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TMI Blog2020 (1) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 167,83,87,158/- against the appellant claim of deduction u/s 80IA of the Act of Rs. 187,58,66,703/- in complete disregard of the fact that in view of provisions of section 80-IA(5) of the Income Tax Act, 1961 the profit from the eligible business for the 2. Briefly stated facts of the case are that the assessee filed return of income on 28/09/2012, declaring total income at Nil, wherein it declared gross total income of Rs. 1,87,58,66,703/- and thereafter claimed deduction under section 80IA of the Income-tax Act, 1961 (in short 'the Act') amounting to Rs. 1,87,58,66,703/-. The case was selected for the scrutiny assessment. During the scrutiny assessment, the Assessing Officer observed that the gross total income of Rs. 1,87,58,66,703/- of the assessee constituted of income under the head "profit and gains of business or profession" of Rs. 1,67,83,87,158/- and income from other sources of Rs. 19,74,79,545/-. According to the Assessing Officer, the assessee was entitled for deduction under section 80-IA of the Act in respect of the income under the head of 'profits and gains of business or profession, amounting to Rs. 1,67,83,87,158/- and not in respect of the 'income from othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss of the other unit had been set off. Hence, as per the provision of section 80AB, it is only the net amount of Rs. 167.84 crores which constitutes the profit 'derived from' the eligible unit. Consequently, it is only that sum which is eligible for deduction u/s 80-lA of the Act. The appellant's computation is amounting to setting off the loss of the other business unit against the Income from Other Sources (which is a different 'head' altogether) and preserving the profit from the eligible unit for claiming deduction u/s 80-IA. This, manner is not sanctioned by the scheme of the Act as discussed above Another way of looking at it is that the appellant has by so manipulating the aggregation and set off in this manner, claimed deduction u/s 80-IA in respect of the Income from other Sources also (Rs. 19.75 crores) over and above the profit from business (Rs. 168 crores). In so far as the deduction is available only in respect of profit derived from the eligible business, the deduction to the extent of Rs. 19.75 crores claimed by the appellant is not allowable. 4.6. The overriding effect of section 80AB on the sections dealing with deductions in Chapter-VI A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income, the AO was correct in restricting deduction u/s 80-IA to that extent only and, consequently, in adding Rs. 19.75 crores to the returned income. The addition made by the AO is confirmed. This ground of appeal is ruled against the appellant." 3. Before us, the Ld. counsel of the assessee filed a paper-book containing pages 1 to 62 and submitted that the assessee has claimed deduction under section 80IA in respect of the profit of eligible unit to the extent of gross total income available as per section 80A(2) of the Act. The Ld. counsel in support of his contention relied on the decision of the Hon'ble Delhi High Court in the case of CIT versus Sona Koyo Steering Systems Ltd reported in (2010) 321 ITR 463 . 4. The Ld DR supported the order of the lower authorities and submitted that deduction under section 80IA has been rightly restricted to the net income under the profit and gains of the business of the assessee. 5. We have heard rival submissions and perused the relevant material on record. The assessee is a company of Government of National Capital Territory of Delhi. The assessee has been operating two separate undertakings termed as project GT-1 at Raj Ghat and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3 In view of the arguments raised before us, the dispute is whether any loss of non-eligible unit should be adjusted with the profit of the eligible unit for determining profit eligible for deduction under section 80IA of the Act. The Section 80IA(1) prescribe for deduction for an amount equal to 100% of the profit and gains derived from the eligible business undertaking. Further, section (5) of the section 80-IA prescribe that while computing the profit in gains of the eligible business under subsection (1), the source of income of the eligible business has only to be considered for deduction. For ready reference, the subsection (5) of section 80-IA is reproduced as under: "80-IA (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.4 of 11 ITR 305 (Delhi) which has considered the pari materia provisions of Section 80-IA(7) of the said Act and has held against the revenue. The learned counsel submits that though the decision of the Delhi High Court is against him, the latter decision of the Supreme Court in the case of Synco Industries Ltd. (supra) is clearly in his favour and, therefore, the question ought to be answered in favour of the revenue and against the assessee. 7. On the other hand, the learned counsel appearing on behalf of the assessee, submitted that the decision of this court in C.I.T. v. Dewan Kraft Systems (supra) is clearly in favour of the assessee and there is nothing in the Supreme Court decision in Synco Industries Ltd. (supra) which would enable us to detract from that position. Consequently, he submitted that the question be answered in favour of the assessee and against the revenue. 8. Section 80-I(1) reads as under:- "80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. - (1) Where the gross total income of an assessee includes any profits and gains derived from an industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under Chapter VI-A. There is no dispute with this proposition. 12. It is further clear from a plain reading of the aforesaid provisions that the deduction under Section 80-I is to be made in case the gross total income includes any profits and gains derived from an industrial ITA Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.6 of 11 undertaking, etc.., in case such profits and gains are included in the gross total income of the assessee. The deduction in the case of a company, in view of the proviso to Section 80-I (1), is to be given to the extent of 25% of such profits and gains of such an industrial undertaking. It is also clear that in view of Section 80-I (6), which begins with a non-obstante clause, the quantum of deduction is to be computed as if the industrial undertaking were the only source of income of the assessee during the relevant years. In other words, each industrial undertaking or unit is to be treated separately and independently. It is only those industrial undertakings, which have a profit or gain, which would be considered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The plain reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is positive, then the question of allowing deductions under Chapter VI-A would arise, but not otherwise. While doing so, the Supreme Court further made it clear that the gross total income must be determined by setting off business losses of earlier years before ITA Nos.1279/08,194/09, 416/09, 761/09 & 788/09 Page No.8 of 11 allowing deduction under Chapter VI-A and that if the resultant income is "Nil‟, then the assessee cannot claim any deduction under Chapter VI-A. While coming to the aforesaid conclusion, the Supreme Court was also confronted with an argument which had been raised on the basis of the provisions of Section 80-I(6) that the profits of one industrial undertaking cannot be set off against the losses suffered by the other industrial undertaking. The Supreme Court was of the view that the provisions of Section 80-I (6) were only for the purposes of computing the quantum of deduction, whereas the gross total income was to be computed in terms of the Act as provided in Section 80-B(5). It is apparent that the Supreme Court distinguished the provisions of Section 80-I(6) which was for the purposes of computing the quantum of deduction from the provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income was "nil" the assessee was not entitled to claim deduction under Chapter VI- A which includes Section 80-I also. 14. The proposition of law, emerging from the above discussion is that the gross total income of the assessee has first got to be determined after adjusting losses, etc., and if the gross total income of the assessee is "nil" the assessee would not be entitled to deductions under Chapter VI-A of the Act." (underlining added) 15. From the above extract, it is apparent that the Supreme Court did not at all hold that while computing the deduction under Section 80-I(6), the loss of one eligible industrial undertaking is to be set off against the profit of another eligible industrial undertaking. All that the Supreme Court said was that in computing the gross total income of the assessee, the same has to be determined after adjusting the losses and that, if the gross total income of the assessee so determined turns out to be "Nil‟, then the assessee would not be entitled to deduction under Chapter VI-A of the said Act. 16. We agree with the submissions made by the learned counsel for the assessee that there is nothing in the decision in the case of Sync ..... X X X X Extracts X X X X X X X X Extracts X X X X
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