M/s Jindal Aluminium Ltd., Bangalore V. ACIT, Bangalore

ITA 1021/BANG/2011

• Counselvise Citation: 102121114 RSA 2011
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI CITI
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 80C; 143(3); 80HHC; 80IB; 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER ITA NO.1021(B)/2011 (ASSESSMENT YEAR : 2004-05) M/S JINDAL ALUMINUM LTD., THE ACI T, JINDAL NAGAR, TUMKUR ROAD, CIR CLE-11(5), BANGALORE-560 073 BANGALORE PAN NO.AAACJ 4324M VS APPELLANT RESPONDENT ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CIT-I (D R) DATE OF HEARING : 08-08-2012 DATE OF PRONOUNCEMENT : 31-08-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 12- 08-2011OF CIT(A)-I, BANGALORE, RELATING TO AY: 2004 -05. 2. M/S JINDAL ALUMINUM LTD., THE ASSESSEE IN THIS APPEAL, IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ALUMINUM EXTRUSION AND GENERATION OF WIND ENERGY. THE ALUMI NUM EXTRUSION PLANT IS SITUATED AT TUMKUR ROAD, BANGALORE. THE B USINESS OF ITA NO.1021(B)/2011 PAGE 2 OF 17 GENERATION OF WIND ENERGY THROUGH WINDMILLS ARE SIT UATED AT THE FOLLOWING PLACES. I) WIND MILL (4.14 MW) AT VILLAGE MADIKARIPURA, CH ITRADURGA DT. KARNATAKA(WM-1) II) WIND MILL (6.6 MW) AT VILLAGE NANDANA HOSUR, CH ITRADURGA DT. KARNATAKA (WM-II) III) WIND MILL (1.9 MW) AT VILLAGE KUNJAHANAHALLI, CHITRADURGA DT. KARNATAKA(WM-III) COMMERCIAL GENERATION OF WM-I STARTED IN FINANCIAL YEAR 1997-98. WM-II STARTED COMMERCIAL GENERATION IN FINANCIAL YE AR 2002-03. COMMERCIAL GENERATION OF WM-III STARTED IN THE FINA NCIAL YEAR 2003- 04. 3. THE ASSESSEE FILED ITS ORIGINAL RETURN UNDER SE CTION 139(1) OF THE IT ACT, 1961 ON 28-10-2004, RETURNING TAXABLE INCOME O F RS.4,05,47,015/- AND WITH A TAX LIABILITY OF RS.1,5 9,06,0-89/- UNDER SECTION 115J OF THE INCOME TAX ACT, 1961. IN THE C OMPUTATION OF TAXABLE INCOME PROFIT & LOSS OF EACH UNIT WAS AS FO LLOWS; ALUMINIUM EXTRUSION RS.11,08,40,976 WIND MILL I (4.14 MW) RS. 4,72,28,143 WIND MILL II (6.6 MW) (-) RS.2,51,53,8 87 (UNAB.DEPRECIATION) WIND MILL III (1.9 MW) (-) RS. 4,35,8 8,634 (UNAB.DEPRECIATION) THE ASSESSEE HAS BEEN CLAIMING DEDUCTION U/S 80IA O F IT ACT IN RESPECT OF ITS WM-I UNIT, SINCE ASSESSMENT YEAR 200 0-01. THE SAME WAS ALLOWED BY THE ASSESSING OFFICER. IN THE CURREN T ASSESSMENT YEAR ALSO, THE ASSESSEE CLAIMED DEDUCTION U/S 80IA AMOUN TING TO ITA NO.1021(B)/2011 PAGE 3 OF 17 RS.4,72,28,143/- (BEING THE 5 TH YEAR OF CLAIM) IN RESPECT OF THE SAID UNIT AND THE SAME WAS ALLOWED BY THE ASSESSING OFFI CER IN HER ORDER U/S 143(3) DATED 29-12-2006. 4. ON 16-12-2008 CIT PASSED ORDER U/S 263 OF THE A CT SETTING ASIDE THE ASSESSMENT ORDER DATED 29-12-2006 AND DIRECTED THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT BY ALLOWING THE DEDUCTION CLAIMED U/S 80IA IN ACCORDANCE WITH LAW IN THE LIGHT OF THE OBSERVATIONS. IN THE PROCEEDINGS BEFORE THE AO PURSUANT TO ORDER OF CIT U/S.263 OF THE ACT, THE ASSESSEE POINTED OUT THAT THE HONBLE INCO ME-TAX APPELLATE TRIBUNAL, BANGALORE IN ASSESSEES OWN CASE (ITA NO. 448/BANG/2009) IN ASSESSMENT YEAR 2006-07 HELD THAT DEDUCTION U/S 80IA IS TO BE ALLOWED UNIT WISE WITHOUT DEDUCTING LOSSES DURING T HE OTHER UNITS. THIS ITAT ORDER WAS SUBMITTED TO ASSESSING OFFICER ON 07-10-2009 AND ON 15-12-2009, ASSESSEE ALSO DREW THE ATTENTION OF THE ASSESSING OFFICER TO FOLLOWING JUDGMENTS; A) KARNATAKA POWER CORPN.LTD VS CIT, BANGALORE )ITAT BANGALORE (ITA NO.249/BQANG/2009) B) ASST. CIT VS GOLDMINE SHARES & FIN.