the Income Tax Act, particularly concerning the treatment of profits and losses from different units while calculating deductions. The judgment cited a Supreme Court ruling emphasizing that only profits should be considered for deduction purposes, excluding losses from eligible units. It highlighted that the deduction of profits and gains of an eligible undertaking should be made independently without setting off losses from other units.

Key Points:
The appellant, a Domestic Limited Company engaged in manufacturing, filed its return of income for the AY 2014-15. The assessment was completed under section 143(3) of the Act, determining the total income by re-computing deduction under section 80IA. The First Appellate Authority upheld the additions made by the Assessing Officer regarding the deduction calculation.

Decision:
The Appellate Tribunal, Chennai, allowed the appeal filed by the assessee, directing the Assessing Officer to grant the deduction claimed under section 80IA without setting off losses from other eligible units. The judgment emphasized the need to treat profits derived from industrial undertakings as the sole source of income for calculating deductions under Chapter VI of the Act, in line with a Supreme Court ruling.

Conclusion:
The judgment provided clarity on the computation of total income and the correct interpretation of section 80IA of the Income Tax Act, ensuring that only profits are considered for deductions without offsetting losses from other eligible units. The decision favored the appellant, emphasizing adherence to legal provisions and established precedents in tax law.