TMI Blog2013 (11) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of manufacture and sale of aluminium extrusions and generation and sale of wing energy. The return of income was filed for the concerned assessment year on 28/10/2005 declaring a total income of Rs.8,70,55,300/-. The scrutiny assessment under section 143(3) of the Act was completed on 28/12/2007. Thereafter, the assessment was reopened by issuance of notice under section 148 of the Act for the following reasons:- "For the assessment year 2005-06 the assessee has declared an income of Rs.8,70,55,300/-. This was accepted and order was passed under section 143(3) of the Act on 28/12/2007. The assessee had 4 units of wind mill; out of which three are profit making units and one incurring losses. The assessee has claimed a deduction of Rs.4,51,83,841/- under section 80IA of the Act. Sec.80IA(5) of the Act provides that for the purpose of computing the quantum of deduction, the eligible business shall be treated as being the only source of income of the business during the previous year. The deduction is for the total profits of the eligible business. This has to be calculated by considering the profits and loss of all the units and deduction allowed for the net p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment years 2006-07 and 2004-05 in assessee s own case. 9. We have heard the rival submissions and perused the materials on record. The Tribunal, in assessee s own case, for the assessment year 2006-07, had held as follows:- 6.1. The Hon ble I.T.A.T., Bangalore Bench A had an occasion to deal with an identical issue in ITA No:294/Bang/2009 dated: 10/7/2009 in the case of M/s. Karnataka Power Corporation Ltd. v. CIT. The issue before the Hon ble Tribunal, in brief, was that he assessee was having seven units in which power was being generated. Out of the seven units, the assessee had loss in two units. In one of the Units, there was profit for the current year but after adjusting brought forward loss, the resultant figure was the loss. In respect of these three units, the assessee had not claimed deduction u/s 801A. The assessee had claimed deduction on the four units and computed the deduction on the basis of the profits of the four units without setting off of loss of three units. However, the AD, relying on the decision of Hon ble Supreme Court in the case of IPCA Laboratory Ltd. v. DCIT (266 ITR 521), computed the deduction after setting off of the loss of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off in the succeeding year(s) and on the balance profit alone the deduction admissible would be computed; (d) where there are no losses of the eligible unit carried forward (in view of set off against profits of that very source), it is the mandate of law that the losses of earlier years, though already absorbed against other sources, they are once again to be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction; (e) the deduction would be limited to gross total income. Thus view of the specific provisions of section 800A(5) (sic) 8OlA(5), the profit from the eligible business for the purpose of determination of the quantum of deduction under section 801A has to be computed after deduction of the notional brought forward losses and depreciation of eligible business, even though they have been allowed to be set off against other income in the earlier years." 2.8. Hence, following the decision of the Special Bench, we hold that the deduction u/s 801A is to be computed undertaking-wise. In case, there is a loss in an undertaking, then it will not be set off against the profit of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termining the gross total income and as the gross total income was "nil" the assessee was not entitled to claim deductions under Chapter VI-A which included sections 80HH and 80-I. The Hon ble Court held that the effect of clause (5) of section 80B of the Income-tax Act, 1961, is that "gross total income" will be arrived at after making the computation as follows: (i) making deductions under the appropriate computation provisions ; (ii) including the incomes, if any, under sections 60 to 64 in the total income of the individual ; (iii) adjusting intra-head and/or inter-head losses ; and (iv) setting off brought forward unabsorbed losses and unabsorbed depreciation, etc. Only if the gross total income so determined is positive the question of allowing the deductions under Chapter VI-A would arise, not otherwise. The words "includes any profits" in section 80-I(1) are important and indicate that the gross total income of an assessee shall include profits from a priority undertaking. While computing the quantum of deduction under section 80-I(6) the Assessing Officer, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to (11B), there shall be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. Sub-section (2) states that this section applies to any industrial undertaking which fulfils all the conditions stipulated in this sub-section. The act of the Assessing Officer allowing deduction under this section, albeit at a lower profit, showed that all other requisite conditions making the assessee eligible for deduction, had been satisfied. If there was a profit derived from a particular industrial undertaking, that would qualify for deduction without reduction of loss suffered by any other eligible industrial undertaking(s). The gross total income of the assessee was Rs. 152.08 lakhs after adjusting the losses suffered by it in the eligible as well as non-eligible units. There were no brought forward losses or unabsorbed depreciation. The claim of deduction under section 80-IB in respect of eligible unit No. 3 at Rs. 100.13 lakhs was less than the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point of view the Hon ble Supreme Court held that the deductions under Chapter VIA are allowed from the gross total income in accordance with section 80A and since the gross total income of the assessee was nil, hence there was no scope for allowing any deduction. We find that there is absolutely no similarity in the facts of that case with those under consideration for the reason that the gross total income of the assessee is Rs. 152.08 lakhs whereas the amount of deduction under section 80-IB is only at Rs. 100.13 lakhs, thereby leaving the total income at a positive figure of Rs. 51.95 lakhs. That was a case in which the gross total income was nil and the Hon ble Supreme Court held that in the absence of positive gross total income, there cannot be granted any deduction under those sections. Moreover in that case there was a brought forward loss from the eligible industrial undertaking, which is not so in the present case. Section 80A(1) provides that in computing the total income of an assessee, there shall be allowed from his gross total income, the deductions specified in sections 80C to 80U. Sub-section (2) further provides that the aggregate amount of the deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he held that the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit for granting the deduction under section 80-IB. Since the facts of the case in the case of Synco Industries Limited [2008] 299 ITR 444 (SC) lie in an altogether different compartment, we hold that the ratio of that case cannot be considered for application to the assessee s case. Accordingly the impugned order is overturned and the assessee is allowed deduction under section 80-IB on the profit derived by it from eligible unit No. 3 at Rs.100.13 lakhs. 11. The facts of the present appeal are identical to the facts as it prevailed in the case of Meera Cotton Synthetic Mills Ltd. (Supra). The computation of total income of the assessee is as follows: The Statement of total income for Income-tax, for the assessment year 2004-05. Extrusions Wind Energy Total Profit as per P/L a/c 108228264 37717523 7661904 6641473 146966218 Add: Prov. for Income-tax 17200000 0 0 0 17200000 Add: Prov. For Wealth tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjusting the losses suffered by it in the eligible as well as profits of the non-eligible units. There are no brought forward losses or unabsorbed depreciation. The claim of deduction under section 80-IA was in respect of eligible unit 4.14 MW wind energy division at Rs. 4,72,28,143 and the deduction u/s.80HHC of the Act was claimed in respect of other units at Rs.15,51,440. Even if both the deductions are added the sum total is obviously less than the gross total income. In our considered opinion the learned Commissioner of Income-tax (Appeals) has erred in interpreting the relevant provision when he held that the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA. Since the facts of the case in the case of Synco Industries Limited [2008] 299 ITR 444 (SC) lie in an altogether different compartment, we hold that the ratio of that case cannot be considered for application to the assessee s case. Accordingly the impugned order is overturned and the assessee is allowed deduction under section 80-IA on the profit derived by it from eligible unit 4.14 MW wind energy unit at Rs.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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