DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI, DELHI V. AKUMS DRUGS AND PHARMACEUTICALS LIMITED, DELHI

ITA 4231/DEL/2024

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The case involves an appeal by the Revenue against the order of the CIT(A) which allowed the deduction under section 80IC of the Income Tax Act to Akums Drugs and Pharmaceuticals Limited. The Revenue contested that the CIT(A) erred in allowing the deduction against income from other sources, which was not in line with the provisions of section 80AB. The tribunal examined the arguments and evidence presented, including the application of section 80IC and its interaction with section 80AB, and referenced a Supreme Court decision that supported the assessee's position. The tribunal concluded that the CIT(A)'s decision was correct and dismissed the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312945 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Other Referred Cases: CIT vs Reliance Energy Ltd., [2021] 127 taxmann.com 69 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIJAVEDAKHTAR
• Assessee Lawyers: ANIL JAIN
• Keywords: Business income
• Section: 154; 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘A’: NEW DELHI) BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:-4231/Del/2024 (Assessment Years- 2016-17) DCIT Circle- 1 (1) New Delhi Vs. Akums Drugs and Pharmaceuticals Limited, 304, Mohan Place, Local Shopping Complex SaraswatiVihar, Delhi PAN No:AAECA7090B APPELLANT RESPONDENT Revenue by : ShriJavedAkhtar CIT DR Assessee by :Shri Anil Jain, CA Date of Hearing : 07.04.2025 Date of Pronouncement : 30.04.2025 ORDER PER SUDHIR PAREEK, JM Instant appeal preferred by the Revenue against the order of the National Faceless Appeal Centre (in short “NFAC”) vide dated 18.07.2024 for A.Y. 2016-17. Page 2 of 13 2. The assessee has raised the following grounds of appeals: 1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition on account of deduction u/s 80IC of Rs. 11,02,77,516/-without appreciating the facts. 2. On the facts and circumstances of the case, the Ld.CIT(A) has erred in allowing deduction u/s 80IC against the income declared under other heads of income other than income from eligible business falling under the heads profit and heads of Business & Profession. 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 3. Facts of the case may be summarised as that assessee company filed its original return of income on 29.11.2016 by declaring a total income of Rs.28,44,31,210/- for the A.Y. 2016-17 which was processed under Section 143(1) of the Act and while processing the same , the Ld. DCIT, CPC restricted the deduction u/s. 80IC to Rs.4,75,56,981/- as against Rs.15,78,34,497/- claimed in thereturnof income and refund claimed by the assessee in return of income amounting to Rs.2,38,09,890/- has also been reduced to Page 3 of 13 Rs.45,57,897/- in the aforesaid order due to the reduction in deduction u/s. 80IC. Thereafter the assessee companyprayed for rectification under section 154 of the Act against intimation u/s. 143(1) for allowing full deduction of Rs.15,78,34,497/- under section 80IC before the ld. AO which was rejected vide order dated 02.07.2019 and aggrieved by the same, the assessee knocked the door of CIT(A) where assessee/ appellant succeeded as appeal stands allowed and the Ld. AO accordingly directed to allow the deduction u/s. 80IC to the extent JTI including from the income from other sources. 4. By aggrieving with the same as above, the revenue preferred appeal before us for adjudication by stating that the CIT(A) erroneously deleted the addition on account of deduction u/s. 80IC of Rs.1,02,77,516/- without appreciating the material and relevant facts. 5. Heard the rival submission and carefully scanned the material available on record. 6. The Ld. DR submitted that the Ld. CIT(A) erred in allowing deduction u/s. 80IC against the income declared under other heads of income other than income from eligible business falling under the Page 4 of 13 heads profit and heads of Business and profession and hence ground raised by the revenue deserves to be allowed. 7. Per contra , the Ld. AR submitted that the Ld. ACIT, CPC while passing order under section 143 (1) allowed the deduction under section 80IC of Rs. 4,75,56,981/- instead of Rs.15,78,34,497/- to Rs.27,964270/- + Rs.12,98,70,227/-and submitted that main contention for reduction that the deduction under section 80IC allowed to the extent of the income from business or profession as per section 80AB of the Act. 8. The Ld. AR further submitted the Ld. ACIT CPC while passing the order u/s 143(1) hasallowed the deduction u/s 80IC of Rs 4,75,56,981/- instead of Rs. Rs 15,78,34,497/- as claimed by the assessee company in the return filed on the basis of the profit from the 2 eligible units i.e. unit 2 & 3 which comes to Rs 15,78,34,497/- (27964270+ 129870227). The main contention for reducing the deduction was that the deduction u/s 80IC has been allowed to the extent of the income from business or profession as per section 80AB of the IT Act. Against the aforesaid order the assessee company filed an application u/s 154 to the Ld. AO for the allowing the deduction u/s 80IC of Rs 15,78,34,497/- instead of Rs Page 5 of 13 4,75,56,981/- The Ld. AO in the order passed u/s 154 although giving the reference of sub-section 1 of 80IC and sub-section 3 of 80IC agreed that the deduction is allowable on the profits and gains of the eligible units , but rejected the application by stating that the deduction u/s 80IC has been allowed up to the extent of total income from business or profession i.e. after reducing the loss from the other units , concluding that there is no mistake apparent in the order passed u/s 143(1)/154 by the CPC Bangalore. 