(P)LTD., 302 ITR (AT 208) SPECIAL BENCH, AHMEDABAD. C) JCIT VS ASSOCIATED CAPSULES PVT.LTD., 304 ITR (AT85 ) MUMBAI BENCH. D) MEERA COTTON & SYNTHETIC MILLS (P)LTD., VS ACIT 318 ITR (AT 64) MUMBAI. WHEREIN IT HAS BEEN LAID DOWN THAT DEDUCTION U/S 80 IA IS TO BE ALLOWED UNIT WISE WITHOUT DEDUCTING LOSSES DURING T HE OTHER UNITS. ITA NO.1021(B)/2011 PAGE 4 OF 17 5. THE ASSESSING OFFICER PASSED ORDER DATED 23-12- 2009 WHEREIN SHE ADJUSTED THE LOSSES (DEPRECIATION OF WM-II & WM III WITH THE PROFIT OF WM I AND DISALLOWED THE DEDUCTION U/S 80IA THOUGH G ROSS TOTAL INCOME OF ASSESSEE WAS POSITIVE AND MORE THAN DEDUC TION CLAIMED U/S 80IA. AFTER SETTING OFF LOSS (UNABSORBED DEPRECIAT ION) THE ASSESSEE HAD GROSS TOTAL INCOME OF RS.9,87,72,464/-. DEDUCTION U/S 80IA AMOUNTING TO RS.4,16,36,240/- WAS CLAIMED IN RESPEC T OF WM I UNIT. THE ASSESSING OFFICER PASSED ORDER U/S 143(3) READ WITH SEC.263 OF THE ACT, SETTING OFF UNABSORBED DEPRECIATION AGAINS T THE PROFITS OF THE WIND MILL-I WHOLLY DISALLOWING THE DEDUCTION CLAIME D U/S 80IA. 6. ON APPEAL BY THE ASSESSEE, THE CIT CONFIRMED TH E ACTION OF THE AO FOR THE FOLLOWING REASONS; I HAVE GONE THROUGH THE FACTS OF THE CASE AS WELL AS THE LEGAL ISSUES AND CITATIONS PUT FORTH BY THE AR ABOVE. FIR STLY, I DO NOT SUBSCRIBE TO THE VIEW THAT THE DECISION OF ITAT PER TAINING TO AYT: 2006-07 IN APPELLANTS OWN CASE BINDS EITHER THE AO OR ME TO HOLD DIFFERENTLY BECAUSE OF TWO REASONS; FIRSTLY, THE I SSUE IS A LEGAL ONE AND THE ISSUE IS CONTENTIOUS. EVEN THE HIGH C OURTS HAVE DIFFERENT VIEWS THAT THE SUPREME COURT. FOR EG. IN THE CASE OF MEERA COTTON, THE HONBLE MUMBAI HIGH COURT HAD GIV EN A DIFFERENT DECISION DISTINGUISHING THE FACTS OF THAT CASE FROM SYNCO CASE DECIDED BY SUPREME COURT. IN THIS CASE, THE LD. ITAT HAS HELD THE CASE IN FAVOUR OF THE ASSESSEE ON THE BASI S OF ITS FINDING IN THE CASE OF- M/S KARNATAKA POWER CORPORATION LTD VS CIT IN ITA NO. 294/BANG/2009 DATED 10- 07-2009 IN THAT CASE, THE ASSESSEE WAS HAVING SEVEN UNITS, ALL GENERATING POWER. IN THIS CASE, THE BUSINESS IS FROM TWO DIFF ERENT SOURCES VIZ. POWER SALE AND ALUMINIUM SALE. BESIDES, IN THE CA SE OF ITA NO.1021(B)/2011 PAGE 5 OF 17 M/S KARNATAKA POWER CORPN.LTD., (AY: 2007-08 ) IN ITA NO.140/AC-11(5)/A-1/10-11 DATED: 09-08-2011 I HAVE DECIDED SUCH ISSUE OF CLAIM U/S 80IA AGAINST THE APPELLANT ELABORATING THE REASONS THEREIN AND I STILL HOLD ON TO THAT AND THEREFORE, FOLLOWING THE SAME REASONING, IT IS ALSO HELD AGAINST THE APPELLANT. IN FACT, I FIND IN THAT CASE TOO THE CA SE OF SYNO HAS NOT BEEN DISCUSSED WHICH IN CLEAR TERMS EXPLAINS THE BI NDING PROVISIONS OF SEC. 80IA OF IT ACT. THE FACTS OF T HE CASE OF SYNCO INDUSTRIES LTD., VS ACIT (2008) 2999 ITR 444(SC) MAY BE PUT AS UNDER; THE ASSESSEE HAS A UNIT FOR OIL DIVISION AND ALSO ANOTHER UNIT OF CHEMICAL DIVISION. THE ASSESSEE EARNED PROF IT IN BOTH THE UNITS IN THE YEAR IN QUESTION. HOWEVER, IT HAD SUFFERED LOSSES IN THE OIL DIVISION IN THE EARLIER YEARS. T HE ASSESSEE CLAIMED DEDUCTIONS U/SS 80HH AND 80I BY CLAIMING TH AT EACH UNIT SHOULD BE TREATED SEPARATELY AND THE LOSS SUFFERED BY OIL DIVISION IN EARLIER YEARS BE ADJUSTED AGAINS T THE PROFIT OF THE CHEMICAL DIVISION WHILE CONSIDERING THE QUES TION OF GRANTING DEDUCTIONS U/S 80HH AND 80I. THE AO OBSE RVED THAT THE GROSS TOTAL INCOME OF