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TMI Blog2013 (7) TMI 979X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter deduction under section 80IA and 80IB of the Act was given. In view of the above and for the reasons stated above, we are of the opinion that the tribunal was right in law in reducing eligible profits under section 80IA of the CPP unit and under section 80IB of the Baddi unit by losses of Daman unit. X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80IA for CPP unit and ₹ 9,72,326/- under section 40A of the Act, by holding that deduction under section 80IB is to be allowed after adjusting loss worked out in other unit or in other words, deduction under section 80IA for CPP unit and deduction under section 80IB for Baddi unit, are to be allowed only after allocation of loss of Daman Unit of ₹ 1,97,47,000/- on proportionate basis in the ratio of sales various units. The Assessing Officer also held that setting off of the loss has been upheld by the CITA in earlier assessment years. 3.2 Being aggrieved by and dissatisfied with the order of assessment passed by the Assessing Officer, the assessee preferred appeal before the Commissioner (Appeals) and by order dtd. 3/10/2008, the Commissioner (Appeals) held against the assessee with respect to deduction under section 80IB of the Act. However, partly allowed the appeal. 3.3 Being aggrieved by the order passed by the Commissioner (Appeals), both, the assessee as well as the Department preferred appeals before the ITAT and by the impugned judgement and order, the tribunal has dismissed the appeal preferred by the assessee and has upheld the direction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of the automobiles parts industries included in the total income without deducting their losses in the Alloy Steel Manufacture. It is submitted that in the case before the Hon'ble Supreme Court the assessee had 2 units, both priority industries and in one unit the assessee was manufacturing Alloy Steels and in another priority industries the assessee was manufacturing automobile ancillaries and the High Court affirmed the view of the appellate tribunal holding that in computing profits for the purpose of deduction under section 80E of the Income Tax Act, losses incurred in the manufacture of Alloy Steels should not be set off against the profit of manufacture of automobile ancillaries. It is submitted that in the aforesaid decision it is specifically observed by the Hon'ble Supreme Court that in the application of section 80E, profits and gains earned by an industry mentioned in that section cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. 5.2 Mr. J.P. Shah, learned counsel appearing on behalf of the assessee has also relied upon the decision of the Allahabad High Court in the case of CIT v. Modi Xerox Ltd. [2012] 344 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be "profit". It is submitted that in the case of first two eventualities, there will not be any difference. However, if there is any profit, in that case, while considering the gross total income, loss of one unit is required to be adjusted first. Under the circumstances, it is submitted that despite the decision of the Hon'ble Supreme Court in the case of Synco Industries Ltd. (supra), considering the decision of Canara Workshops (P.) Ltd. (supra) present appeals deserve to be allowed . 6. Both these appeals are opposed by Ms. Paurami Sheth, learned counsel appearing on behalf of the Department. It is vehemently submitted that as such the controversy raised in the present appeals is squarely covered by the decision of the Hon'ble Supreme Court in the case of Synco Industries Ltd. (supra). It is submitted that after considering various decisions of the other High Courts and considering the provisions and deductions under section 80IA and 80IB of the Act, it is specifically held by the Hon'ble Supreme Court that loss from one unit / division is required to be adjusted before determining the gross total income. Therefore, as such no error and/or illegality has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reducing the eligible profits under section 80IA of CPP unit and section 80IB of Baddi Unit by losses of Daman unit?" 8.1 It appears that while submitting the return of the Assessment Year 2006-07, the assessee claimed deduction under section 80IA of the Act amounting to ₹ 17,93,82,731/-on account of income derived from CPP unit. The assessee also claimed deduction under section 80IB of the Act amounting to ₹ 8,63,51,359/- and out of the said deduction, ₹ 3,33,091/-was on account of the Daman Unit @ 30% of the eligible profits of ₹ 11,10,302/- and ₹ 8,60,80,268/- on account of Baddi unit. It was found that the Company had incurred loss of ₹ 1,97,47,000/- so far as Daman unit is concerned and therefore, considering the provisions of section 80IB(13) read with section 80IA(5), deduction of the assessee Company for Daman unit was further reduced to ₹ 1,97,47,000/-. The Assessing Office also held that as per the provisions of section 80AB of the Income Tax Act, deduction under section 80IB is to be allowed after adjusting loss worked out in other units or in other words deduction under section 80IA in the case of CPP unit and deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction and, therefore, the non obstante clause in section 80-I(6) cannot restrict the operation of sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier, section 80I(6) deals with only computation of deduction, whereas section 80I(1) deals with treatment to be given to such deductions in order to arrive at the total income of the assessee and therefore, while interpreting section 80I(1) which also refers to gross total income, one has to read the expression "gross total income" as defined in section 80B(5)." After observing so, the Hon'ble Supreme Court confirmed the view expressed by the High Court holding that loss from the Oil division was required to be adjusted before determining the gross total income and as the gross total income was nil, the assessee was not entitled to claim deduction under Chapter VI-A which includes section 80I also. The proposition of law which is laid down by the Hon'ble Supreme Court in the said decision is in the last but one paragraph which reads as under : 'The proposition of law, emerging from the above discussion is that the gross total income of the assessee has first got to be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Company. The Hon'ble Supreme Court has further held that the object of Section 80E was properly served only by confining the application of the provisions of that section to the profits and gains of a "single industry". In the present case, under section 80I(6), profit of Baddi unit are required to be treated as if that was the only source of income. That the losses from the Daman unit are required to be ignored. Therefore, while calculating quantum of deduction, profit of the Baddi unit alone are required to be taken. To that there is no difficulty. However, after calculating the deduction on the basis that the profits from the Baddi unit was the only source of income, one has to give effect to the computed deduction in order to arrive at the total income of the Company and while giving effect, one has to consider the provisions of section 80IA and 80IB of the Act. In other words, while considering the gross total income of the assessee, deduction under section 80IA and 80IB of the Act are required to be allowed after adjusting loss out in other units. Under the circumstances and as stated above, the decision of the Hon'ble Supreme Court in the case of Cana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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