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TMI Blog2010 (3) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... I, ANIL KUMAR, JJ. JUDGMENT Rakesh Tiwari J.- Heard learned counsel for the parties and perused the record. 2. This appeal has been preferred by the appellant-Commissioner of Income-tax-I, Lucknow, under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), challenging the validity and correctness of the judgment and order dated March 31, 2003, passed by the Income-tax Appellate Tribunal, Lucknow Bench, Lucknow, in I. T. A. No. 769/Luck./2001 for the assessment year 1995-96. 3. The facts of the case are that the assessee is a closely held domestic company which filed its return of income on November 30, 1995, after setting off the brought forward losses of earlier years against the current year's income computed at Rs. 10,14,442. The income from the various divisions of the company in the relevant year 1995-96 was as under : Division Income (Rs.) Income from construction division 3,76,939 Loss of cement division (21,63,703) Income from Nainital Hotel 35,01,828 Income from Lucknow Hotel 33,25,612 4. The aggregate income set off of all the units came to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble even in a case where the gross total income is negatived within the meaning of section 80A read with section 80B of the Income-tax Act ?" Appellant's case 8. The contention of learned counsel for the appellant is that the Assessing Officer has disallowed the claim of the assessee for deduction under sections 80HH, 80HHD and 80-I of the Income-tax Act, 1961, on the ground that the gross total income of the assessee, as defined under section 80B(5), was in loss. In appeal the Commissioner of Income-tax (Appeals) allowed the claim of deduction under section 80-I to the extent of unabsorbed depreciation relating to hotel divisions at Lucknow and Nainital brought forward from the earlier years and upheld the order of the Assessing Officer disallowing the claim of deduction under sections 80HH and 80HHD. 9. He further submits that in appeal preferred by the assessee the Income- tax Appellate Tribunal, while allowing full deduction, has relied on the order of the apex court in the case of Canara Workshops P. Ltd. [1986] 161 ITR 320 (SC) that the Income-tax Appellate Tribunal has held that deduction under sections 80-I and 80-IA is based on performance on year to year and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nco Industries Ltd. v. Assessing Officer of Income-tax [2002] 254 ITR 608 (Bom) has held that the non obstante clause in sub-section (6) of section 80-I is applicable only to quantum of deduction. Gross total income referred to in section 80-I(1) is to be read as defined in section 80B(5) and is required to be computed in the manner provided in the Act. Sections 80A(2) and 80B(5) are declaratory in nature. They apply to all sections falling under Chapter VI-A. Non obstante clause in section 80-I(6), therefore, cannot restrict sections 80A(2) and 80B(5). 13. Sri D. D. Chopra, learned counsel for the Department, has then urged that a study of the provisions of sections 80A, 80B(5) and 80HHC makes it clear that in computing the total income of an assessee deductions specified in sections 80C to 80U shall be allowed from the "gross total income" and such deduction shall not exceed the gross total income. Gross total income, as defined in section 80B(5), would be computed in accordance with the provisions of the Act before making any deduction under Chapter VI-A of the Act. The mandate contained in sections 80A and 80B(5) clearly requires that the gross total income is to be compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 260A before this court. This appeal has been filed for quashing the impugned order and restoration of the orders of the Commissioner of Income-tax (Appeals) based on the aforesaid I. T. As. Respondent's case 16. The respondent-counsel argued that the assessee is a company incorporated. For the assessment year in question, the assessee carried on various businesses, i.e., construction activity, cement production, running hotels at Lucknow and Nainital. In the mining division, it has not shown any production and that the assessee maintains separate accounts in respect of each division, as also for the head office, copies of which were filed during the course of assessment proceedings. According to him, Chapter VI-A of the Income-tax Act, 1961, deals with various deductions available to various assessees. Referring to sections 80A(1), 80A(2) and 80B(5) he submits that since the two hotel units of the assessee, i.e., the hotel unit at Nainital was entitled to deduction under section 80HH and deduction under section 80-I and the hotel unit at Lucknow was entitled to deduction under section 80-IA, therefore, the respondent claimed the said deduction as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss total income" means the total income computed in accordance with the provisions of this Act before making any deduction under the said Chapter. But, however, as the gross total income of the respondent-assessee, after taking into consideration the losses of the other units and after taking into consideration the losses carried forward from the previous year came to nil, the assessing authority, although not doubting the entitlement of the assessee to the deduction, did not allow the deduction. 