THE ASSESSEE BEFORE GRANTING DEDUCTIONS UNDER THIS SECTION WAS NIL. HE, THEREF ORE, HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT O F DEDUCTION. THE FIRST APPELLATE AUTHORITY CONFIRMED THE VIEW OF THE AO. SIMILAR WAS THE FATE OF THE ASSESSEE BE FORE THE TRIBUNAL AND THE HIGH COURT. IT WAS ARGUED BEFORE THE S.C THAT SEC.801(6) ENTITLES IT TO DEDUCTION BY CONSIDE RING SUCH INDUSTRIAL UNDERTAKINGS AS THE ONLY SOURCE OF INCOM E OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND HENCE THE L OSS SUFFERED BY THE ASSESSEE IN THE EARLIER YEARS OUGHT NOT TO HAVE BEEN CONSIDERED FOR THE PURPOSES OF GRANTING D EDUCTION UNDER THESE SECTIONS IN THE CURRENT YEAR. JETTISONI NG THE ASSESSEES POINT OF VIEW THE SUPREME COURT HELD THA T THE DEDUCTION UNDER CHAPTER VIA ARE ALLOWED FROM THE GR OSS TOTAL INCOME IN ACCORDANCE WITH SEC.80A AND SINCE T HE GROSS TOTAL INCOME OF THE ASSESSEE WAS NIL, HENCE THERE W AS NO SCOPE FOR ALLOWING ANY DEDUCTION. ITA NO.1021(B)/2011 PAGE 6 OF 17 SINCE SUCH DECISION IS BINDING UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA, THE HONBLE HIGH COURT OF MU MBAI DISTINGUISHED THE FACTS TO HOLD THAT THE APPELLANT MEERA COTTON DESERVES RELIED VIDE PARA-9 OF THE ORDER REPRODUCED BELOW; WE FIND THAT THERE IS ABSOLUTELY NO SIMILARITY IN THE FACTS OF THAT CASE WITH THOSE UNDER CONSIDERATION F OR THE REASON THAT THE GROSS TOTAL INCOME OF THE ASSESSE IS ONLY AT RS.152.08 LAKHS WHEREAS THE AMOUNT OF DEDUCTION U/S 80IB IS ONLY ATRS.100.13 LAKHS THEREBY LEAVING THE TOTAL INCOME AT A POSITIV E FIGURE OF RS.51.95 LAKHS. THAT WAS A CASE IN WHICH THE GROSS TOTAL INCOME WAS NIL AND THE HONBLE SC HELD THAT IN THE ABSENCE OF POSITIVE GROSS TOTAL INCOME, THERE CANNOT BE GRANTED ANY DEDUCTION UNDER THOSE SECTIONS. MOREOVER, IN THAT CASE THERE WAS A BROUGHT FORWARD LOSS FROM THE ELIGIBLE INDUSTRIAL UNDERTAKING, WHICH IS NOT SO IN THE PRESENT CASE. IN FACT, ON A SIMILAR ANALYSIS OF FATS OF THE CASE IN HAND AND THAT OF MEERA COTTON CITED BY THE AR. I FIND THE AGGREG ATION OF PROFITS FROM THE THREE UNDERTAKINGS OF ELIGIBLE BUSINESS OF GENERATION OF POWER THROUGH WIND MILL IS LOSS OR NEGATIVE. THE R ATIO OF SYNO CASE AND NOT MEERA COTTON CASE IS APPLICABLE TO THE FACTS OF THE CASE ON HAND. THEREFORE, IT IS HELD HAT THE AOS A CTION OF DISALLOWANCE OF CLAIM U/S 80IA IS HELD JUSTIFIED. THE GROUNDS OF APPEAL NOS.2 TO 9 ARE DISMISSED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISS IONS AS WERE MADE BEFORE THE AO. ITA NO.1021(B)/2011 PAGE 7 OF 17 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN S YNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2008] 299 ITR 444 (SC), THE FACTS WERE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF OIL AND CHEMICALS. IT HAD A UNIT FOR OIL DIVISION IN SIROHI AND A UNIT FOR CH EMICAL DIVISION IN JODHPUR. FOR THE ASSESSMENT YEARS 1990-91 AND 1991- 92 IT HAD EARNED PROFITS IN BOTH THE UNITS. BUT IN THE EARLIE R YEARS THE ASSESSEE HAD SUFFERED LOSSES IN THE OIL DIVISION. IN RELATIO N TO THE DEDUCTIONS UNDER SECTIONS 80HH AND 80-I OF THE INCOME-TAX ACT, 1961, IT CLAIMED THAT EACH UNIT SHOULD BE TREATED SEPARATELY AND THE LOSSES SUFFERED IN THE EARLIER YEARS BY THE OIL DIVISION WERE NOT ADJU STABLE AGAINST THE PROFITS OF THE CHEMICAL DIVISION. BUT SINCE THE GRO SS TOTAL INCOME WAS NIL THE ASSESSING OFFICER HELD THAT THE ASSESSEE WA S NOT ENTITLED TO THE BENEFIT OF DEDUCTIONS