9. Relevant extract of section 801C(1) reads as under:: \"Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in 80-IC (2), there shall in the accordance with and subject to the provision of this section be allowed in computing total income of assessee, a deduction as specified in 80IC(3)”. 9.1 The learned AR submitted following details (chart) for consideration : Page 6 of 13 Particulars Amount of profit/ loss (Rs.) Deduction allowable u/s. 80IC from eligible units Unit No.1 (56,71,82,002) 2,79,64,270/- (30% of the total profit) Unit No.2 9,32,14,233 12,98,70,227/- (30% of the total profit) Unit No.3 43,29,00,756 Although eligible unit but loss is tobe carried forward and to be set off from the income of this unit in the next years Unit No.4 and 5 (2,97,94,955) Not eligible Head Office (57,209) Not eligible Others 11,84,76,156/- 15,78,34,497/- Total 4,75,56,981/- Page 7 of 13 Thus, the deduction allowable from eligible units comes to RLs.157834497/-. Computation of Income for the year has been worked out as under : Particulars Amount Income from PGBP 4,75,56,981/- Income from House property 63,00,000 Income from other sources 38,84,08,273 Gross : Total Income (GTI) 44,22,65,704 Less : Deduction u/s. 80IC 15,78,34,497 Total Income (TI) 28,44,31,207 9. The Learned AR further submitted that Section 80AB of the act is with reference to computation of deduction on the basis of gross total income including income from other sources and there is no indication in Sub Section (5) of the section 80-IA that the deduction under Sub Section (1) is restricted to business income only. On the other hand Sub Section (5) deals with determination of the Page 8 of 13 quantum of deduction by treating the eligible business as the only source of income of the assessee. So there is no dispute that the computation of deduction is to calculated on the basis of income from eligible business only. 10. It is also submitted that restriction on taking into account income from any other sources while allowing the deduction computed u/s 801A subject to aggregate of all the deduction under chapter VI-A does not exceed the gross total incomeand the scope of sub section (5) of section 801A of the Act is confined to the determination of quantum of deduction under subsection (1) of section 801A by treating \"eligible business\" as the only source of income. Subsection (5) cannot be pressed into service for limiting the deduction under subsection (1) of section 80IA of the Act is limited to determination of quantum of deduction under subsection (1) of section 80IA by treating “eligible business” as the only source of income. Subsection (5) cannot be pressed into service for limiting the deduction under subsection (1) to the business income only. Page 9 of 13 11. The Learned AR relied upon the judgment of Hon'ble Supreme Court in the case of CIT vs Reliance Energy Ltd., [2021] 127 taxmann.com 69 (SC), inwhich case the eligible deduction u/s 80IA was Rs 546,26,01,224/-. However, the Net income from business was Rs 355,74,73,451/- and the gross total income was Rs 397,37,76,178/- including income from other sources of Rs 41,62,96,727/-. The AO restricted the deduction u/s 801A to the extent of the net income from business by applying provision of the section 80AB of the Act. The Hon'ble Supreme court held that assessee is entitled to the deduction u/s 801A to the extent of the GTI i.e. Rs 397,37,70,178/- including the income from other sources of Rs 41,62,96,727/-. The Learned AR submitted that in the present case also there is an income from other sources of Rs 39,47,08,273/-(68,00,000/-+ 38,84,08,273/-). Accordingly, by applying the ratio of the above said case deduction u/s 80IC in the present case cannot exceed GTI including income from other sources which comes to Rs.44,22,65,704/-. Thus the assessee is duly entitled for deduction u/s 80IC for Rs. 15,78,34,497/- which is less than the GTI of Rs.44,22,65,704/-. Page 10 of 13 12. The Ld. CIT(A) has observed in the impugned order as under :- 8.2 On the application of the above relied upon apex Court judgment to the fact of the case under consideration – it is noticed that the appellant claimed in ROI- Income from Business from Rs.4,75,03,2019/- Income from House Property Rs. 63,00,000/-, Income from other source of Rs. 38,84,08,723/- aggregating to GTI of Rs. 44,22,11,942/- and deduction claimed u/s. 80IC Rs. 15,78,34,497/-Thus, arrived at taxable income of Rs. 28,43,77,445/- and by adding disallowance u/s. 37 towards TP adjustment Rs. 53.760/- has finally offered taxable income of Rs. 28,44,31,205/-. 8.3 In the relied upon case also, the Income from business was Rs. 3,55,74,73,451/- gross total income Rs. 3,97,37,76,178/- including Income from other source of Rs. 41,62,96,727/- wherein the Hon'ble Apex Court held that appellant is entitled to the deduction u/s. 801A to the extent of GTI l.e. Rs. Page 11 of 13 3,97,37,70,178/- including income from other source of Rs. 41,62,96,727/-. 8.4 Since the fact of the case under consideration and the relied upon case are similar, the Hon'ble Apex Court decision is squarely applicable to the appellant case. Therefore, AO is directed to allow the deduction u/s. 80IC to the extent of GTI including the income from other source. 14. We have heard the rival contentions and perused the material available on record. On the basis of foregoing discussions and following binding judicial precedent cited hereinbefore ,we do not find any legal infirmity in the impugned order which enables us to interfere with findings of the Learned CIT(A). Hence, the appeal of the revenue is liable to be dismissed. 15. Consequently, the appeal of the Revenue is hereby dismissed . Order pronounced in the Open Court on 30.04.2025 SD/- SD/- (SHAMIM YAHYA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:30/04/2025. Neha, Sr. PS "