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TMI Blog2019 (5) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... g our attention to the facts of the case, it was pointed out that the assessee was a manufacturer of soaps carrying out its operations in two units, both of which were eligible for deduction of profits u/s 80IC of the Act. During the impugned assessment year one unit showed profits while the other had shown net loss. The A.O. had adjusted the loss of one eligible unit against the profits of the other eligible unit and allowed deduction u/s 80IC of the Act on the balance amount. The Ld.CIT(A) upheld the order of the A.O. following the decision of the Hon'ble Jurisdictional High Court in the case of M/s Him Teknoforge Ltd. Vs. DCI T, reported in 256 CTR 293. The assessee has challenged this order of the Ld.CIT(A) before us in the impugned appeals filed. 3. At the outset itself, the Ld. counsel for assessee pointed out that identical issue has been dealt with by the ITA T Chandigarh Bench in group of appeals in M/s Milestone Gears Pvt. Ltd. Vs. DCI T in I TA No.883 to 885/Chd/2017 dated 6.12.2018. Copy of the order was placed before us. Our attention was drawn to the findings of the I.T.A.T. at paras 12 to 22 of the order as under: "12. We have heard the contentions of both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.]" 15. Reading the same, the Hon'ble High Court held that there can be no manner of doubt that only income from a priority undertaking is to be taken into consideration while making the deduction and the profits or losses of non priority undertakings are not to be considered. Going further, the Hon'ble High Court held that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes ,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) wherein the Hon'ble Apex Court was seized with the issue of deduction u/s 80HHC of the Act and the Hon'ble Apex Court had held that since section 80AB of the Act provided for a notwithstanding clause and there being no such corresponding clause provided for in section 80HHC the provision of section 80AB would override the provisions of section 80HHC of the Act. This is a very important observation of the Hon'ble High Court and it is from this that a distinction can be drawn vis-à-vis deduction claimed u/s 80IC of the Act, which is the fact in the present case. For clarity the relevant provisions of section 80IA & 80IC of the Act are being reproduced hereunder: "80-IA [(1) Where the gross total income of an assessee includes any profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 same will not apply to deduction claimed u/s 80IC of the Act. As stated above, the provisions of section 80IC will prevail over section 80AB of the Act and the deduction will have to be calculated as provided for in section 80IC(7) of the Act, as per which for the purpose of determining the quantum of deduction the eligible undertaking is to be treated as the only source of income of the assessee during the previous year, thus treating each eligible undertaking or enterprise as a separate unit for the purpose of calculating deduction. 18. Even otherwise as correctly pointed out by the Ld.Counsel for the assessee, while the decision in the case of Him Teknoforge Ltd. (supra) was rendered in the context of section 80IA, the assessee in the present case has claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Teknoforge Ltd. (supra) is applied for the purpose of section 80IC, it would lead to an anomalous situation creating a difficulty for calculating the quantum of deduction, since as rightly pointed out by the Ld. counsel for assessee, the section provides for different rates of deduction of profits for different years in case of specific undertakings and if netting of profits and losses of all eligible undertakings are resorted to, as laid down in the decision of Him Teknoforge Ltd. (supra), in a situation where the different eligible units are entitled to different rates of deduction of profits, it would be difficult to determine the rate to be applied to the remaining profits since there is no section or provision in the entire Act dealing with such a situation. We therefore, ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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