TMI Blog2010 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 10-2-2010 - BADAR DURREZ AHMED and SIDDHARTH MRIDUL JJ. Sanjeev Sabharwal and Ms. Rashmi Chopra for the appellant. R. Santhanam for the respondent. JUDGMENT BADAR DURREZ AHMED J.- These appeals filed by the Revenue pertain to the assessment years 1992-93, 1993-94, 1994-95, 1995-96 and 2000-01. Two orders of the Income-tax Appellate Tribunal are challenged before us, being the order dated September 28, 2007 relating to the assessment years 1992-93 and 1993-94 arising out of I. T. A. Nos. 2703/Del/2004, 2704/Del/2004 and the order dated June 6, 2008, which relates to the assessment years 1994-95, 1995-96 and 2000-01 in I. T. A. Nos. 3877/Del/2005, 3878/ Del/2005 and 5480/Del/2003. 2. The assessee has two units, namely, a steering unit and an axle unit. In all these years, the assessee was incurring losses in one of the two units and profits in the other unit. The assessee claimed deduction under section 80-I of the Income-tax Act, 1961 (hereinafter referred to as "the said Act"). The Assessing Officer, while computing the deduction allowable to the assessee, set off the losses of one unit against the profits of the other unit and, thereafter, sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be decisive factors to hold that the two units are distinct and separate business or one. Thus, it is to be held that steering unit and axle unit are two different units for the purpose of computing deduction under section 80-I. The Assessing Officer shall grant deduction without set off of loss of one unit against the profit of another subject to the availability of gross profits as per section 80B(5) of the Act." 3. The same view has been followed by the Income-tax Appellate Tribunal in respect of the other years which have been dealt with by its order dated June 6, 2008. 4. After hearing the counsel for the parties, we feel that the following substantial question of law arises for our consideration: "Whether, in the facts and circumstances of the case, the Income-tax Appellate Tribunal erred in law in holding that the loss of one unit could not be set off against the other unit in view of the provisions of section 80-I(1), (6) and 80B(5) of the Income-tax Act, 1961?" 5. Since the issue involved is purely legal, the counsel for the parties agreed that the matter may be disposed of at this stage itself without the requirement of filing any paper book. We have, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'twenty-five per cent.' had been substituted." 9. Section 80-I(6) reads as under: "(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." 10. Section 80-B(5), which defines gross total income, is as follows: "(5) 'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter." 11. A pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA of the said Act, the profits and gains of the Kalamb unit for the purposes of determining the quantum of deduction under section 80-IA(5) were to be computed as if such eligible business of the said unit was the only source of income of the assessee. This court observed that the Assessing Officer had erroneously mixed the profits of the Delhi and Noida units and had thereby restricted the deduction to the extent of business income and that such an exercise was in total disregard of the provisions of sub-section (7) of section 80-IA of the said Act. It was held that the Kalamb unit, being the only unit of the assessee eligible for deduction under section 80-IA of the said Act, was to be treated as an independent unit and the same was to be treated as the only source of income of the assessee for the purposes of computing deduction under section 80-IA. 14. We now come to the decision of the Supreme Court in the case of Synco Industries Ltd. [2008] 299 ITR 444 which was strongly relied upon by the learned counsel for the appellant. On going through the entire decision, we find that the Supreme Court was primarily concerned with the question as to whether any deduction could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of section 80A(2) of the Act nugatory and, therefore, the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) contemplates that only the profits shall be taken into account as if it was the only source of income. However, section 80A(2) and section 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and, therefore, the non obstante clause in section 80-I(6) cannot restrict the operation of sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier, section 80-I(6) deals with actual computation of deduction whereas section 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and, therefore, while interpreting se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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