TMI Blog2004 (2) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... m other sources, the AO was justified in computing deduction under s. 80-I at Rs. 4,42,088 after taking into consideration the profit of unit I, loss of unit II and income from other sources. 2. The learned CIT(A) has erred in law and on facts in holding that from the gross total income the amount of deduction under s. 80-I amounting to Rs. 21,28,859 as per para 1 above, has to be allowed in such a manner that the net income does not result in a loss ignoring the provisions of s. 80AB which provides for the deduction only in respect of the income which is included in the gross total income determined as per provisions of s. 80B(5) of IT Act, 1961. 3. Learned CIT(A) has erred in law and on facts in allowing relief under s. 80-I without adequately appreciating the ratio of decision given by Hon ble Courts as follows: (i) Cambay Electric Supply Industrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC); (ii) H.H. Sir Rama Varma vs. CIT (1994) 116 CTR (SC) 55 : (1994) 205 ITR 433 (SC); (iii) CIT vs. Rockweld Electrodes India Ltd. (1995) 128 CTR (Mad) 152 : (1995) 215 ITR 358 (Mad)." The common issue thus involves the computation of deduction allowable to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of deduction under s. 80-I has to be computed in terms of s. 80AB without setting of the loss of the other unit. Thereafter, however, the quantum of deduction would be available against the gross total income of the assessee in terms of the provisions of s. 80B(5). Learned counsel further submitted that the same proposition has been followed even in the decisions being relied upon on behalf of the Department. 6. Smt. Vandana Verma, learned senior Departmental Representative, on the other hand, supported the impugned order of the CIT(A) and placed reliance on the following decisions: (i) CIT vs. Macmillan Co. of India Ltd. (1999) 151 CTR (Mad) 175 : (2000) 243 ITR 403 (Mad); (ii) CIT vs. Sundaravel Match Industries (P) Ltd. (2000) 163 CTR (Mad) 625 : (2000) 245 ITR 605 (Mad); (iii) Synco Industries Ltd. vs. AO Ors. (2002) 173 CTR (Bom) 1 : (2002) 254 ITR 608 (Bom). 7. We have carefully considered the rival submissions and gone through the various judicial authorities cited by the learned representatives before us. At the outset, we may point out that the Delhi Bench of the Tribunal in the case of Bajaj Motors (P) Ltd. has considered a similar issue in ITA No. 246/D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that in applying s. 80-I of the IT Act (which replaced s. 80E), it is not permissible to compute the profits of the priority industry respecting which the relief is claimed, by taking into account the depreciation loss from other industries. No doubt the depreciation loss arose in that case from non-priority industries, but in view of what we have said earlier, that should make no difference whatever." 9. The Supreme Court has further referred with approval to the decision of Mysore High Court in CIT vs. Balanoor Tea Rubber Co. Ltd. (1974) 93 ITR 115 (Mys). It appears to us that Canara Workshop (P) Ltd. s judgment is the basic decision which supports the case of the assessee and any contrary view would, therefore, not be permissible. 10. In English Electric Co. Ltd. vs. CIT, the Supreme Court has held that the assessee would be entitled to deduction under s. 80E on the profits of a priority industry without adjusting of losses in non-priority industry. In this decision, Supreme Court placed reliance on its earlier decision in Canara Workshops (P) Ltd. 11. The next decision cited by the learned counsel has been rendered by Andhra Pradesh High Court in CIT vs. Visakha Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve in support of Revenue s case. Learned Departmental Representative has mainly relied upon the two decisions of Madras High Court, namely, CIT vs. Macmillan Co. of India Ltd. and CIT vs. Sundaravel Match Industries (P) Ltd. In Macmillan s case while assessee had made a profit in the business of printing and publishing, it had suffered a loss in its business of trading. The High Court held that the deduction under s. 80QQ, available in the business of printing and publishing was to be calculated after excluding the loss suffered in the trading activity. While taking this view, the Court referred to two decisions of Supreme Court, namely, CIT vs. Canara Workshops (P) Ltd. and H.H. Sir Rama Varma vs. CIT. The Court further observed that in Canara Workshops (P) Ltd. s case, Supreme Court did not consider the provisions of s. 80AB while the question has been specifically considered by the Supreme Court in the latter case of H.H. Sir Rama Varma. On these grounds, Madras High Court observed that the latter decision of the Supreme Court was binding. With great respect to Their Lordships, we feel that both the decisions of the Supreme Court have been rendered in the context of different se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the specific provisions contained under s. 80A(2). The Bombay High Court upheld the view and observed that s. 80A(2) and s. 80B(5) of the IT Act, 1961, will apply to all the sections under Chapter VI-A. They impose a ceiling on the total amount of deduction and, therefore, the non obstante clause in s. 80-I(6) cannot restrict ss. 80A(2) and 80B(5) since they operate in different spheres. This decision does not in any manner lay down the proposition as canvassed by the learned Departmental Representative that deduction under s. 80-I is to be calculated on the profits of one unit after set off of loss of the other unit. What the High Court has laid down is to place a ceiling on the quantum of deduction in view of s. 80A(2). In so far as the quantum of deduction is to be calculated, such calculation has to be made on the basis of profits of the unit without any set off of losses incurred by the assessee in any other unit. In fact, the High Court has clarified this point at p. 611 of the report by giving a hypothetical example by pointing out that if the assessee has profits of Rs. 80 from the eligible industrial unit and simultaneously if there was a loss of another unit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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