DCIT 3(3)(1), MUMBAI vs. S.D. CORPORATION P.LTD, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-8 [the ld. CIT(A)], Mumbai dated 5th July 2017 for

Assessment Year 2010-11. The revenue has raised the following grounds of

appeal:

"A. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of deduction u/s 80IB (10) at Rs. 61,29,65,439/- instead of Rs. 58,95,08,692/- calculated by the AO, ignoring the provisions of Section 80IB of the Act which stipulates that income under a section has to be computed in accordance with the provisions of the Act (before making any deduction under Chapter VIA) which is included in the gross total income of the assessee? B. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of deduction u/s 80IB (10) at Rs. 1

ITA No 6395 Mum 2017-M/s S.D. Corporation Pvt. Ltd.

61,29,65,439/- instead of Rs. 58,95,08,692/- calculated by the AO, various courts in the case of Sterling foods 237 ITR 53 (SC), Pandian Chemicals Ltd. 262ITR 278 (SC), Liberty India vs. Commissioner of income tax (2009) 183 Taxman 349 (SC), Vellore Electric Corpn. Ltd. vs Commissioner of Income tax (1997) 93 Taxman 401, Commissioner of Income Tax vs. Kothari products Ltd., (2008) 168 taxman 236 (All.), Liberty Shoes Ltd. vs. Commissioner of Income tax, Central circle, Ludhiana, (2007) 158 Taxman 340 (Punjab & Haryana) have held that income falling the parameters of being incidental to business, can fall within the scope of the business of the assessee, yet it cannot be said to have been derived from the eligible industrial undertaking of the assessee, so as to be eligible for deduction under Section 80IB of the Act? 2. Brief facts of the case are that the assessee is a Private Ltd. Company

engaged in the business of real estate development, filed its return of income

on 15.10.2010 declaring total income of Rs. 65,17,414/- after claiming

deduction under section 80IB(10) of Rs. 53,23,78,755/-. The return was

revised on 07.10.2011 declaring total income at Rs. 98,90,404/- and claimed

deduction under section 80IB of Rs. 61,29,65,438/. The return of income was

selected for scrutiny and the assessment was completed under section 143(3)

on 28.03.2013. During the assessment, the Assessing Officer noted that

initially the assessee claimed deduction under section 80IB(10) of Rs.

53,23,78,755/- in the original return, whereas it has enhanced its claim under

section 80IB(10) to Rs. 61,29,65,438/-. The Assessing Officer was of the

view that prima facia, the claim of the assessee is not admissible as per the

provision of section 80AB. The assessing officer issued show cause notice to

the assessee on the issue as to why the deduction under section 80IB should

not be restricted to the income shown under the head “income from business 2

ITA No 6395 Mum 2017-M/s S.D. Corporation Pvt. Ltd.

and profession”. The assessee filed its reply dated 25.03.2013. In the reply

the assessee stated that they are entitled for deduction under section 80IB in

respect of Housing Project. The conditions of section 80IB are fully satisfied. The assessee furnished working of the deduction under section 80IB(10). It

was further stated that provision of section 80AB will not coming the way to

the claim of section 80IB and claim to allowed on the Gross total income and

not to be restrict to the ‘Business Income’. The reply of assessee was not

accepted by Assessing Officer. The Assessing Officer concluded that the

profit of Rs. 61,29,65,438/- from eligible SRA Project and loss from non-

eligible sold building of Rs. 2,34,56,746/-. After setting of such losses, the

income of assessee under the head “Income from Business & Profession”

remains at Rs. 58,95,08,692/- only and the assessee is eligible for deduction

to that extent only. In claiming deduction in excess of its income under the head “Income from Business & Profession” the assessee ignored the

provisions of section 80IB. The assessing officer made reliance on case law

in CIT Vs Sterling Foods (237 ITR 53 SC), Pandian Chemicals Ltd. Vs CIT

(266 ITR 278 Mad), CIT vs. Liberty India (183 taxmann.com 349), CIT vs.

Vellore Electric Corporation Ltd. Vs CIT (93 Taxman 401 SC), CIT vs.

Kothari Products Ltd. (168 Taxman 236 All), CIT vs. Liberty Shoes Ltd.

(158 Taxman 340 SC). 3. On appeal before the ld. CIT(A), the plea of the assessee was accepted and

the assessee was allowed deduction under section 80IB(10) on gross total 3

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income. Aggrieved by the order of ld. CIT(A), the revenue has filed the

present appeal before this Tribunal. 4. We have heard the submission of ld. Departmental Representative (DR) for the revenue and ld. Authorized Representative (AR) of the assessee and

perused the material available on record. The ld. DR for the revenue

supported the order of Assessing Officer. The ld. DR further submits that the

assessee is entitled for deduction under section 80IB (10) for eligible

business only. The assessee claimed deduction under section 80(IB) in

excess of its eligible business and the assessing officer rightly disallowed . In

support of his submission, the ld. DR relied upon the decision of CIT Vs

Sterling Foods (supra), Pandian Chemicals Ltd. Vs CIT (supra), CIT vs.

Liberty India (supra), CIT vs. Vellore Electric Corporation Ltd. Vs CIT (

supra), CIT vs. Kothari Products Ltd. (supra), CIT vs. Liberty Shoes Ltd. (supra) 5. On the other hand, the AR of the assessee supported the order of Assessing

Officer. The ld. AR of the assessee further submits that Hon’ble Supreme

Court in CIT vs. Canara Workshops (P.) Ltd. [1986] 27 Taxman 262 (SC)

held that deduction under section 80E is to be allowed on Profit & Gains

earned by Industry without reducing such profit by setting of loss suffered by

other Industries. Further, the Hon’ble Andhra Pradesh High Court in CIT vs.

