2009 (2) TMI 506 - AT - Income Tax

Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings

Summary

Issues:
Denial of deduction under section 80-IB amounting to Rs. 1,00,13,301.

Analysis:

1. The appeal concerned the denial of deduction under section 80-IB amounting to Rs. 1,00,13,301 for the assessment year 2003-2004. The Assessing Officer reduced the deduction based on the judgment of the Hon'ble Bombay High Court, which required adjusting the losses from two eligible units against the profit of another eligible unit before allowing the deduction.

2. The Tribunal analyzed the provisions of section 80-IB, which allow deductions from profits and gains derived from an industrial undertaking. The Tribunal emphasized that the deduction should be granted based on the profits of each eligible industrial undertaking separately. Adjusting losses from one eligible unit against the profit of another would not align with the clear language of the section.

3. Referring to the judgment in CIT v. Canara Workshop (P.) Ltd., the Tribunal highlighted a similar scenario where the High Court held that losses from one priority industry cannot be set off against profits from another priority industry for the purpose of deductions. This principle was further supported by the judgment in CIT v. Visakha Industries Ltd.

4. The Tribunal distinguished the case of Synco Industries Ltd., which was relied upon by the authorities below, by noting the differences in the facts. In the present case, the gross total income was positive, and there were no brought forward losses from eligible industrial undertakings, unlike in the Synco Industries case.

5. The Tribunal also discussed the computation of deductions under Chapter VI-A, emphasizing that the aggregate deductions should not exceed the gross total income of the assessee. In this case, the gross total income was higher than the claimed deduction under section 80-IB, making the deduction eligible without adjusting losses from other units.

6. Ultimately, the Tribunal overturned the decision of the lower authorities and allowed the deduction under section 80-IB on the profit derived from the eligible unit without reducing losses from other eligible units. The Tribunal held that the interpretation applied in the Synco Industries case was not applicable in the current scenario due to the differences in factual circumstances.

7. Therefore, the appeal was allowed in favor of the assessee, granting the deduction under section 80-IB on the profit derived from the eligible unit without adjusting losses from other eligible units.