UNDER CHAPTER VI-A. THE APPEL LATE TRIBUNAL AND THE HIGH COURT AFFIRMED THE VIEW OF THE ASSESSING O FFICER. ON APPEAL TO THE SUPREME COURT HELD, AFFIRMING THE DECISION OF T HE HIGH COURT, THAT THE HIGH COURT WAS JUSTIFIED IN HOLDING THAT THE LO SS FROM THE OIL DIVISION WAS REQUIRED TO BE ADJUSTED BEFORE DETERMI NING THE GROSS TOTAL INCOME AND AS THE GROSS TOTAL INCOME WAS NIL THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTIONS UNDER CHAPTER VI-A WHI CH INCLUDED SECTIONS 80HH AND 80-I. THE HONBLE COURT HELD TH AT THE EFFECT OF CLAUSE (5) OF SECTION 80B OF THE INCOME-TAX ACT, 19 61, IS THAT GROSS TOTAL INCOME WILL BE ARRIVED AT AFTER MAKING THE C OMPUTATION AS FOLLOWS: (I) MAKING DEDUCTIONS UNDER THE APPROPRIAT E COMPUTATION PROVISIONS ; (II) INCLUDING THE INCOMES, IF ANY, UN DER SECTIONS 60 TO 64 IN THE TOTAL INCOME OF THE INDIVIDUAL ; (III) ADJUS TING INTRA-HEAD AND/OR INTER-HEAD LOSSES ; AND (IV) SETTING OFF BROUGHT FO RWARD UNABSORBED ITA NO.1021(B)/2011 PAGE 8 OF 17 LOSSES AND UNABSORBED DEPRECIATION, ETC. ONLY IF THE GROSS TOTAL INCOME SO DETERMINED IS POSITIVE THE QUESTION OF AL LOWING THE DEDUCTIONS UNDER CHAPTER VI-A WOULD ARISE, NOT OTHE RWISE. THE WORDS INCLUDES ANY PROFITS IN SECTION 80-I(1) ARE IMPOR TANT AND INDICATE THAT THE GROSS TOTAL INCOME OF AN ASSESSEE SHALL IN CLUDE PROFITS FROM A PRIORITY UNDERTAKING. WHILE COMPUTING THE QUANTUM O F DEDUCTION UNDER SECTION 80-I(6) THE ASSESSING OFFICER, NO DOU BT, HAS TO TREAT THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS T HE ONLY SOURCE OF INCOME IN ORDER TO ARRIVE AT THE DEDUCTION UNDER CH APTER VI-A. HOWEVER, THE NON OBSTANTE CLAUSE IN SECTION 80-I(6) IS APPLICABLE ONLY TO THE QUANTUM OF DEDUCTION, WHEREAS, THE GROSS TOT AL INCOME UNDER SECTION 80B(5) WHICH IS ALSO REFERRED TO IN SECTION 80-I(1) IS REQUIRED TO BE COMPUTED IN THE MANNER PROVIDED UNDER THE ACT WH ICH PRESUPPOSES THAT THE GROSS TOTAL INCOME SHALL BE AR RIVED AT AFTER ADJUSTING THE LOSSES OF THE OTHER DIVISION AGAINST THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. TO SAY THAT UNDER S ECTION 80-I(6) THE PROFITS DERIVED FROM ONE INDUSTRIAL UNDERTAKING CAN NOT BE SET OFF AGAINST LOSS SUFFERED FROM ANOTHER AND THAT THE PRO FIT IS REQUIRED TO BE COMPUTED AS IF THE PROFIT MAKING INDUSTRIAL UNDERTA KING WAS THE ONLY SOURCE OF INCOME WOULD ALMOST RENDER THE PROVISIONS OF SECTION 80A(2) OF THE ACT NUGATORY. SECTIONS 80A(2) AND 80B(5) ARE DECLARATORY AND APPLY TO ALL THE SECTIONS FALLING IN CHAPTER VI-A. THEY IMPOSE A CEILING ON THE TOTAL AMOUNT OF DEDUCTION AND THEREFORE THE NON OBSTANTE CLAUSE IN SECTION 80-I(6) CANNOT RESTRICT THE OPERA TION OF SECTIONS 80A(2) AND 80B(5) WHICH OPERATE IN DIFFERENT SPHERE S. THE GROSS TOTAL INCOME OF THE ASSESSEE HAS FIRST GOT TO BE DETERMIN ED AFTER ADJUSTING ITA NO.1021(B)/2011 PAGE 9 OF 17 LOSSES ETC., AND IF THE GROSS TOTAL INCOME OF THE A SSESSEE IS NIL THE ASSESSEE WOULD NOT BE ENTITLED TO DEDUCTIONS UNDER CHAPTER VI-A OF THE ACT. 9. