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TMI Blog2014 (7) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... p; "(i)Whether the term 'Profit and Gains' used in section 80HH & 80I of the Income Tax Act 1961 with reference to an eligible industrial undertaking have the same meaning as the term 'income' whereas the statute uses both the terms independently in different provisions of the Act? (ii)Whether the 'Profits and Gains' of current year of the eligible undertaking would be relevant for computing deduction u/s. 80HH and 80I of the Act or the income computed after reducing depreciation allowance u/s 32 (1), unabsorbed depreciation u/s 32(2) and unabsorbed loss u/s 72 shall be relevant for these deductions?" Substantial question of law in DB ITA No.20/2005. "(i)Whether the learned Tribunal was justified in holding that the deduction under Chapter VIA are to be given from the amount of Gross Total Income for the purpose of computing the deduction u/S.80HH and 80I of the Income Tax Act 1961? (ii)Whether the term 'Profit and Gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter total income of the assessee had been positive after allowing deductions for depreciation, investment allowance u/s 32 and 32A respectively. 6. Aggrieved with the aforesaid finding appeal was preferred before the Commissioner of Income Tax (Appeals) (for short, the 'CIT(A) and it was submitted that the relief u/s 80HH and 80I is available to the industrial undertaking which fulfills the requirement and it is out of the profit and gains of an industrial undertaking. It was argued that the relief is to be deducted first for computing the total income and the other deductions ought to have been considered afterwards. It was the claim of the assessee that the term profit and gains having not been defined under the provisions of the IT Act but the income has been defined under Chapter VI-A and the reference is to term profit and gains in majority of subsection and only in certain sections, the term income is referred to and accordingly it was argued that the relief u/s 80HH and 80I has to be worked out with reference to profit and gains. It was further submitted that provisions of Sec. 80HH and Sec.80I are independent and self contained. The CIT(A) did not agree with the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits. He contended that Sec.80HH and Sec.80I are beneficial provisions and is allowable for a particular industry which is to be set up in remote areas and being beneficial provisions, the claim deserves to be allowed on profits and gains and not income. 10. Per contra, Mrs. Parinitoo Jain, counsel for the respondent submits that deduction u/s 80HH & 80I is allowable on net profit after deducting deprecation, unabsorbed depreciation, unabsorbed losses etc. and in the instant case, there is a loss, hence no benefit u/s 80HH & 80I could be allowed. She further contended that the Hon'ble Supreme Court in the case of Motilal Pesticides (I.) Pvt. Ltd. Vs. Commissioner of Income Tax, reported in (2000)9 SCC 63 had an occasion to consider this very issue and after analyzing the provisions affirmed the judgment of Delhi High Court which had considered the issue at length. She also contended that again the Hon'ble Supreme Court in the case of SYNCO Industries Ltd., reported in (2008) 299 ITR 444 has come to the same conclusion. She also contended that this Court had consistently held in favour of revenue and against the assesseee in the cases of Commissioner of Income Tax vs. Loon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of deduction, whereas, the gross total income under Section 80B(5) which is also referred to in Section 80I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of Section 80A(2) of the Act nugatory and therefore the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under Section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because Sub-section 6 contemplates that only the profits shall be taken into account as if it was the only source of income. However, Section 80A(2) and Section 80B (5) are declaratory in nature. They apply to all the Sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and therefore the nonobstante clause in Section 80-I(6) cannot restrict the operation of Sections 80A(2) and 80B(5) which operate in different spheres. As ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s case: [1985] 155 ITR 120 (SC) , however, this court specifically overturned its earlier decision in Cloth Traders (P.) Ltd.'s case: [1979] 118 ITR 243 (SC) and held that deduction is to be allowed only on the net income and not on the gross income. With reference to Section 80AB, this court said it was merely of a clarificatory nature and the decision of this court in Distributors (Baroda) P. Ltd.'s case: [1985] 155 ITR 120 (SC) is thus irrespective of Section 80AB of the Act. The High Court, therefore, relying on the decision of this court in Distributors (Baroda) P. Ltd.'s case : [1985] 155 ITR 120 (SC) answered the question in favour of the Revenue and against the assessee." 15. Recently, the Hon'ble Apex Court, in the case of M/s. Himatsingka Seide Ltd. Vs. CIT, Civil Appeal No.1501/2008, decided on 19/09/2013 also took similar view. In the case of M/s. Himatsingka Seide Ltd. the assessee filed nil return claiming exemption u/s 10B and the assessee computed the profits of the EOU without adjusting the brought forward unabsorbed deprecation of Assessment Year 1988-89. It is claimed that as Sec. 10B conferred "exemption" for the profits of the EOU, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les (supra); Sunil & Co. (supra); Rajasthan Cooperative Spinning Mills Ltd. (supra); Vijay Industries Vs. Commissioner of Income Tax, reported in (2004) 270 ITR 175 & Commissioner of Income-Tax Vs. Surendra Textiles, reported in (2002) 258 ITR 387; Modern Syntex (India) Ltd. Vs. CIT: (2005) 142 Taxman 80 (Raj.) came to the same conclusion. 18. The Calcutta High Court in the case of Sea Hawk (I)(P)Ltd. Observed as under:- "It is also a point of interest to note that the larger Bench of the Supreme Court in Distributors (Baroda) (P.) Ltd.'s case (supra) observed that the ratio in Cambay Electric Supply Industrial Co. Ltd.'s case (supra) was a correct one and the decision in Cloth Traders (P.) Ltd.'s case (supra) was wrongly taken and taken in oversight of the principle laid down by Cambay Electric Supply Industrial Co. Ltd.'s case (supra). Therefore, we have no hesitation to say that the Tribunal erred in following the ratio in Cloth Traders (P.) Ltd.'s case (supra) and in holding that the assessee is entitled to the deduction of the profits and gains from its new hotel business before adjustment of the pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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