TMI Blog2020 (1) TMI 546X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80-IA of the Act and if so the claim of deduction under section 80-IA of the Act has to be computed for both eligible units. CIT(A) has not adjudicated on the addition made by the AO in respect of the interest income which was not derived from the business of the eligible undertaking. In view of the complete financial information in respect of the two units of the assessee not available before us, in interest of the Justice, we feel it appropriate to set aside the order of the CIT(A) and restore the issue back to him for deciding afresh in accordance with law, after verification of financial statements of both the units of the assessee. It is needless to mention that both the parties, i.e., the assessee as well as the Assessee Officer shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes. - ITA No.2712/Del/2017 - - - Dated:- 10-1-2020 - Shri Amit Shukla, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri Ved Jain, Adv., Ms. Umang Luthra, Adv., Shri Himanshu Aggarwal, CA For the Respondent : Ms. Pramita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed by the assessee at ₹ 203,36,83,278/-, was to be reduced by the loss of ₹ 35,52,96,120/- of other unit for determination of allowable deduction of ₹ 1,67,83,87,158/- under section 80IA of the Act. The finding of the ld. CIT(A) are reproduced as under: 4.4. I have carefully considered the order and written submissions filed by the Ld. AR. The scheme of computation of income, deduction as well as tax under the Income tax Act is clear No doubt, the appellant had profit of ₹ 203.37 crores from the eligible unit which is more than the GTI of ₹ 187.59 crores and it claimed deduction to the extent of ₹ 187.59 crores only. In my view, this is against the provisions of the Act. As per the scheme of computation, the income under each source under a particular head of income needs to be computed first. Then, the loss, if any, from any source needs to be set off against the profit from the other (Intra-head set off). Thus, income under a particular head is computed. That income, again needs to be set off against the 'loss , if any, under another head as per law. Thus, GTI is computed. Against this, deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 521 (SC). The relevant part of the decision is reproduced below for ready reference: 4.... It shows that even though section 80HHC has to be construed in the light of the object of giving incentives, it still has to be interpreted as per its language. An interpretation which leads to an absurd result or a result not contemplated by its language cannot be given... 12. Section 80AB is also in Chapter VI-A. It starts with the words where any deduction is required to be made or allowed under any section of this Chapter . This would include section 80HHC Section 80AB further provides that notwithstanding anything contained in that section Thus section 80AB has been given an overriding effect over all oilier sections in Chapter VIA. Section 80HHC does not provide that its provisions are to prevail over section 80AB or over any other provision of the Act. Section 80HHC would thus be governed by section 80AB Decisions of the Bombay High Court and the Kerala High Court to the contrary cannot be said to be the correct law. Section 80AB makes it dear that the computation of income has to be m accordance with the provisions of the Act. If the income ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking engaged in the business of generation and distribution of power located at Bawana. It is claimed by the assessee that commercial operations in respect of GT-1 Raj Ghat commenced in July, 2002 and as such the income arising out the business of generation and distribution of power by GT-1 Raj Ghat (undertaking) was eligible for deduction under section 80IA of the Act. The unit-wise profit allocation has been provided by the assessee in the computation of total income, which is reproduced as under: 5.1 The assessee has explained that it has claimed deduction under section 80-IA of the Act on the basis of the certificate issued by the Auditor in form No. 10CCB dated 28/08/2012, a copy of which has been placed at pages 35 to 41 of the paper book. According to the certificate, after making adjustment to the book profit of the eligible units, the eligible deduction has been computed at ₹ 203,36,83,278/-. While working this deduction, the interest from bank of ₹ 15,37,81,256/- has been reduced from the eligible profit for deduction. The assessee, then computed the gross total income at ₹ 187,58,66,703/- as under and claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80-IA is reproduced as under: 80-IA (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year 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. 5.4 Thus, section 80-IA(5) prescribe maximum deduction which could be claimed under section 80-IA, but the section 80A(2) restrict the aggregate amount of deduction under chapter VIA (the deduction under Section 80-IA is in the chapter VIA), which reads as under: Deductions to be made in computing total income. 80A. (1) .. (2) The aggregate amount of the deductions under this Chapter sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue and against the assessee. 7. On the other hand, the learned counsel appearing on behalf of the assessee, submitted that the decision of this court in C.I.T. v. Dewan Kraft Systems (supra) is clearly in favour of the assessee and there is nothing in the Supreme Court decision in Synco Industries Ltd. (supra) which would enable us to detract from that position. Consequently, he submitted that the question be answered in favour of the assessee and against the revenue. 8. Section 80-I(1) reads as under:- 80-I. Deduction in respect of profits and gains from industrial undertakings after a certain date, etc. - (1) Where the gross total income of an assessee includes any profits and gains derived from 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 this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA Nos.1279/08,194/09, 416/09, 761/09 788/09 Page No.6 of 11 undertaking, etc.., in case such profits and gains are included in the gross total income of the assessee. The deduction in the case of a company, in view of the proviso to Section 80-I (1), is to be given to the extent of 25% of such profits and gains of such an industrial undertaking. It is also clear that in view of Section 80-I (6), which begins with a non-obstante clause, the quantum of deduction is to be computed as if the industrial undertaking were the only source of income of the assessee during the relevant years. In other words, each industrial undertaking or unit is to be treated separately and independently. It is only those industrial undertakings, which have a profit or gain, which would be considered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The plain reading of the provision suggests that the loss of one such industrial undertaking cannot be set off against the profit of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee under Section 80-I (1) of the said Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business losses of earlier years before ITA Nos.1279/08,194/09, 416/09, 761/09 788/09 Page No.8 of 11 allowing deduction under Chapter VI-A and that if the resultant income is Nil ‟ , then the assessee cannot claim any deduction under Chapter VI-A. While coming to the aforesaid conclusion, the Supreme Court was also confronted with an argument which had been raised on the basis of the provisions of Section 80-I(6) that the profits of one industrial undertaking cannot be set off against the losses suffered by the other industrial undertaking. The Supreme Court was of the view that the provisions of Section 80-I (6) were only for the purposes of computing the quantum of deduction, whereas the gross total income was to be computed in terms of the Act as provided in Section 80-B(5). It is apparent that the Supreme Court distinguished the provisions of Section 80-I(6) which was for the purposes of computing the quantum of deduction from the provisions of Section 80-I (1) and Section 80-B(5) which deal with the manner in which the gross total income is to be considered. The Supreme court observed as under:- 13. ...While computing the quantum of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion is that the gross total income of the assessee has first got to be determined after adjusting losses, etc., and if the gross total income of the assessee is nil the assessee would not be entitled to deductions under Chapter VI-A of the Act. (underlining added) 15. From the above extract, it is apparent that the Supreme Court did not at all hold that while computing the deduction under Section 80-I(6), the loss of one eligible industrial undertaking is to be set off against the profit of another eligible industrial undertaking. All that the Supreme Court said was that in computing the gross total income of the assessee, the same has to be determined after adjusting the losses and that, if the gross total income of the assessee so determined turns out to be Nil ‟ , then the assessee would not be entitled to deduction under Chapter VI-A of the said Act. 16. We agree with the submissions made by the learned counsel for the assessee that there is nothing in the decision in the case of Synco ITA Nos.1279/08,194/09, 416/09, 761/09 788/09 Page No.10 of 11 Industries Ltd (supra) which would enable us to detra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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