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MEERA COTTON AND SYNTHETICS MILLS PVT.LTD. VS. ACIT 318 ITR (AT) 64 (MUMBAI) HAD AN OCCASION TO DEAL WITH A CASE SIMILAR TO THE CASE OF THE ASSESSEE IN THIS APPEAL. THE FACTS WERE, THE ASSESSEE FILED IT S RETURN FOR THE ASSESSMENT YEAR 2003-04 DECLARING TOTAL INCOME AT R S. 51,95,406. IN COMPUTING THE TOTAL INCOME IT HAD CLAIMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT,1961, IN RESPECT OF UNI T NO. 3 AT RS. 1 CRORE. THE ASSESSING OFFICER NOTED THAT THE ASSESSE E HAD THREE UNITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB AND THAT THE LOSS INCURRED IN UNIT NOS. 1 AND 2 WAS REQUIRED TO BE ADJUSTED AG AINST THE PROFIT OF UNIT 3 BEFORE ALLOWING DEDUCTION UNDER SECTION 80-I B AT 100 PER CENT. OF SUCH PROFIT. HE, THEREFORE, REDUCED THE AMOUNT O F DEDUCTION FROM RS. 1 CRORE TO RS. 87.61 LAKHS. THE COMMISSIONER (A PPEALS) AFFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. ON APPEAL THE TRIBUNAL HELD THAT SUB-SECTION (1) OF SECTION 80-IB PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AN D GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) T O (11B), THERE SHALL BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE AS SESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. SUB-SECTION (2) STATES THAT THIS SECT ION APPLIES TO ANY INDUSTRIAL UNDERTAKING WHICH FULFILS ALL THE CONDIT IONS STIPULATED IN THIS SUB-SECTION. THE ACT OF THE ASSESSING OFFICER ALLOWING DEDUCTION ITA NO.1021(B)/2011 PAGE 10 OF 17 UNDER THIS SECTION, ALBEIT AT A LOWER PROFIT, SHOWE D THAT ALL OTHER REQUISITE CONDITIONS MAKING THE ASSESSEE ELIGIBLE F OR DEDUCTION, HAD BEEN SATISFIED. IF THERE WAS A PROFIT DERIVED FROM A PARTICULAR INDUSTRIAL UNDERTAKING, THAT WOULD QUALIFY FOR DEDU CTION WITHOUT REDUCTION OF LOSS SUFFERED BY ANY OTHER ELIGIBLE IN DUSTRIAL UNDERTAKING(S). THE GROSS TOTAL INCOME OF THE ASSES SEE WAS RS. 152.08 LAKHS AFTER ADJUSTING THE LOSSES SUFFERED BY IT IN THE ELIGIBLE AS WELL AS NON-ELIGIBLE UNITS. THERE WERE NO BROUGHT F ORWARD LOSSES OR UNABSORBED DEPRECIATION. THE CLAIM OF DEDUCTION UND ER SECTION 80-IB IN RESPECT OF ELIGIBLE UNIT NO. 3 AT RS. 100.13 LAK HS WAS LESS THAN THE GROSS TOTAL INCOME. THE COMMISSIONER (APPEALS) HAD ERRED IN INTERPRETING THE RELEVANT PROVISION WHEN HE HELD TH AT THE LOSSES SUFFERED BY THE ASSESSEE IN TWO ELIGIBLE UNITS BE R EDUCED FROM THE INCOME OF THE OTHER ELIGIBLE UNIT FOR GRANTING THE DEDUCTION UNDER SECTION 80-IB . THE ASSESSEE WAS ENTITLED TO DEDUCT ION UNDER SECTION 80-IB ON THE PROFIT DERIVED BY IT FROM ELIGIBLE UNI T NO. 3 AT RS. 100.13 LAKHS. 10. THE MUMBAI BENCH OF ITAT IN THE CASE OF MEERA COTTON AND SYNTHETIC MILLS LTD., (SUPRA) DISTINGUISHED THE DEC ISION OF THE HONBLE SUPREME COURT IN THE CASE OF SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2008] 299 ITR 444 (SC) AS FOLLOWS: AT THIS JUNCTURE IT WILL BE RELEVANT TO CONSIDER T HE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT RELIED UPON BY THE AUTHORITIES BELOW IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFIC ER [2002] 254 ITR 608 WHICH NOW STANDS APPROVED BY THE HONBLE APEX COURT IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [20 08] 299 ITR 444. THE FACTS OF THIS CASE ARE THAT THE ASSESSEE H AD A UNIT FOR ITA NO.1021(B)/2011 PAGE 11 OF 17 OIL DIVISION AND ALSO ANOTHER UNIT FOR CHEMICAL DIV ISION. THE ASSESSEE EARNED PROFITS IN BOTH THE UNITS IN THE YE AR IN QUESTION. HOWEVER IT HAD SUFFERED LOSSES IN THE O IL DIVISION IN THE EARLIER YEARS. THE ASSESSEE CLAIMED DEDUCTION S UNDER SECTIONS 80HH AND 80-I BY CLAIMING THAT EACH UNIT SHOULD BE TREATED SEPARATELY AND THE LOSSES SUFFERED BY THE O IL DIVISION IN EARLIER YEARS BE NOT ADJUSTED AGAINST THE PROFITS O F THE CHEMICAL DIVISION WHILE CONSIDERING THE QUESTION OF GRANTI NG DEDUCTIONS