M/S BAJAJ MOTORS PVT. LTD. vs. COMMISSIOER OF INCOME TAX,FARIDABAD

ITA/75/2003HC Punjab & HaryanaPHHC01023703200309 March 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL9 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Bajaj Motors (P) Ltd., filed an appeal against an order dated 25.11.2002 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'C', for assessment year 1994-95. The dispute concerns the computation of deduction under Section 80-I of the Income Tax Act, 1961. The Assessing Officer, and subsequently the CIT(A) and the ITAT, held that the loss incurred by the assessee in an independent Unit No.2 should be set off against the profits of Unit No.1 before calculating the deduction under Section 80-I. The assessee manufactures automobile parts at Gurgaon and is entitled to the deduction. The appeal is before the High Court of Punjab and Haryana.

What did the High Court hold?

The High Court held that the loss incurred in Unit No.2 must be set off against the profits of Unit No.1 before computing the deduction under Section 80-I. The Court agreed with the view taken by the Madras High Court in CIT Vs. Macmillan Co. of India Ltd. and the Bombay High Court in CIT Vs. Nima Specific Family Trust and Synco Industries Ltd. The reasoning was based on the interpretation of Sections 80A(2), 80B(5), and 80AB of the Act. Section 80AB, with its non-obstante clause, mandates that deductions under Chapter VI-A are to be made with reference to income included in the gross total income, which is computed after considering all applicable provisions of the Act, including set-off of losses under Section 70. The Court noted that the Supreme Court's decision in Canara Workshops' case did not consider Section 80AB, making it distinguishable. The ratio decidendi is that Section 80AB, along with Sections 80A(2) and 80B(5), dictates that gross total income must be computed first, including the set-off of losses, before calculating deductions under Chapter VI-A. The appeal was dismissed.

What were the issues?

1. Whether, for computing the quantum of deduction under Section 80-I of the Income Tax Act, 1961, the loss incurred in an independent Unit No.2 should be set off against the profits of Unit No.1? (Question of law) Assessee's contentions: The assessee argued that for computing the benefit under Section 80-I, the loss from another unit could not be taken into account. They relied on the Supreme Court judgment in CIT Vs. Canara Workshops Pvt. Ltd. (1986) 161 ITR 320 (SC), and subsequent decisions in CIT Vs. Siddaganga Oil Extractions Pvt. Ltd. (1993) 201 ITR 968 (Karnatala) and CIT Vs. Visakha Industries Ltd. (2001) 251 ITR 471 (Andhra Pradesh), as well as CIT Vs. Devidayal Rolling Refineries Pvt. Ltd. (1984) 40 CTR 191 (Bombay). Revenue's contentions: The revenue contended that the deduction under Section 80-I must be worked out with reference to the total income after excluding losses, as provided under Section 80AB read with Sections 80A(2) and 80B(5). They cited judgments including Distributors (Baroda) P. Ltd. Vs. Union of India (1985) 155 ITR 120 (SC) and H.H.Sir Rama Varma Vs. Commission of Income-Tax (1994) 205 ITR 433 (SC).

Which sections of the Income-tax Act were involved?

Section 260A,Section 80-I,Section 80AB,Section 80A(2),Section 80B(5),Section 70

AI-generated summary — verify with the full judgment below

Income-tax Appeal No.75

of 2003

-1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.75 of 2003 Date of decision: 9.3.2011. M/s Bajaj Motors (P) Ltd. ...Appellant Versus Commissioner of Income Tax, Faridabad ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Pankaj Jain, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel for the respondent.

**** ADARSH KUMAR GOEL, J (

Oral)

.

1.

This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 25.11.2002 passed by the Income Tax Appellate Tribunal, Delhi Bench 'C', New Delhi in ITA No.246/Del/1998, for the assessment year 1994-95, claiming following substantial question of law:- “i). Whether under the facts and circumstances of the case the Appellate Tribunal was right in holding that in computing the quantum of deduction u/s 80-I of the Income Tax Act, 1961 out of the profits and gains of Unit No.1 the loss incurred in another independent Unit No.2 should be set off against the

The order continues below.

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