19. Learned counsel for the respondent would argue that section 80-I(6) is a non obstante clause and, therefore, the manner of computation by the Department is incorrect. According to him, the gross total income is to be computed and, thereafter, 20 per cent. profits are to be adjusted in the gross total income from the industry, which was earning profits and only thereafter computation according to the procedure prescribed under section 80A will come into play. 20. He submits that the respondents are entitled to the deduction under section 80-I(6) read with section 80HH of the Act and has relied upon the following observation of the apex court in case of CIT v. Canara Workshops P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome, it provides "a deduction from such profits and gains". 22. It is further stated that this submission of the assessee further finds support from a perusal of sub-section (6) which starts with a non obstante clause which reads as under : "(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." 23. According to the counsel for the respondent, this provision clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... express language of sub-section (1) of both the sections. 26. It is, lastly, submitted that it is a settled principle of law that while interpreting any provision of law, meaning should be given to each and every word used therein. 27. In the alternate, it is argued by the counsel for the respondent deductions under Chapter VI-A especially the deductions under sections 80-I and 80HH are provided to industrial undertakings being beneficiary provisions, hence a liberal interpretation should be given to these provisions. 28. He also relied upon a recent judgment of the Delhi High Court in the case of CIT v. Sona Koyo Steering Systems Ltd. [2010] 321 ITR 463 (Delhi); [2010] 1 Taxmann.Com 102 (Delhi), where a similar argument raised by the Revenue was rejected upholding the order of the Tribunal. The court also distinguished the decision in the case of Synco Industries [2008] 299 ITR 444 (SC) being relied upon by the Revenue. 29. In rebuttal the learned counsel for the Department submits that in the case of CIT v. Chhata Sugar Co. Ltd. [2005] 277 ITR 256 (All) the court held that in view of the specific definition of gross total income as given in section 80B(5) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in that case the assessment year involved was the assessment year 1966-67 and the assessment years 1967-68 and the issue involved was with regard to the deduction under section 80E of the Act prevailing during that period, viz., deduction in respect of profits and gains from specific industries in the case of certain companies. The Finance Act, 1967, with effect from April 1, 1968, transported the subject-matter hitherto covered by section 80E to section 80-I of the Act. In the present case, the issue involved is with regard to the deduction under section 80-I of the Act, therefore, the Income-tax Appellate Tribunal has grossly erred in relying upon the ratio laid down by the apex court in the case of Canara Workshop Pvt. Ltd. [1986] 161 ITR 320 (SC). 32. The provisions of section 80-I in this back drop would apply and the provisions of section 80E would not apply as is apparent from the judgment rendered by this court in CIT v. Chhata Sugar Co. Ltd. [2005] 277 ITR 256 (All) referred by the learned counsel for the appellant. In that case, the court held that specific definition of gross total income, as given in section 80B(5) of the Act, for computation of special deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants ; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990, but before the 1st day of April, 1991, there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty-five per cent. thereof : Provided that in the case of an assessee, being a company, the provisions of this sub-section shall have effect in relation to profits and gains derived from an industrial undertaking or a ship or the business of a hotel as if for the words 'twenty-five per cent.', the words 'thirty per cent.' had been substituted. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence ; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. Explanation 3.-For the purposes of this sub-section, 'small-scale industrial undertaking' shall have the same meaning as in clause (b) of the Explanation below sub-section (8) of section 80HHA. (3) This section applies to any ship, where all the following conditions are fulfilled, namely :- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it ; (ii) it was not, previous to the date of its acquisition by the Indian company, owned or used in Indian territorial waters by a person resident in India ; and (iii) it is brought into use by the Indian company at any time within the period of ten years next following the 1st day of April, 1981. (4) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (i) the business of the hote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wered craft, the provisions of this sub-section shall have effect as if for the words 'seven assessment years', the words 'four