UNDER SECTIONS 80HH AND 80-I. THE ASSESSING OFFIC ER OBSERVED THAT THE GROSS TOTAL INCOME OF THE ASSESSEE BEFOR E GRANTING DEDUCTIONS UNDER THIS SECTION WAS NIL. HE, THEREF ORE, HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DED UCTION. THE FIRST APPELLATE AUTHORITY CONFIRMED THE VIEW OF THE ASSESSING OFFICER. SIMILAR WAS THE FATE OF THE ASSESSEE BEFOR E THE TRIBUNAL AND THE HONBLE HIGH COURT. IT WAS ARGUED BEFORE THE HONBLE SUPREME COURT THAT SECTION 80-I(6) ENTITLES IT TO DEDUCTION BY CONSIDERING SUCH INDUSTRIAL UNDERTAKING AS THE ON LY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR R ELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND HENCE THE LOSS SUFFERED BY THE ASSESSEE IN THE EARLIER YEARS OUGHT NOT TO HAVE BEEN CONSIDERED FOR THE PURPOSES OF GRANTING DEDUCT ION UNDER THESE SECTIONS IN THE CURRENT YEAR. JETTISONING T HE ASSESSEE S POINT OF VIEW THE HON BLE SUPREME COURT HELD THA T THE DEDUCTIONS UNDER CHAPTER VI-A ARE ALLOWED FROM TH E GROSS TOTAL INCOME IN ACCORDANCE WITH SECTION 80A AND S INCE THE GROSS TOTAL INCOME OF THE ASSESSEE WAS NIL, HENCE T HERE WAS NO SCOPE FOR ALLOWING ANY DEDUCTION. WE FIND THAT THERE IS ABSOLUTELY NO SIMILARITY IN T HE FACTS OF THAT CASE WITH THOSE UNDER CONSIDERATION FOR THE REASO N THAT THE GROSS TOTAL INCOME OF THE ASSESSEE IS RS. 152.08 LAKHS WHEREAS THE AMOUNT OF DEDUCTION UNDER SECTION 80-IB IS ON LY AT RS. 100.13 LAKHS, THEREBY LEAVING THE TOTAL INCOME AT A POSITIVE FIGURE OF RS. 51.95 LAKHS. THAT WAS A CASE IN WHICH THE GROSS TOTAL INCOME WAS NIL AND THE HONBLE SUPREME COUR T HELD THAT IN THE ABSENCE OF POSITIVE GROSS TOTAL INCOME, TH ERE CANNOT BE GRANTED ANY DEDUCTION UNDER THOSE SECTIONS. MOREO VER IN THAT CASE THERE WAS A BROUGHT FORWARD LOSS FROM THE EL IGIBLE INDUSTRIAL UNDERTAKING, WHICH IS NOT SO IN THE PRES ENT CASE. ITA NO.1021(B)/2011 PAGE 12 OF 17 SECTION 80A(1) PROVIDES THAT IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, THERE SHALL BE ALLOWED FROM HIS GROSS TOTAL INCOME, THE DEDUCTIONS SPECIFIED IN SECTIONS 80C TO 80U. SUB-SECTION (2) FURTHER PROVIDES THAT THE AGGREGATE AMOUNT OF THE DEDUCTIONS UNDER THIS CHAPTER SHALL NOT, IN ANY C ASE, EXCEED THE GROSS TOTAL INCOME OF THE ASSESSEE. THE GROSS T OTAL INCOME HAS BEEN DEFINED UNDER SECTION 80B(5) TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS O F THIS ACT, BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER . IT THEREFORE FOLLOWS THAT THE PRIMARY STEP FOR CONSIDERING THE GRANT OF DEDUCTIONS UNDER CHAPTER VI-A IS TO DETERMINE THE GROSS TOTAL INCOME, WHICH, IN TURN, IS COMPUTED BY AGGREGATING THE INCOME FROM ALL THE SOURCES IN THIS YEAR AFTER ADJU STING THE LOSSES OF THE CURRENT YEAR UNDER ANY HEAD. THE BR OUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION ETC. ARE ALSO REDUCED. THE RESULTANT FIGURE IS DETERMINED AS GROSS TOTAL INCOME. TO PUT IT SIMPLY GROSS TOTAL INCOME IS THE INCOME AVAI L- ABLE AT THE DISPOSAL OF THE ASSESSEE IMMEDIATELY BEFORE ALLOWIN G DEDUCTIONS UNDER CHAPTER VI-A. IF THE GROSS TOTAL INCOME IS SA Y RS. 100 AND THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80-IB AT RS. 150, THEN THE AMOUNT OF DEDUCTION UNDER SECTION 8 0-IB WILL BE RESTRICTED TO RS. 100 AS PER THE MANDATE OF SECTI ON 80A WHICH PROVIDES THAT THE DEDUCTIONS SHALL BE ALLOWED FRO M THE GROSS TOTAL INCOME AND THE AGGREGATE AMOUNT OF ALL THE DEDUCTIONS SHALL NOT IN ANY