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TMI Blog2019 (1) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... dertakings are not to be netted for the purpose of calculating deduction u/s 80IC and are to be taken on a stand alone basis - We direct the A.O. to allow deduction to the assessee u/s 80IC with respect to the profits earned by the assessee from the eligible undertakings ignoring the losses from other eligible undertakings. Ground of appeal No.1 raised by the assessee is allowed. Benefit of MAT credit as eligible and allowable u/s 115JAA - The limited prayer of the Ld. Counsel for the assessee was that the A.O. be directed to granted the same as per law. - ITA Nos.883 to 885/Chd/2017 - - - Dated:- 6-12-2018 - SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER For the Appellant : Shri Ani l Khanna, CA For the Respondent : Shri Ram Mohan, CIT DR ORDER Per Annapurna Gupta, Accountant Member: All the three appeals filed by the same assessee have been preferred against the consolidated order passed by the Ld. Commissioner of Income Tax(Appeals), Shimla (hereinafter referred to as CIT(Appeals) ) dated 30.3.2017 relating to assessment years 2010-11, 2011-12 and 2012-13. It was common ground that the issues involved in all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case and provisions of law, the Commissioner of Income Tax (Appeals) has erred in upholding the action of the assessing officer in respect of not considering the year of substantial expansion of Unit III as the initial assessment year for deduction u/s 80IC.As per law the allowance @100% u/s 80IC be considered from the year in which the substantial expansion was done. 3. As per facts and circumstances of the case and provisions of law, the Commissioner of Income Tax (Appeals) has erred in upholding the action of the assessing officer in respect of restricting the deduction u/s 80IC @ 30% at ₹ 1,43,38,894/- against the claim of ₹ 5,31,56,414/-. The claim of assessee u/s 80IC be allowed. 4. As stated above four units/undertakings of the assessee were eligible for deduction u/s 80IC with respect to which the assessee had claimed deduction as under: Unit Date of substantial expansion/commencement of commercial production Income/ (Loss) for the year Rs. 80IC deduction claimed by the assessee I Substantial Expansion 28.02.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the decision of the Hon'ble High Court of Himachal Pradesh in the case of CIGT, Shimla Vs. Him Teknoforge Ltd. in ITA Nos.36,37 38 of 2008 set off all losses of the eligible unit i.e. Units IV V against the eligible profits of Units I III, before allowing deduction u/s 80IC of the Act. The CIT(A) upheld the order of the A.O. stating that it is squarely covered by the decision of the Hon'ble Jurisdictional High Court. 10. Before us, the Ld. counsel for assessee vehemently contested the applicability of ratio laid down by the Hon'ble Jurisdictional High Court in the case of Him Teknoforge Ltd. (supra) in the present case raising two fold arguments. The first argument raised by the Ld. counsel for assessee was that the decision in the case of Him Teknoforge Ltd. (supra) was rendered in the context of section 80IA of the Act which is markedly worded differently from section 80IC in which the assessee in the present case has claimed deduction. It was pointed out that while section 80IA (5), which is relevant for the impugned issue and which has been interpreted by the Hon'ble Jurisdictional High Court to mean that the profits and losses of all eligible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year 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. c. The eligible business concept is there in Section 80IA but in 80IC sub section (7) clearly states that the provisions contained in Sub-section 5 and sub-section 7-12 of Section 80IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. Eligible Undertaking is defined in section 80IC(4) which relates to the under taking only . Hence so far as the deduction is concerned the same is considered relating to the undertaking. This contention is further supported by the fact that if there is loss the same will be carried forward and set off in subsequent year against the profits of the respective unit and then the deduction under chapter VI-A will be computed or if one unit is set up in one year and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceed the Gross Total Income. In the case of the assessee company the deduction is not exceeding the Gross Total Income. e. Considering the above arguments it is very clear that what is considered in Section 80IC is the profits of eligible undertaking or enterprise independently for the purposes of determining quantum of deduction and not to be clubbed with loss making industrial undertaking whereas for the purposes of Gross Total Income all the units need to be clubbed. f. In the case of AA/s. Synco Industries Ltd., Petitioner Vs. Assessing Officer, Income Tax, Mumbai Anr., Respondent. 