TMI Blog2020 (10) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 (12) TMI 881 - SUPREME COURT] , which was rendered by the Hon'ble Supreme Court much after the impugned decision by the Tribunal. As argued before us by the assessee that Section 10B occurs in Chapter 3 of the Act, which deals with income not to be included in the total income and when income is not to be included in the total income, loss should also be excluded from the total income and cannot be set off against the income from other unit. Further, it is argued that even in the case of Section 10A, the provision was converted into a provision granting deduction and not exemption of income and in several cases, it has been held that profit from Section 10A unit can be set off against the loss of other units. In decision in the case of Mohan Breweries and Distilleries Ltd. [ 2007 (10) TMI 354 - ITAT MADRAS-B] and Rajapalayam Mills Ltd. vs. CIT [ 1978 (10) TMI 4 - SUPREME COURT] wherein the issue was that loss of unit entitled to deduction under Chapter VI-A, which has been set off against such income in the respective year, cannot be notionally carried forward. Tribunal did not assign any reason as to why it was satisfied that the order of the CIT(A) is erroneous, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loss of Section 80-IC unit against the profit of the non 80-IC unit, holding that eligible income or loss derived by the Himachal Pradesh Unit cannot be eligible or set off with any other unit. Further, the Assessing Officer held that the income or loss of the Himachal Pradesh Unit is to be treated as if it is the only source of income to the assessee, which means that the income or loss of this unit cannot be clubbed with the income or loss from any other source under the same head. The Assessing Officer, therefore, held that the set off / or clubbing of the loss derived is not allowable as per Section 70(1) of the Act and hence, the loss of the Himachal Pradesh Unit is carried forward and be allowed to set off against the income of the said unit in the subsequent years. 4. The assessee preferred appeal before the Commissioner of Income Tax (Appeals)-III, Chennai (for brevity the CIT(A) ). The assessee contended that the income of the Himachal Pradesh Unit is not an exempt income, it is only entitled for deduction under Section 80-IC of the Act subject to the conditions contained in the respective Sections under Chapter VI-A. The assessee further contended that the same is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held that eligibility for relief under Chapter VI-A can be considered only if the assessee has positive gross total income. Where the relief exceeds the gross total income, which is computed after set ff of pass losses and unabsorbed depreciation, it will be limited to an available gross total income. This is the law which is accepted in a number of cases, because of the requirements made clear under Sections 80A, 80AB and 80B(5). The Hon'ble Supreme Court found that the law as pronounced by the various High Courts had taken the view that incentive profits have to be reckoned only from the gross total income and that no deduction is possible under Chapter VI-A if the gross total income is nil or negative. The Hon'ble Supreme Court in the case of Shrike Construction Equipment Ltd (supra) has also taken a similar view and held that in determining business profit for deduction u/s 80-HHC, the unabsorbed business loss of earlier years u/s 72 should be set off. The Hon'ble Supreme Court in A.M.Moosa (supra) has held that profit in sec 80HHC(1) and (3) of the Act means positive profit and 'profit from such exports' has to be profits from export of self manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter VI-A. Therefore, the profit or loss of the above undertaking, as the case may be, is to be taken into account for the purpose of computing gross total income of the assessee in view of sub-Section (1) of sec. 80-IC. The appellant is eligible for set off of loss of the Himachal unit against profits of other units as per sec 70(1) of the Act. Otherwise, the gross total income of the appellant cannot be computed. However, the appellant was not eligible for any deduction because there was loss in the Himachal unit. The appellant has also not claimed any such deduction. The above fact, however, does not postulate that the loss of Himachal unit cannot be taken into u/s 80-IC in the subsequent years is to be computed after adjusting the losses of this unit as envisaged in sec. 80-IC(7) read with sec.80IA(5) of the Act, which treats the eligible business as the only source of the assessee. Reference may be made to the Circular No.281, dated 22.09.1980 (131 ITR St 23) which explained the object of reintroduction of section 80-I by the Finance (No.2) Act, 1980 where similar provisions are enshrined. The relevant part is reproduced for ready reference and clarity: Deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her of the two, then the loss has to be taken into a/c for the purpose of computing the profits. It is submitted that the above decision is rendered in the context of deduction u/s 80HHC and does not apply to the facts of the case. 6. The Tribunal referred to the contention raised by the assessee before the CIT(A) by relying upon the decision of the jurisdictional Tribunal in the case of Mohan Breweries and