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TMI Blog2011 (3) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... antial question of law : "(i). Whether, under the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in computing the quantum of deduction under section 80-I of the Income-tax Act, 1961, out of the profits and gains of unit No. 1 the loss incurred in another independent unit No. 2 should be set off against the profits of unit No. 1 ?" 2. The assessee manufactures automobile parts at Gurgaon. It is entitled to deduction under section 80-I of the Act. The Assessing Officer while computing the same took into account loss of the assessee in another manufacturing unit. It was held that the benefit under section 80-I was referable to total income which was required to be worked out after taking into ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for computing deduction in Chapter VI envisages that first gross total income would be computed by applying the provisions of the Act and on the total income so arrived at deduction under Chapter VI-A would be computed. Thus, section 70 which provides for set off of loss under any head from one source against income from any other source under the same head would be given effect to while computing the gross total income. On the basis of the aforesaid provisions, loss of unit No. 2 would be set off against profits of unit No. 1 and on the total income so arrived at deduction under section 80-I would be worked out. The view taken by the learned Commissioner of Income-tax (Appeals) is thus contrary to the express provisions of section 80AB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer to the following provisions : "80A.(2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee . . . . 80AB. 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 accord ance with the provisions of this Act (before making any deduction under this Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also followed in H. H. Sir Rama Varma [1994] 205 ITR 433 (SC). The judgment in Canara Workshops does not refer to section 80AB. As observed by the Madras High Court in Macmillan Co. of India Ltd. [2000] 243 ITR 403 (Mad) if the component of deduction under section 80-I is to refer the total income without excluding the loss therefrom, it will be against the statutory provisions. It will be appropriate to make a reference to the following observations in the said judgment (page 405) : "Learned counsel for the assessee, however, contended that the law to be applied is that laid down in the case of CIT v. Canara Workshops P. Ltd. [1986] 161 ITR 320 (SC). It was held in that case that for computing the profits for the purpose of deductions un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 1, 1981. It has been so held by the apex court in the case of H. H. Sir Rama Varma v. CIT [1994] 205 ITR 433 (SC)." 8. We are, thus, in agreement with the view taken by the Madras High Court in Macmillan Co. of India Ltd. [2000] 243 ITR 403 (Mad) and the Bombay High Court in Nima Specific Family Trust [2001] 248 ITR 29 (Bom) and Synco Industries Ltd. [2002] 254 ITR 608 (Bom) The provisions of sections 80A(2), 80B(5) and 80AB of the Act were not considered before the apex court in Canara Workshops' case [1986] 161 ITR 320 (SC). It may further be observed that the said judgment has been followed by the Andhra Pradesh High Court in Visakha Industries Ltd.'s case [2001] 251 ITR 471 (AP). We are unable to subscribe to the view ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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