Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2008 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2008 (9) TMI 416 - ITAT DELHI-DComputation of deduction u/s 80IA - assessee was carrying on the business in three different units i.e. bubblegum unit, plain toffee unit and trading unit - bubblegum and plain toffee units were eligible for tax holiday u/s. 80-IA of the Act and the assessee claimed deduction equivalent to the gross total income - plain toffee unit had incurred losses in the first two years of its operation i.e. AY's 1997-98 and 1998-99 - AO denied the deduction u/s. 80-IA for the plain toffee unit on the ground that losses of earlier years pertaining to the said unit were to be notionally set off against the profits of said unit - CIT confirmed the order of AO. HELD THAT:- The assessee was an intervenor before the Special Bench in Asstt. CIT vs. Gold Mine Shares & Finance (P) Ltd. [2008 (4) TMI 405 - ITAT AHMEDABAD]. Therefore, Following the ratio laid down by the Special Bench in Asstt. CIT vs. Gold Mine Shares & Finance P. Ltd., we uphold the order of CIT(A) in directing the AO to notionally adjust the losses of plain toffee unit arising in AY's 1997-98 and 1998-99, though absorbed in those years against the profits of the year under consideration for computing the deduction allowable u/s. 80-IA of the Act. The brought forward losses for AY's 1997-98 and 1998-99 being higher than the profits for the year under consideration, the assessee is not entitled to any deduction u/s. 80-IA of the Act against the profits of its plain toffee unit. We confirm the order of CIT(A) in this regard. The ground Nos. 2 to 3.1 raised by the assessee are dismissed. Setting off of losses of the trading unit - whether against the profit of bubblegum unit or against the plain toffee unit? - CIT(A) held that the set off of loss of the trading unit against the profits of the bubblegum unit and not against the profits of the plain toffee unit - HELD THAT:- The bubblegum unit enjoys tax holiday u/s 80IA of the IT Act and as such the profits arising in the bubblegum unit are exempt from tax. The profits arising in the plain toffee unit though enjoying tax holiday are not entitled to the deduction claimed u/s. 80IA of the Act in view of our decision hereinabove. The assessee claims that the losses arising from its trading unit are to be adjusted against profits from the plain toffee unit which are eligible to tax. We find merit in the contention of the ld AR and direct the AO to adjust the losses from the trading unit against the profits from plain toffee unit and allow deduction u/s. 80IA of the IT Act on the profits of bubblegum unit without adjusting the losses from trading unit. Thus, the ground No. 4 raised by the assessee is allowed. Assessment of interest income - denial of deduction u/s. 80IA on interest on employees loans, bank interest and miscellaneous income - In the facts of the present case the miscellaneous income received by the assessee comprises of interest on late payments, received from the customers and also interest received from the employees. The interest income includes the interest on employee loan and bank interest. The interest received on employees loan and on late payment from customers being linked to the business of the industrial undertaking and being included as business income was eligible for the benefit of deduction u/s. 80IA of the Act. Following the ratio laid down by Delhi High Court in CIT vs. Eltek SGS (P) Ltd.[2008 (2) TMI 17 - DELHI HIGH COURT]. The provisions of 80IA and 80IB are similar. The judgment of apex Court relied upon by AO is regarding deduction u/s. 80HH of the IT Act. The interest income received by the assessee from bank is not eligible for the said deduction us. 80IA of the Act. Thus. the ground Nos. 5 and 6 are partly allowed and ground No. 7 is allowed. In the result, the appeal of the assessee is partly allowed.
|