Distilleries Ltd. vs. ACIT [(2009) 311 ITR (AT) 346] and other decisions to support their contention that the set off loss of 80-IC unit should be allowed against the income of other units. The Revenue relied upon the decision of the High Court of Delhi in the case of CIT vs. KEI Industries Ltd. [(2015) 373 ITR 0574 (Delhi)]. It appears that the only argument of the Revenue before the Tribunal was based on the said decision and it is recorded by the Tribunal that the Revenue stated that based on the said decision, the finding of the CIT(A) should be reversed. The order passed by the Tribunal on the above submissions on either side and on the grounds, which were raised before us, is as follows:- 33. We have heard both sides, perused the materials on record and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the facts of the case, referred to the relevant provisions in Chapter VI-A of the Act more particularly, Sections 80A(2), 80-IC, 80B(5) and 80AB of the Act. The learned counsel also referred to Sections, 70, 71 and 72 of the Act. It is submitted that Chapter VI-A deals with 'deductions to be made in computing total income'. Sub-Section (1) of Section 80A states that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of Chapter VI-A, the deductions specified in Sections 80C to 80U. Sub-Section (2) of Section 80A states that the aggregate amount of the deductions under Chapter VI-A shall not, in any case, exceed the gross total income of the assessee. It is submitted that Section 80-IC is a special provision in respect of certain undertakings or enterprises in certain special category States. Sub-Section (1) of Section 80-IC states that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-Section (2), there shall be in accordance with and subject to the provisions of Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter VIA of the Act. It follows, therefore, that deductions under Chapter VI-A can be given only if the gross total income is positive and not negative. 8. .......... 9. .......... 10. ......... In Commissioner of Income-Tax, Bombay City-III, Bombay v. Mercantile Bank Ltd. (1988) 169 ITR 44 after examining the scheme envisaged by Sub-Section 1 of Section 80A, Sub-Section 2 of Section 80A and SubSection 5 of Section 80B the Calcutta High Court has held that the gross total income defined by Section 80B(5) is the total income computed under the provisions of the Act, but before making any deductions under Chapter VI-A and if the total income computed under the Act before making the deductions under Chapter VI-A is found to be a positive figure, can the deductions permissible under Chapter VI-A be given........... 12. The contention that under Section 80-I (6) the profits derived from one industrial undertaking cannot be set off against loss suffered from another and the profit is required to be computed as if profit making industrial undertaking was the only source of income, has no merits. Section 80-I (1) lays down that where the gross total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 Section 80I(1), which also refers to gross total income one has to read the expression 'gross total income' as defined in Section 80B(5). Therefore, this Court is of the opinion that the High Court was justified in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was 'Nil' the assessee was not entitled to claim deduction under Chapter VI-A which includes Section 80-I also. 10. Based on the above judgment, it is argued that the gross total income of the assessee has first got to be determined after adjusting losses of earlier years, unabsorbed depreciation, etc., and if the gross t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Section 10A units, not contemplated by Sections 80HHC and 80HHE, was intended by the legislature. Such a benefit can only be understood by a legislative mandate to understand that the stages for working out the deductions under Section 10A and 80HHC and 80HHE are substantially different. This is the next aspect of the case which we would now like to turn to. 16. From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal. Further, it has been argued before us by the assessee that Section 10B occurs in Chapter 3 of the Act, which deals with income not to be included in the total income and when income is not to be included in the total income, loss should also be excluded from the total income and cannot be set off against the income from other unit. Further, it is argued that even in the case of Section 10A, the provision was converted into a provision granting deduction and not exemption of income and in several cases, it has been held that profit from Section 10A unit can be set off against the loss of other units. 16. The learned counsel for the assessee has also relied upon the decision in the case of Mohan Breweries and Distilleries Ltd. (supra) and the decision of the Hon'ble Supreme Court in the case of Rajapalayam Mills Ltd. vs. CIT [(1978) 115 ITR 777 (SC)], wherein the issue was that loss of unit entitled to deduction under Chapter VI-A, which has been set off against such income in the respective year, cannot be notionally carried forward. Thus, in the light of the elaborate submissions made before us and also noting that the Tribunal did not assign any reason as to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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