Visakha Industries Ltd. (118 Taxman 777) held that deduction under section

80HH with reference to profit of particular unit, without set off of loss on 4

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other unit and deduction contemplated is to be allowed with reference to

particular industrial undertaking and not with reference to total income of the

assessee. the ld AR for the assessee further relied on the decision of Delhi High Court in Meera Cotton & Synthetic Mills (P) Ltd Vs ACIT (29 SOT

177 Mumbai Tri), Punit Construcrtion Co. Vs CIT (92 taxmann.com 28)

(Mumbai-Trib), ACIT Vs Tata Metalics Ltd (81 taxmann.com 439) (Mumbai

Trib) and CIT Vs Sona Koyo Steering Systems Ltd (189 Taxman 110 Delhi

High Court). The ld AR for the assessee filed the copies of the decision relied

by ld DR ( as copies of the case law was not filed by him). The ld AR for the

assessee further submits that none of the case laws relied by assessing officer

and just referred by ld DR for the revenue is not applicable on the issue

involve in the present case. 6. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on various

case laws relied by the lower authorities and the ld. representatives of the

parties. During the assessment, the Assessing Officer observed that initially

the assessee claimed deduction under section 80IB (10) of Rs. 53,23,78,755/-

whereas in the revised return the assessee claimed the deduction under

section 80IB at Rs. 61,29,65,438/-. The Assessing Officer after issuing show

cause notice that in view of the provisions of section 80AB, the claim of

assessee is not admissible. The assessee furnished the following revised

computation; 5

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(1) Net Income from business eligible u/s 80IB(1) Rs. 61,29,65,438/- (2) Net loss from business non eligible u/s 80IB(10) ( Rs.2,34,56,746/-) (3) Income from other sources Rs.3,33,47,149/- Gross total income Rs.62,28,55841/- Allowable claim u/s 80IB(10) Rs. 61,29,65438/-

58,95,08,692/- by deducting the loss of Rs. 2,34,56,746/- from non eligible

business. Before the ld. CIT(A), the assessee urged that the assessee earned

income from eligible business. The assessee suffered loss in the business

which is ineligible for claiming deduction. The assessee claimed net

chargeable income to tax under the head Profit & Gain from Business is Rs.

58,95,08,692/-. The assessee also earned income of Rs. 3.33 crore from

‘Other Sources’. Thus, gross total income of assessee was Rs. 62,28,55,841/-.

The assessee claimed that its gross total income is more than the claim of

section 80IB(10). Thus, the allowability of the claim under section 80IB

should be at Rs. 61,29,65,438/-. The ld. CIT(A) after referring the provisions

of section 80A, section 80IB noted that the overruling principle of deduction

under Chapter-VIA as laid down in section 80 as well as section 80IB both

refers to gross total income, which includes all the head of income in respect

of assessee. The deduction under section 80IB(1) has to be computed on the

basis of profit of eligible unit as it is the only business of assessee. The

essence of section 80AB is that “eligible” income has to be calculated as per

the provisions of the Act.

ITA No 6395 Mum 2017-M/s S.D. Corporation Pvt. Ltd.

Albright Morarji and Pandit Ltd. (1999) 236 ITR 914 (Bom), wherein it was

held that section has provided that Profit & Gain in respect of which deduction is to be allowed are those which are included in assessee’s gross total income and since ‘gross total income’ is defined by section 80B(5) as it

stood then to mean “the total income computed in accordance with the provisions of the Act, before making any deduction under Chapter VI-A or

under section 280-O”, the profits and gain “derived from an industrial

undertaking included in gross total income would, therefore, obviously be the

profit and gains computed in accordance with the provisions of the Act”. 9. The ld. CIT(A) finally concluded that the amount of deduction under section

80IB(10) has to be computed by first arriving at profit/loss of the eligible

business as per provision of the Act and then reducing the amount from “gross total income” which includes all other heads of income. It was also

concluded that as long as “gross total income” exceed the amount of

deduction calculated as per the Act, the same has to be allowed. 10. The Hon’ble Supreme Court in CIT vs. Canara Workshops (P.) Ltd. (supra)

also held that deduction under section 80E is to be allowed from profits and

gains and by industry without reducing such profit by setting of loss suffered

by other industries owned by assessee. Similarly, the Hon’ble Andhra

Pradesh High Court in CIT vs. Visakha Industries Ltd. (supra) held that

deduction under section 80E is to be allowed from profits and gains and by 7

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industry without reducing such profit by setting of loss suffered by other

industries owned by assessee. Delhi High Court in CIT Vs Dewan Kraft

System (P) ltd also took the same view. Therefore, we do not find any

illegality or infirmity in the order passed by ld. CIT(A). 11. The case law relied by assessing officer and further referred by ld. DR for the

revenue, which we have mentioned in para- 4 above, have no application on

the facts of the present case, as the same relates to computation of income

drives from the undertaking. No other contrary facts or law is brought to our

notice, in the result the grounds of appeal raised by the revenue is rejected. 12. In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on 24/06/2019.

Sd/- Sd/- M. BALAGANESH, PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 24.06.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “G” Bench, ITAT, Mumbai 6. Guard File

BY ORDER, Dy./Asst. Registrar ITAT, Mumbai