2012 (8) TMI 196 - HC - Income Tax

Denial of claim of Section 80 IB (3)- Revenue held total investment in the assessee s two units exceeded Rs.1 crore - ITAT decided that investment in Unit-I only is to be taken into consideration - Held that - ITAT on noticing the text of Section 80IB and analyzing the facts stated that as both the units were separately located, the deduction is to be seen with respect to investment made in each unit separately not-with-standing the fact that proprietor of both the units is the same. As decided in CIT Versus DEWAN KRAFT SYSTEM P. LTD. 2007 (2) TMI 149 - HIGH COURT , DELHI where profits of two eligible units were sought to be clubbed and adjusted towards the loss claimed in the unit which had been granted the benefit under Section 80IA - as in the present case the assessee has not admittedly claimed the benefit u/s 80IA for the relevant assessment year in respect of Unit No.2 the question of clubbing the investment for purpose of common undertaking does not arise - Section 80-IA(5) directs the income tax authorities to treat the initial unit as an entirely separate entity to the extent the benefit has to be given - in favour of assessee.

Summary

Issues:
Interpretation of Section 80IB(3) - Whether investment in both Unit-I and Unit-2 has to be considered for claiming deduction under Section 80IB or only investment in Unit-I is relevant.

Analysis:

Issue 1: Interpretation of Section 80IB(3)
The case involved a dispute regarding the interpretation of Section 80IB(3) of the Income Tax Act, 1961, specifically related to the eligibility criteria for claiming deduction for a small-scale industrial undertaking. The appellant, a proprietor of two units, argued that the investment in each unit should be considered separately for claiming the deduction under Section 80IB. The Assessing Officer had clubbed the investments in both units, exceeding the threshold of Rs.1 crore, making the appellant ineligible for the deduction.

Analysis:
The Tribunal analyzed the provisions of Section 80IB and concluded that the deduction is allowable for each industrial unit separately, not based on the individual assessee. It emphasized that an assessee may have multiple industrial units, and each unit fulfilling the conditions under Section 80IB is entitled to claim the deduction. The Tribunal held that the investment in each unit should be evaluated independently, irrespective of the common proprietorship. Therefore, it upheld the CIT(A)'s decision to allow the deduction for the appellant's industrial unit, Jagdamba Industries, by excluding the investment made in Unit No.2, Jagdamba Exports, to meet the eligibility criteria under Section 80IB.

Issue 2: Commonality in Units and Policy Considerations
The revenue contended that allowing the deduction based on separate investments in each unit could lead to the proliferation of multiple units claiming deductions. However, the appellant relied on a previous court decision to support the uniform treatment of small-scale units under Section 80IB, emphasizing the government's policy to promote industrial growth in the sector.

Analysis:
In response to the revenue's argument, the Court referenced a previous judgment involving the interpretation of Section 80IA, highlighting the specific provisions that treat eligible businesses as independent units for the purpose of computing deductions. The Court emphasized the importance of adhering to the statutory provisions and treating each eligible unit as a separate entity for determining deductions. It concluded that since the appellant had not claimed benefits under Section 80IA for Unit No.2, the issue of clubbing investments for a common undertaking did not arise, and the appellant was entitled to the deduction for Jagdamba Industries under Section 80IB.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision that the deduction under Section 80IB should be assessed separately for each industrial unit, based on their individual investments, even if owned by the same proprietor. The judgment underscored the statutory provisions and policy considerations supporting the independent treatment of eligible units for claiming deductions, ensuring a fair and consistent application of tax benefits in the industrial sector.