SINTEX INDUSTRIES LTD vs. ASSISTANT COMMISSIONER OF INCOME TAX (OSD)

TAXAP/261/2012HC GujaratGJHC24022751201202 July 2013Author: HONOURABLE MR. JUSTICE M.R. SHAH,HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI17 pages
AI SummaryDismissed

What were the facts?

The assessee, Sintex Industries Limited, filed its return of income for Assessment Year 2006-07, claiming deductions under Section 80IA for its Captive Power Plant (CPP) unit and under Section 80IB for its Baddi unit. The Assessing Officer disallowed a portion of these deductions, holding that losses from the Daman unit (Rs. 1,97,47,000) must be adjusted against the profits of the Baddi and CPP units on a proportionate basis. The Commissioner (Appeals) partly allowed the assessee's appeal. The Income Tax Appellate Tribunal (ITAT) allowed the department's appeal, upholding the adjustment of losses from the Daman unit against the profits of the Baddi and CPP units, thereby reducing the eligible profits for deduction under Sections 80IA and 80IB. The assessee is challenging the ITAT's order.

What did the High Court hold?

The High Court held that the Tribunal was right in law in reducing the eligible profits under Section 80IA of the CPP unit and Section 80IB of the Baddi unit by the losses of the Daman unit. The Court reasoned that while calculating the quantum of deduction under Sections 80IA and 80IB, the gross total income of the assessee needs to be considered. This means that deductions under these sections are to be allowed only after adjusting the losses worked out in other units. The Court distinguished the case of Canara Workshops P. Ltd. by noting that the Supreme Court in Synco Industries Ltd. had clarified that for the purpose of arriving at the total income, losses from other units must be considered. The Court also found that the decisions in Liberty India, Modi Xerox Ltd., and Bharat Heavy Electricals Ltd. were not applicable on facts. Furthermore, the Court noted that for the very same assessee, the issue had been decided against them in earlier assessment years (2003-04, 2004-05, and 2005-06) without being challenged. Therefore, the appeals were dismissed.

What were the issues?

1. Whether the Tribunal was right in law in reducing the eligible profits under Section 80IA of the CPP unit and Section 80IB of the Baddi unit by the losses of the Daman unit? (Question of law) Assessee's Contentions: - The assessee argued that losses sustained in one unit cannot be taken into account for calculating deductions under Section 80I(6) (as interpreted in the context of Sections 80IA and 80IB), as the provision contemplates considering profits as if it were the only source of income. Reliance was placed on the Supreme Court decision in Commissioner of Income-Tax, (Central), Madras Vs. Canara Workshops P. Ltd. (1986) 161 ITR 320, which held that losses incurred in one priority industry could not be set off against profits of another priority industry for deduction under Section 80E. Revenue's Contentions: - The revenue contended that while calculating the quantum of deduction under Sections 80IA and 80IB, the gross total income of the assessee must be considered, which includes adjusting losses from other units. The Tribunal's decision was supported by the Supreme Court's ruling in Synco Industries Ltd. Vs. Assessing Officer (Income-Tax) and another (2008) 299 ITR 444 (SC). The revenue also pointed out that similar issues for earlier assessment years (2003-04, 2004-05, and 2005-06) were decided against the assessee and not challenged further.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 80IB,Section 40A,Section 143(2),Section 142(1),Section 80I(6),Section 80E,Section 80HH

AI-generated summary — verify with the full judgment below

O/TAXAP/261/2012 CAV JUDGEMNT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 261 of 2012 With TAX APPEAL NO. 375 of 2012

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MS JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ================================================================ SINTEX INDUSTRIES LTD....Appellant(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX (O )....Opponent(s) ================================================================ Appearance: MR MANISH J SHAH, ADVOCATE for the Appellant(s) No. 1 MS PAURAMI B SHETH, ADVOCATE for the Opponent(s) No. 1 =============

The order continues below.

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