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TMI Blog2019 (1) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. - Decided in favour of revenue Quantification of deduction u/s 80IC - the loss of one priority unit is to be set off against the profit of the other priority unit - Held that:- Since the issue involved in the present case is identical to that in the case of Milestone Gears [2019 (1) TMI 421 - ITAT CHANDIGARH] the decision rendered by the ITAT in the said case would squarely apply to the present case also following which we hold that the assessee is eligible to claim deduction on the profits of each individual undertaking without resorting to netting of the profit and loss of the eligible undertakings. - Decided in favour of assessee - ITA No. 871/CHD/2017, ITA No. 784 And 1180/CHD/2017 - - - Dated:- 8-1-2019 - SH. SANJAY GARG, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Assessee : Shri Vineet Krishan For The Revenue : Shri Ankur Alya, Sr.DR Order PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The above are appeals filed by the different assessees against separate orders passed by the Commissioner of Income Tax (Appeals) Shiml ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 are general in nature and need no adjudication. 5. Ground No. 2 3 raised by the assessee relate to the issue of restriction of deduction claimed u/s 80IC of the Act to30% of the eligible profits as against 100% claimed by the assessee on account of substantial expansion carried out by it. The brief facts relating to the issue are that the assessee firm is engaged in the manufacturing of axels, gears and shafts having units at Baddi and Rudrapur. In the Baddi unit, the assessee had declared business profit of ₹ 1,39,26,245/- and had claimed 100% deduction of the same. The AO noted that the assessee company had started its business activities w.e.f. 17.09.1986 and the Baddi Unit had completed substantial expansion for the first time during the assessment year 2005-06 and claimed deduction u/s 80IC of the Act from assessment year 2005-06 by showing it to be the initial assessment year. The claim of deduction u/s 80IC was allowed by the AO for assessment year 2005-06. Thereafter, deduction u/s 80IC was allowed to the assessee u/s 143(3) upto assessment year 2009-10 for a period of five years. In the impugned assessment year, which was the seventh year of production since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Vs ACIT in ITA 883 to 885/CHD/2017 on 10.09.2018. It was stated by both the parties that their contentions vis- -vis the issue were identical to that raised in the said appeal. 12. Having heard both the parties, we find that the Coordinate Bench of the ITAT since then has passed its order on the issue in the case of Milestone Gears Pvt. Ltd. (supra) on 6th December,2018. The coordinate bench has decided the issue in favour of the assessee, holding that the decision in the case of Him Teknoforge (supra) was distinguishable with that in the present case.The ITAT has pointed out that in the case of HimTeknoforge(supra) it was held that the profits and losses of the priority units were to be netted for the purpose of calculating of deduction u/s 80IC on the basis of the decision of the Apex Court in the case of IPCA Laboratories Ltd. vs DCIT (2004) 266 ITR 521 and ITO vs Induflex Products Pvt. Ltd. (2006) 280 ITR 1, which decisions had been rendered in the context of Section 80HHC wherein the Hon'ble Apex Court had held that Section 80AB which dealt with the incomes on which deduction was to be allowed under Chapter VIA, had a not withstanding clause and since Section 80HCC d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, on the other hand, was that the deduction was to be computed only on the profits and gains derived from industrial undertakings to which the benefit was granted and was not relatable to the gross total income of the assessee but only to the gross income from that particular industrial undertaking. On going through the order of the Hon'ble High Court in the case of Him Teknoforge Ltd. (supra), 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 repro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile dealing with the issue of deduction allowable u/s 80HHC, had held that section 80AB had a notwithstanding clause and thus had a overriding effect over all other sections in Chapter VIA, which included section 80HHC also. The Hon ble apex court noted in the said decision that section 80HHC did not provide that its provision would prevail over section 80AB or any provisions of the Act. Thus the Hon'ble Apex Court held 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 , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y States (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), 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, as specified in sub-section (3). 7) The provisions contained in sub-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). Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be substituted with eligible undertaking. Therefore, for the purpose of section 80IC(7), we agree with the Ld. counsel for assessee, it is the profits of each eligible undertaking which are to be treated and taken separately as being the only source of the income during the impugned year and allowed deduction thereof as opposed to treating the eligible business of all eligible undertakings u/s 80IA(5) of the Act as being the only source of 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 categorica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and loss of the eligible undertakings. Ground of appeal No. 4 raised by the assessee is, therefore, allowed. 14. In effect, the appeal of the assessee is partly allowed. ITA 784/CHD/2017 15. The assessee has raised the following effective grounds of appeal : 2. That in the facts and circumstances of the case, the Td. Commissioner of Income Tax (Appeals) gravelly erred in upholding the calculation of deduction made by the Id. Assessing Officer under Section 80IC of the Income Tax Act. 1961 who wrongly adjusted the loss of Manpura Division with the profit of Gear Division for calculation of quantum of deduction under Section 80IC of the Income Tax Act, 1961 whereas the gross total income is to be arrived by adjusting profit or loss of all Units but the quantum of deduction is to be calculated as per Sub Section (5) of Section 80IA of the Income Tax Act, 1961. 3. That in the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) gravelly erred in upholding the action of the Id. Assessing Officer in allowing the deduction under Section 80IC at ₹ 1,04,36,482/- as against claim of ₹ 2,14,61,823/-. 16. It was common g ..... 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