CASE EXCEED THE GROSS TOTAL INCOME OF THE ASSESSEE. IF HOWEVER THE AMOUNT OF ELIGIBLE RELIEF UNDER SECTION 80-IB IS SAY RS. 90, THEN FULL AMOUNT WILL BE ELI GIBLE FOR DEDUCTION BECAUSE THE AMOUNT OF THE ELIGIBLE RELI EF DOES NOT EXCEED THE GROSS TOTAL INCOME. THEREFORE IT IS MA NDATORY TO WORK OUT THE ELIGIBLE AMOUNT OF DEDUCTION UNDER VAR IOUS SECTIONS OF CHAPTER VI-A INDIVIDUALLY AND THEN SUCH AGGREGATE AMOUNT HAS TO BE RESTRICTED TO THE AMOUNT OF GROS S TOTAL INCOME AS COMPUTED UNDER SECTION 80B(5), WHICH MEAN S THE INCOME AVAILABLE AFTER ADJUSTING ALL THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ETC. COMING BACK TO THE FACTS OF OUR CASE WE OBSERVE THA T THE GROSS TOTAL INCOME OF THE ASSESSEE IS AT RS. 152.08 LAK HS AFTER ADJUSTING THE LOSSES SUFFERED BY IT IN THE ELIGIB LE AS WELL AS ITA NO.1021(B)/2011 PAGE 13 OF 17 NON-ELIGIBLE UNITS. THERE ARE NO BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION. THE CLAIM OF DEDUCTION U NDER SECTION 80-IB IN RESPECT OF ELIGIBLE UNIT NO. 3 AT RS. 100.13 LAKHS IS OBVIOUSLY LESS THAN THE GROSS TOTAL INCO ME. IN OUR CONSIDERED OPINION THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS) HAS ERRED IN INTERPRETING THE RELEVANT PROVISION WHEN HE HELD THAT THE LOSSES SUFFERED BY THE ASSESSEE IN TWO ELIGIBLE UNITS BE REDUCED FROM THE INCOME OF THE OTHER ELIGI BLE UNIT FOR GRANTING THE DEDUCTION UNDER SECTION 80-IB. SINCE T HE FACTS OF THE CASE IN THE CASE OF SYNCO INDUSTRIES LIMITED [2008] 299 ITR 444 (SC) LIE IN AN ALTOGETHER DIFFERENT COMPA RTMENT, WE HOLD THAT THE RATIO OF THAT CASE CANNOT BE CONSID ERED FOR APPLICATION TO THE ASSESSEE S CASE. ACCORDINGLY TH E IMPUGNED ORDER IS OVERTURNED AND THE ASSESSEE IS ALLOWED DED UCTION UNDER SECTION 80-IB ON THE PROFIT DERIVED BY IT F ROM ELIGIBLE UNIT NO. 3 AT RS.100.13 LAKHS. 11. THE FACTS OF THE PRESENT APPEAL ARE IDENTICAL TO THE FACTS AS IT PREVAILED IN THE CASE OF MEERA COTTON SYNTHETIC MIL LS LTD. (SUPRA). THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE IS AS FOLLOWS: THE STATEMENT OF TOTAL INCOME FOR INCOME-TAX, FOR T HE ASSESSMENT YEAR 2004-05. EXTRUSION S WIND ENERGY TOTAL PROFIT AS PER P/L A/C 108228264 3771752 3 7661904 -6641473 146966218 ADD: PROV. FOR INCOME-TAX 17200000 0 0 0 17200000 ADD: PROV. FOR WEALTH TAX 800000 0 0 0 800000 ADD: PROV. FOR DEFERRED TAX 4429369 0 0 0 4429 3699 ADD: DONATIONS(CONSIDERED SEPARATELY) 287000 0 0 0 287000 ADD: DEPRECIATION AS PER COMPANYS ACT) 31930163 970 5405 31953247 15852839 80441654 ADD: INTEREST PAID TO INCOME-TAX DEPT. 5423485 0 0 0 5423485 208162611 47422928 39615151 9211366 304412058 ITA NO.1021(B)/2011 PAGE 14 OF 17 LESS: CAPITAL GAIN (CONSIDERED SEPARATELY) 61980319 0 0.00 0.00 6198031 9 LESS: DEPRECIATION AS PER INCOME-TAX ACT 35054316 19478 5 64769038 52800000 152818139 LESS: DEDUCTION U/S 35AC 287000 287000 110840976 47228143 -25153887 -43588634 89326598 INCOME FROM BUSINESS CAPITAL GAINS AS PER ANNEXURE A (..LONG TERM CAPITAL LOSS RS.49,17,717 C/F 0 LESS: DEED. UND ER/CHAPTER VIA 1551440 89326598 DEED. U/S 80HHC 47228143 48779583 TAXABLE INCOME 40547015 12. AS CAN BE SEEN FROM THE COMPUTATION OF TOTAL I NCOME AT THE STAGE OF AGGREGATION OF INCOME UNDER SAME HEAD OF INCOME AS WELL AS UNDER DIFFERENT HEADS OF INCOME, THE LOSSES INTRA HEAD AS WELL AS INTER HEAD HAVE TO BE ADJUSTED. IT THEREFORE FOLLOWS THAT THE PRIMARY STEP FOR CONSIDERING THE GRANT OF