2012 (12) TMI 759 - HC - Income Tax

Deduction u/s 80IA - whether the amount of loss suffered in the Avitech Division was rightly set off against the profits from the eligible vaccine unit - Held that - A fair and objective reading of the record would reveal that the assessee s claim was inadmissible under Section-80IA because the second Unit was located within the same premises and could not, therefore, be characterised as a separate undertaking . Once the assessee decided to open the separate division in the same premises, he cannot claim the benefit of Section 80IA as far as that activity is concerned. In none of the orders of AO or CIT (A) no such contention that the Avitech undertaking was located within the same premises as the other poultry vaccine division or undertaking was raised before the Tribunal. Certainly, the grounds recorded by the Tribunal do not reflect this. Being a pure question of fact, this Court would not interfere with the conclusions of the authorities below on this aspect. As far as the legality of the conclusions are concerned, the Court notices that the Tribunal and the CIT (A) relied upon the ruling of the Supreme Court in CIT v. Canara Workshops 1986 (7) TMI 5 - SUPREME COURT assessee is entitled to a deduction on the entire profits of one priority industry without deducting loss in the other priority industry - no substantial question of law arise.

Summary

Issues:
1. Whether the amount of loss from the Avitech Division was rightly set off against profits from the eligible vaccine unit for computing deduction under Section 80IA.
2. Whether the Avitech Division can be considered a separate undertaking for claiming deductions under Section 80IA.

Issue 1:
The judgment addressed the issue of setting off the loss from the Avitech Division against profits from the vaccine unit for computing deductions under Section 80IA. The assessee company claimed deductions under Section 80IA for profits from its vaccine unit while reporting losses from the Avitech Division. The Assessing Officer adjusted the loss claimed against the profits, leading to a reduced deduction. The Appellate Commissioner directed the deduction to be allowed as per the appellant's claim, supported by the Supreme Court's ruling in CIT vs. Canara Workshop P. Ltd. The ITAT rejected the Revenue's appeal, emphasizing that losses from another industrial undertaking cannot be set off against the income claimed for deduction under Section 80IA. The judgment highlighted that the deduction under Section 80IA is available for industrial activities of an undertaking, not the gross total income of the assessee. The Court dismissed the Revenue's appeal, stating that no substantial question of law arose for consideration.

Issue 2:
The judgment also delved into whether the Avitech Division could be considered a separate undertaking for claiming deductions under Section 80IA. The Revenue argued that the second unit within the same premises could not be classified as a separate undertaking, rendering the claim inadmissible under Section 80IA. The Revenue contended that once the assessee opened a separate division in the same premises, the benefit of Section 80IA could not be claimed for that activity. However, the Court noted that this aspect was not squarely addressed in previous orders, and no such contention was raised before the Tribunal. The Court observed that without specific fact findings on this aspect, interference with the authorities' conclusions would be unwarranted. The Tribunal and the CIT (A) had relied on the Supreme Court's ruling in CIT v. Canara Workshops, 161 ITR 320. Ultimately, the Court dismissed the appeal, concluding that no substantial question of law merited consideration.

The judgment thoroughly analyzed the issues surrounding the setting off of losses against profits for deduction under Section 80IA and the classification of the Avitech Division as a separate undertaking. It highlighted the legal principles governing deductions under Section 80IA and the applicability of relevant case law in determining the admissibility of claims. The Court's decision rested on the interpretation of statutory provisions and previous judicial precedents, emphasizing the need for factual clarity and adherence to legal principles in tax matters.