2008-(168)-TAXMAN-0224-SC, 2008-(299)ITR-0444-SC - the Apex Court has clearly held that: It is true that under Section 80-1(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. The court has further held that the overall deduction cannot exceed the gross total income in terms of section 80A(2) and 80B(5) - Copy of the judgment is enclosed at page 33 to 40. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that the question of law before the Hon'ble Jurisdictional High Court was that whether deductions u/s 80HH/80IA of the Act were allowable on the profits of each unit separately. The Hon'ble High Court after considering the provisions of the Act and various judicial decisions in this regard, held that while calculating the deduction under Chapter VI-A, under which the deductions were allowed, only the profits of priority units, meaning thereby the eligible units, were to be taken into consideration. 14. The Hon ble High court analyzed the relevant provisions of chapter VI A ,specifically referring to section 80AB included therein and which dealt with deduction to be made with reference to income included in the gross total income. The same is reproduced hereunder for clarity: 80AB. [Deductions to be made with reference to the income included in the gross total income. Where any deduction is required to be made or allowed under any section [][* * *] included in this Chapter under the heading C-Deductions in respect of certain incomes in respect of any income of the nature specified in that section which is included in the gross total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the section 80HHC would be ignored by 80AB and, therefore, as per section 80AB of the Act the amount of income eligible for deduction would have to be computed in accordance with the provisions of the Act which meant that the profits and losses of units would have to be set off against each other, since the section providing for set off of losses preceded the Chapter VI-A dealing with deduction under the Act. Following this proposition laid down by the Hon'ble Apex Court in the case of IPCA Laboratories Ltd. (supra) the Hon'ble High Court held that the Hon'ble Apex Court had clearly laid down the law in this regard that section 80AB would prevail over the other sections provided in Chapter VI A of the Act dealing with the deduction of incomes ,and since section 80AB provided for the computation of income eligible for deduction in accordance with the provisions of the Act, the profits and losses of all priority units needed to be set off and in the balance income only deduction was to be calculated. 16. The point to be noted is that the Hon'ble High Court followed the decision of the Hon'ble Apex Court in the case of IPCA Laboratories Ltd. (supra) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. 17. As per section 80IC(7), the provisions of section 80IA(5) have been made applicable to the undertaking or enterprises eligible for deduction u/s 80IC of the Act. And, section 80IA(5) begins with a notwithstanding clause . Thus when provisions of section 80IC are read alongwith the provisions of section 80AB of the Act, we find that section 80IC of the Act clearly provides that its provisions are to prevail over the provisions of section 80AB of the Act which was absent in the case of section 80HHC, as noted by the Hon'ble Apex Court in the case of IPCA Laboratories Ltd. (supra). Therefore, the proposition laid down by the Hon'ble Jurisdictional High Court in the case of Him Teknoforge Ltd. (supra) that the profits and losses of the priority units are to be clubbed for calculating eligible deduction under Chapter VI A having been borrowed from the law laid down by the Hon'ble Apex Court in the case of IPCA Laboratories Ltd. (supra), which is clearly distinguishable from the present case, as pointed out above, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for the impugned years as stipulated u/s 80IA(5) of the Act. 20. The first and primary rule of construction is that the intention of the legislature must be found in the words used by the legislature itself. Every word of a statute has to be assumed to have been deliberately and consciously incorporated therein by the legislature and if the language of a statute is clear and explicit, effect must be given to each word. The Hon ble Apex court has time and again reinforced this rule of interpretation of statutes in its judgements, right from Padmasundara Rao vs State of TN 255 ITR 147(SC), Mohammad Vs CWT 224 ITR 672(SC) Pandian Chemicals Ltd. vs CIT 262 ITR 278(SC).In view of the same since the words used in section 80IC categorically state that the provisions of sub section 5 to section 80IA shall apply to the eligible undertaking or enterprise, they have to be read as such and applied to each undertaking, meaning thereby that the profits of each eligible undertaking has to be treated as if it were the only source of income of the assessee. 21. Further as rightly pointed out by the Ld. counsel for assessee that if the interpretation given in the case of Him Tekn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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