assessment years' had been substituted : Provided also that in the case of- (i) an industrial undertaking which begins to manufacture or produce articles or things or to operate its cold storage plant or plants ; or (ii) a ship which is first brought into use ; or (iii) the business of a hotel which starts functioning, on or after the 1st day of April, 1990, but before the 1st day of April, 1991, provisions of this sub-section shall have effect as if for the words 'seven assessment years', the words 'nine assessment years' had been substituted : Provided also that in the case of an assessee, being a co-operative society, deriving profits and gains from an industrial undertaking or a ship or a hotel referred to in the third proviso, the provisions of that proviso, shall have effect as if for the words 'nine assessment years', the words 'eleven assessment years' had been substituted. (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ocean-going vessels or other powered craft shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, market value, in relation to any goods, means the price that such goods would ordinarily fetch on sale in the open market. (9) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation.-Where any machinery or plant or any part thereof previously used for any purpose in any backward area is transferred to a new business in that area or in any other backward area and the total value of the machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the machinery or plant used in the business, then, for the purposes of clause (iii) of this subsection, the condition specified therein shall be deemed to have been fulfilled. (3) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (i) the business of the hotel has started or starts functioning after the 31st day of December, 1970, but before the 1st day of April, 1990, in any backward area ; (ii) the business of the hotel is not formed by the splitting up, or the reconstruction, of a business already in existence ; (iii) the hotel is for the time being approved for the purposes of this sub-section by the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the hotel in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-In this sub-section, 'market value' in relation to any goods means the price that such goods would ordinarily fetch on sale in the open market. (7) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial under- taking or the hotel, the Assessing Officer shall, in computing the profits and gains of the industrial undertaking or the hotel for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived there- from . . . (9) In a case where the assessee is entitled also to the deduction under section 80-I or sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter VI-A shall not, in any case, exceed the gross total income of the assessee. Thus, if the gross total income of the assessee is determined as nil, then there is no question of any deduction being allowed under Chapter VI-A as that will clearly exceed the gross total income of the assessee. 39. In the case of CIT v. Mohd. Amin Tyamboo [1980] 125 ITR 375 (J K) it has held that "total income" chargeable under section 5 of the Act is not the same as "gross total income" defined in section 80B(5). 40. A perusal of section 80B(5) of the Act shows that the total income of the assessee is to be computed after specified deductions in sections 80C to 80U is not to exceed the gross total income. The mandate contained in sections 80A and 80B(5) requires that gross total income should be computed after setting off the brought forward business loss and unabsorbed depreciation, etc., for allowing of the deductions specified under sections 80C to 80U. It is only then that from the resultant positive income of the previous year, if any, that deficiencies of business loss can be made. 41. The findings of the Income-tax Appellate Tribunal are, therefore, erroneous it has misdirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appear to be correct. 44. We have already considered the case of Canara Workshop [1986] 161 ITR 320 (SC) referred to in this regard in the order of the Commissioner of Income-tax (Appeals). The cases of CIT v. Balmer Lawrie [1995] 215 ITR 249 (Cal) ; CIT v. Visakha Industries Ltd. [2001] 251 ITR 471 (AP) and CIT v. R. B. Jodha Mal/Bishan Lal [2006] 202 CTR (J K) 289, cited by the respondent's counsel are not relevant for the purpose of manner of computation specifically provided in the section referred to above. These cases have been placed before us for taking a liberal interpretation in the matter. We do not consider it appropriate that any liberal consideration of the provisions should be taken where a specific manner is provided and strict interpretation is required. Sections 80A(1), 80A(2), 80B(5), 80-I and 80HH reflects the intention of Legislature and the assent of income by the Department according to it is correct. 45. The aim and object of the Income-tax Act 1961, is to consolidate and amend the law relating to the income-tax and super tax, further Chapter VI-A of the Act deals with the deduction to be made in computing total income. 46. Section 80A(1) which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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