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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI MANJUNATHA. G, HON’BLE
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-1, Madurai, dated 06.03.2020, and pertains to assessment year 2014-15.
The assessee has raised the following grounds of appeal: 1) Computation of Total Income for the Asst. Year 2014-15 is as follows: -
Income from Chlorate Division Rs. 4,50,04,103 Income from Gas Power Division -1 Rs. 8,28,95,617 Loss in Gas Power Division -2 Rs. (-)14,25,456 Income from Business Rs. 12,64,74,264 Income from Other sources Interest on Bank deposit & 244A Int. Rs. 1,61,91,686 Gross Total Income Rs. 14,26,65,950 LESS Deduction u/s. 80IA(4) 10th year Gas Power Rs. 8,28,95,617 Div.1 Taxable Income Rs. 5,97,70,333
As the loss of Rs.14,25,456/- incurred in Gas Power Division -2 is already deducted to arrive at the Gross Total Income it need not be deducted once again from the income of the units which are eligible for deduction u/s.80 1A. i.e., the provision of section 71 is already complied with. (306 ITR (AT) page 298).
2) The Supreme Court clearly held that while computing the quantum of deduction u/s.80I(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 arrive at the deduction under Chapter VIA. The Supreme Court also held that under section 80 I(6) for the purposes of calculating the deduction, the loss sustained in one of the units is not be taken into account because subsection (6) contemplates that only the profits shall be taken into account as if it was the only source of income’.
3) While interpreting the provisions of law, no extended meaning to the intent of the legislature can be given. Thus the observation of the CIT(A) that 'the claim of the appellant is against the principles of accounting cannot be accepted' is unwarranted unjustified and unlawful.
It is prayed that the connected papers may kindly be looked into and justice rendered. Your appellant craves leave to add, amend, alter, withdraw any grounds of appeal at any time up to the hearing of the appeal.
3. The brief facts of the case are that the assessee is a Domestic Limited Company engaged in the business of manufacturer of Potassium chlorate generating gas power and steam power, filed its return of income for the AY 2014-15 on 26.09.2014 admitting total income of Rs.5,97,70,330/- under normal provisions of the Income Tax Act, 1961, and book profit of Rs.12,80,96,813/- u/s.115JB of the Income Tax Act, 1961 (in short “the Act"). The assessment has been completed u/s.143(3) of the Act, on 21.12.2016 and determined total income of Rs.6,97,22,670/- by re- computing deduction u/s.80IA of the Act, by setting off loss of one eligible unit to profit of another eligible unit. The assessee carried the matter in appeal before the First Appellate Authority, but could not succeed. The Ld.CIT(A) for the reasons stated in their appellate order dated 06.03.2020, rejected arguments of the assessee and sustained the additions made by the AO towards re-computation of deduction u/s.80IA of the Act.
None appeared for the assessee. However, the assessee has filed written submissions, which has been taken on record. We have heard Ld.DR and perused the materials available on record. We find that the sole dispute in appeal filed by the assessee is with regard to computation of eligible profit for the purpose of deduction u/s.80IA of the Act. The AO has allowed deduction u/s.80IA of the Act, by setting off loss of one eligible unit to profit of another eligible unit and quantified net profit eligible for deduction u/s.80IA of the Act. We find that this issue is squarely covered by the decision of the Hon’ble Supreme Court in the case of CIT v.
Yakogawa India Ltd. reported in [2017] 391 ITR 274 (SC), where the Hon’ble Supreme Court clearly held that while computing the quantum of deduction u/s.80 I(6) of the Act, the AO, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at deduction under Chapter VI of the Act. The Hon’ble Supreme Court further held that u/s.80 I(6) of the Act, for the purpose of calculating deduction, loss sustained in one of the units is not to be taken into account, because, sub-section (6) contemplates that only the profit shall be taken into account as if it was the only source of income. Therefore, we are of the considered view that the stage of deduction of profits & gains of the business of an eligible undertaking has to be made independently, and therefore, immediately after the stage of determination of profits & gains, and therefore, we are of the considered view that the AO & the Ld.CIT(A) completely erred in re-computing deduction u/s.80IA of the Act, by setting off loss of one eligible unit to profit of another eligible unit. Hence, we direct the AO to allow deduction claimed u/s.80IA of the Act, without setting off loss of another eligible unit.
In the result, appeal filed by the assessee is allowed.