ACME SOAP WORKS,MUMBAI vs. DCIT IT 18 (1) NEW 21(1), MUMBAI

The above titled appeals have been preferred by the assessee against the orders both dated 19.11.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2004-05 & 2005-06.

The sole issue raised by the assessee in both the appeals is against the adjustment of the profit earned by the 80IB eligible unit of the assessee against loss sustained by non eligible unit of the assessee. Shri Rajiv Kallianpur, Director of the company has appeared and relied upon the decision of the Hon’ble Delhi High Court in the case of “CIT vs. Dewan Kraft System P. Ltd.” (2008) 297 ITR 305 (Delhi) wherein the Hon’ble Delhi High Court, while interpreting the provisions of section 80IA, has held that for the purpose of determining the quantum of deduction under section 80IA(5) of the Act, the 2 & 512/M/2015 M/s. Acme Soap Works income of the unit is to be computed if such eligible business of the said unit is the only source of income of the assessee. The profits of the eligible unit cannot be mixed with the profits of ineligible unit. The eligible unit is to be treated as an independent unit and the same is to be treated as the only source of income of the assessee for the purpose of computing the deduction under section 80IA of the Act.

The Ld. D.R., on the other hand, has relied upon certain provisions of section 80A(2) to contend that the aggregate amount of deduction under chapter VIA cannot exceed the gross total income of the assessee. However, the Ld. D.R. has fairly admitted that the impugned order of the Ld. CIT(A) is a very cryptic order. The Ld. CIT(A) has not properly examined the issue. He simply dismissed the appeal of the assessee observing that the assessee is having same PAN number for IT purposes in respect of both the units.

We find that this type of finding is totally wrong and baseless. An assessee, may be having many units, but the assessee has to file the return under one PAN number in relation to the total income of the assessee earned from various units. Hence, there cannot be separate PAN numbers in relation to each unit. The Ld. D.R., at this stage, has fairly admitted that the above finding of the Ld. CIT(A) is not correct. He, however, has submitted that the issue needs examination at the hands of Ld. CIT(A) regarding the claim of deduction from the eligible unit of the assessee. Shri Rajiv Kallianpur, Director of the company has also not objected to the above submission of the Ld. D.R.

In view of this, the impugned order of the Ld. CIT(A) is hereby set aside and the matter is restored to the file of the Ld. CIT(A) to decide it afresh in accordance with law.