DEDUCTIONS UNDER CHAPTER V I-A IS TO DETERMINE THE GROSS TOTAL INCOME, WHICH, IN TURN, IS COMPUTED BY AGGREGATING THE INCOME FROM ALL THE SOURCES IN TH E YEAR AFTER ADJUSTING THE LOSSES OF THE CURRENT YEAR UNDER AN Y HEAD. THE BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION E TC. ARE ALSO REDUCED. THE RESULTANT FIGURE IS DETERMINED AS GR OSS TOTAL INCOME. AT THE STAGE OF AGGREGATION OF INCOME THERE IS NO Q UESTION OF ADJUSTING ITA NO.1021(B)/2011 PAGE 15 OF 17 LOSS OF ANY OTHER BUSINESS AGAINST THE BUSINESS INC OME THE UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER CHAPTER VI A OF THE ACT. 13. COMING BACK TO THE FACTS OF OUR CASE WE OBSERV E THAT THE GROSS TOTAL INCOME OF THE ASSESSEE IS AT RS. 8,03,26,59 8 LAKHS AFTER ADJUSTING THE LOSSES SUFFERED BY IT IN THE ELIGIBLE AS WELL AS PROFITS OF THE NON-ELIGIBLE UNITS. THERE ARE NO BROUGHT FORWA RD LOSSES OR UNABSORBED DEPRECIATION. THE CLAIM OF DEDUCTION UNDER SECTION 80- IA WAS IN RESPECT OF ELIGIBLE UNIT 4.14 MW WIND ENE RGY DIVISION AT RS. 4,72,28,143 AND THE DEDUCTION U/S.80HHC OF THE ACT WAS CLAIMED IN RESPECT OF OTHER UNITS AT RS.15,51,440. EVEN IF B OTH THE DEDUCTIONS ARE ADDED THE SUM TOTAL IS OBVIOUSLY LESS THAN TH E GROSS TOTAL INCOME. IN OUR CONSIDERED OPINION THE LEARNED COM MISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN INTERPRETING TH E RELEVANT PROVISION WHEN HE HELD THAT THE LOSSES SUFFERED BY THE ASSESS EE IN TWO ELIGIBLE UNITS BE REDUCED FROM THE INCOME OF THE OTHER ELIGI BLE UNIT BEFORE GRANTING THE DEDUCTION UNDER SECTION 80-IA. SINCE T HE FACTS OF THE CASE IN THE CASE OF SYNCO INDUSTRIES LIMITED [2008] 299 ITR 444 (SC) LIE IN AN ALTOGETHER DIFFERENT COMPARTMENT, WE HO LD THAT THE RATIO OF THAT CASE CANNOT BE CONSIDERED FOR APPLICATION TO T HE ASSESSEE S CASE. ACCORDINGLY THE IMPUGNED ORDER IS OVERTURNED AND THE ASSESSEE IS ALLOWED DEDUCTION UNDER SECTION 80-IA ON THE PROFIT DERIVED BY IT FROM ELIGIBLE UNIT 4.14 MW WIND ENERGY UNIT AT RS.4,72,2 8,143. 14. WE FIND THAT THE CIT(A) IN THE PRESENT CASE HA S DISREGARDED THE BINDING DECISION OF THE ITAT. THE BASIS ON WHICH T HE CIT(A) REFUSED TO ITA NO.1021(B)/2011 PAGE 16 OF 17 FOLLOW THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 CANNOT BE SUSTAINED. IN THE CASE OF M /S MEERA COTTON & SYNTHETICS MILLS (P) LTD., THE BOMBAY BENCH OF THE ITAT AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF M/S SYNCO INDUSTRIES LIMITED [2008] CITED SUPRA HAD CLEARLY HELD THAT THE STAGE AT WHICH SET OFF HAS TO BE DONE IS ONLY A FTER AGGREGATION OF INCOME UNDER ALL HEADS. THE CIT(A) DID NOT AGREE W ITH THIS REASONING OF THE ITAT. THE FACTS OF THE PRESENT CASE ARE CLE ARLY IDENTICAL TO THE FACTS, AS IT PREVAILED IN THE CASE OF M/S MEERA COT TON & SYNTHETICS MILLS (P) LTD., SUPRA. THE CIT(A) BEING AN AUTHORI TY LOWER IN THE TIER OF AUTHORITIES UNDER THE ACT TO THAT OF THE ITAT, IS B OUND TO FOLLOW THE DECISION OF THE ITAT. IN OUR VIEW, THE CIT(A) IN T HE PRESENT CASE HAS FOR NO VALID REASON REFUSED TO FOLLOW THE DECISION OF THE HONBLE ITAT. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST DAY OF AUGUST, 2012. SD/- SD/- (N.BARATHVAJA SANKAR) (N.V.VASUDEV AN) VICE PRESIDENT JUDICIAL MEMBER BANGALORE: D A T E D : 31-08-2012. AM* / DS ITA NO.1021(B)/2011 PAGE 17 OF 17 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-I, BANGALORE. 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE