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TMI Blog2019 (8) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... 15JB of the Act. Subsequently, the assessee filed revised return of income admitting total income of Rs. 67,31,11,740 under the normal provisions of the Act after claiming deduction under chapter VIA and book profit of Rs. 114,72,88,000 u/s 115JB of the Act. The return was initially processed u/s 143(1) of the Act determining the income at Rs. 66,70,26,276/-. Thereafter, the assessment was picked up for scrutiny and during the assessment proceedings u/s 143(3) of the Act, various information was called for and the assessee furnished the same. The AO determined the taxable income at Rs. 71,10,52,234/-. Against the order of the assessment, the assessee preferred an appeal before the CIT (A) and consequent to the order of the CIT (A), the taxable income was determined at Rs. 69,10,97,234/- and the book profit u/s 115JB of the Act at Rs. 17,20,93,305/-. The AO observed that a mistake had crept in the assessment as there was an excess claim of deduction u/s 80IA of the Act of Rs. 6,77,36,404. In order to rectify this mistake, a notice u/s 154 of the Act dated 9.3.2015 was issued to the assessee and after considering the written submissions of the assessee, the AO held that the tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw any ground of appeal either before or at the time of hearing of this appeals". 3. The learned Counsel for the assessee submitted that in the return of income filed by the assessee, deduction u/s 80IA of the Act in respect of their power generating unit aggregating to Rs. 21,04,47,956/- was claimed as is evident from the tax audit report and form 10CCB filed along with the return of income. He submitted that there were 8 units eligible for deduction u/s 80IA and in respect of two units i.e. Bheema Samudram Unit-I & II, there was a loss and with regard to Kapatgudda Unit-VI(K) and Unit-V(T), Udumelpet, the income was set off against the loss relating to brought forward losses of earlier years. It is submitted that only units 1 to 4 at Jaglur had positive income which had been claimed as a deduction u/s 80IA of the Act and that the AO during the assessment proceedings has considered the issue and accepted the claim of deduction u/s 80IA of the Act. He submitted that vide the subsequent notice u/s 154 of the Act, the AO has proposed to amend/reduce the deduction claimed u/s 80IA of the Act to the tune of Rs. 6,77,38,404/- after adjusting the loss of two units out of the 4 eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) CIT vs. Dewan Kraft Systems (P) Ltd (2008) 297 ITR 305 (Del. HC) 5. Therefore, he prayed that the AO has correctly allowed the claim of deduction u/s 80IA of the Act in the assessment order passed u/s 143(3) of the Act. 6. The learned Counsel for the assessee further submitted that the CIT (A)'s observation that the deduction u/s 80IA is eligible only to the extent of business income and not against the gross total income, is not correct and not sustainable. He, therefore, prayed for deletion of the remarks of the CIT (A). 7. The learned DR, on the other hand, submitted that the AO while passing the assessment order u/s 143(3) of the Act, had not verified the quantum claim of the assessee's deduction u/s 80IA of the Act and that he only noticed the same only after passing the assessment order that there is an excess claim of deduction. He submitted that there is a mistake apparent from the record which can be rectified u/s 154 of the Act. He submitted that the AO is not examining the eligibility of the assessee in claiming the deduction u/s 80IA, but he is only examining the correctness of the quantification of the claim and therefore, it is not a debatable issue but is a mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;person'. The expression 'person' is defined in section 2(9) of 1922 Act to include a HUF and a local authority. Unless a firm can be considered as a 'person', section 17(1) of the 1922 Act cannot govern the assessment of the assessee-firm. In the 1961 Act the expression 'person' is defined differently. It is a matter for consideration whether the definition contained in section 2(31) of the 1961 Act is an amendment of the law or is merely declaratory of the law that was in force earlier. To pronounce upon this question, it may be necessary to examine various provisions in the Act as well as its scheme. Thus, the question whether section 17(1) was applicable to the case of the assessee-firm was not free from doubt. Therefore, the ITO was not justified in thinking that on that question there could be no two opinions. It was not open to the ITO to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the 1961 Act. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 12. In the case of CIT vs. Dewan Kraft Systems () Ltd (2008) 297 ITR 305, the hon'ble Delhi High Court has clearly brought out that loss of eligible unit cannot be set off against the profits of another eligible unit. Relevant paragraphs of the Hon'ble Delhi High Court decision are as under: "13. Perusal of the above provision shows that it is a distinct and separate deeming provision which lays down the special method of computing the profits and gains entitled to deduction under section 80-IA of the Act. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period in which the assessee is entitled to deduction under section 80-IA of the Act, this provision will be applied as if the industrial unit is an independent unit and is the one and only source of income possessed by the assessee. 14. It is clear that while computing deduction under section 80-IA of the Income-tax Act, 1961, the profits and gains of Kalamb unit for the purpose of determining the quantum of deduction under section 80-IA(5) of the Act is to be computed if such eligible business of the said unit is the only sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Hence, we direct the AO to allow deduction claimed u/s 80IA of the Income Tax Act, 1961. 14. In the case of Jindal Aluminium Ltd (Supra), in similar circumstances it was held as under: "13. Coming back to the facts of our case we observe that the gross total income of the assessee is at Rs. 8,03,26,598 lakhs after 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 Ltd. (supra) lie in an altogether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced. The resultant figure is determined as gross total income. To put it simply gross total income is the income available at the disposal of the assessee immediately before allowing deductions under Chapter VI-A. If the gross total income is say Rs. 100 and the assessee is entitled to deduction under section 80-IB at Rs. 150, then the amount of deduction under section 80-IB will be restricted to Rs. 100 as per the mandate of section 80A which provides that the deductions shall be allowed from the gross total income and the aggregate amount of all the deductions shall not in any case exceed the gross total income of the assessee. If however the amount of eligible relief under section 80-IB is say Rs. 90, then full amount will be eligible for deduction because the amount of the eligible relief does not exceed the gross total income. Therefore it is mandatory to work out the eligible amount of deduction under various sections of Chapter VI-A individually and then such aggregate amount has to be restricted to the amount of gross total income as computed under section 80B(5), which means the income available after adjusting all the brought forward losses and unabsorbed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after adjusting losses suffered by the assessee in the other two 'projects viz. 'Shreyas' and 'Coimbatore'. There are no brought forward losses or unabsorbed depreciation. The claim of deduction u/s 80IB in respect of the two eligible units viz. 'Spandhana' and 'Samruddhi' of Rs. 2,23,22,237/- is obviously less than the gross total income. In our considered opinion, the Assessing Officer as well as the ld. CIT(A) erred in interpreting the relevant provisions when they held that the losses suffered by the assessee from two projects, viz. 'Shreyas' and 'Coimbatore' be reduced from the profits of the other two units viz. 'Spandhana' and 'Samruddhi' for granting deduction u/s 80IB. Accordingly, the impugned orders of the lower authorities are set aside. The Assessing Officer is directed to allow deduction u/s 80IB on the profits derived by the assessee from two projects viz. 'Spandhana' and 'Samruddhi' of Rs. 2,23,22,237/-. Thus, the grounds of appeal of the assessee are allowed". 17. Respectfully following the above decisions, we hold that the loss of the eligible units cannot be set off against t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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