2015 (12) TMI 625 - HC - Income Tax

Deductions under Section 80HH and 80I - non adjusting the losses of other loss making industrial undertakings of the same assessee with the profit of eligible profit making units as directed by ITAT - Held that - In Bajaj Motors P. Limited s case (2011 (3) TMI 475 - PUNJAB AND HARYANA HIGH COURT ) identical issue was considered by this Court. In the said case the assessee manufactured automobile parts at Gurgaon. It was entitled to deduction under section 80I of the Act. The Assessing Officer took into account loss of the assessee in another manufacturing unit. It was held that the benefit under section 80I of the Act was referable to total income which was required to be worked out after taking into account the loss if any. This view was upheld by the CIT(A) as well as the Tribunal. This Court while dismissing the appeal of the assessee held that in computing the quantum of deduction under section 80I of the Act out of the profits and gains of unit No.1 the loss incurred in another independent unit No.2 should be set off against the profits of unit No.1 - Decided in favour of the revenue

Summary

Issues:
- Interpretation of Sections 80HH and 80I of the Income Tax Act, 1961 regarding deductions without adjusting losses of other industrial units.
- Application of legal precedents in similar cases to determine the eligibility for deductions under Sections 80HH and 80I.

Analysis:
1. The appeal was filed by the revenue challenging the order of the Income Tax Appellate Tribunal regarding the allowance of deductions under Sections 80HH and 80I of the Income Tax Act, 1961 without adjusting losses from other industrial units. The main question was whether the Tribunal was correct in upholding the decision of the Commissioner of Income Tax (Appeals) to allow deductions without adjusting losses (para 1).

2. The Assessing Officer noted that the assessee company had six industrial units and claimed deductions under sections 80HH and 80I without adjusting losses from other units. The Assessing Officer rejected the claim, but the Commissioner of Income Tax (Appeals) partly allowed it. The Tribunal later dismissed the revenue's appeal, leading to the current appeal by the revenue (para 2).

3. The revenue relied on the judgment in Bajaj Motors P. Limited vs. Commissioner of Income Tax to argue that the issue was settled in favor of the revenue. In that case, it was held that the benefit under section 80I should be calculated after considering losses from other units. Legal precedents and judgments were cited by both parties to support their arguments (para 4).

4. The Court analyzed various provisions of the Income Tax Act, including Sections 80A(2), 80AB, and 80B(5), to determine the computation of deductions under Section 80I based on gross total income. The Court referred to previous judgments and concluded that losses from other units should be considered while calculating deductions, as per statutory provisions (para 8).

5. Ultimately, the Court found in favor of the revenue, stating that the provisions of Sections 80A(2), 80B(5), and 80AB were not considered in previous judgments relied upon by the assessee. The Court agreed with the interpretation that losses from other units should be adjusted while calculating deductions under Section 80I. The substantial question of law was answered in favor of the revenue, and the appeal was allowed (para 9).