The Asstt. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad V. Eris Lifesciences Limited, Ahmedabad

ITA 34/AHD/2023

AI Insights

The case involves two appeals by the Revenue against Eris Lifesciences Ltd. concerning the disallowance of deduction under section 80IE of the Income Tax Act, 1961 for the Assessment Years 2018-19 and 2019-20. The primary issue was whether the deduction under section 80IE should be calculated on the Gross Total Income of the assessee, which includes capital gains, or restricted to income from business or profession only. The CIT(A) had allowed the deduction on Gross Total Income, which was contested by the Revenue. The Tribunal dismissed the Revenue's appeals, referencing the Supreme Court's decision in Reliance Energy Ltd., which supported the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114128 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 15-01-2023
• Other Referred Cases: CIT Vs. Reliance Energy Ltd., V.M. Salgaocar & Brother Pvt. Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Set aside; Capital Gains
• Section: 143(3); 143(1); 80IA; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The ACIT, Circle-2(1)(1), Ahmedabad (Appellant) Vs Eris Lifesciences Ltd., 8 th Floor, Commerce House IV, Nr. Shell Petrol Pump, Anand Nagar Road, Ahmedabad-380015 PAN: AABCE7067M (Respondent) Assessee Represented: Shri Biren Shah, A.R. Revenue Represented: Shri Akhilendra Pratap Yadaw, CIT-DR Date of hearing : 13-07-2023 Date of pronouncement : 19-07-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- These two appeals are filed by the Revenue as against separate Appellate orders both dated 18.11.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the intimation passed under section 143(1) of the Income Tax Act, 1961 ITA Nos. 34 & 35/Ahd/2023 Assessment Years 2018-19 & 2019-20 I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 2 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2018-19 and 2019-20. 2. Since common issue of disallowance of deduction u/s. 80IE of the Act is involved in both the appeals, the same are disposed of by this common order. ITA No. 34/Ahd/2023 relating to the Assessment Year 2018-19 is taken as the lead case. 2.1. Brief facts of the case is that the assessee is a company filed its Return of Income for the Assessment Year 2018-19 on 27-10- 2018 declaring Nil total income under normal provisions of the Act and Rs. 31,84,06,25,409/- under the provisions of Minimum Alternate Tax. The Return of Income was processed u/s. 143(1) of the Act on 05-01-2020, wherein the CPC made the following adjustments: (i) Reduction in the claim of the assessee for the deduction u/s. 80IE of the Act by Rs.13,97,31,310/- and (ii) late payment of ESI of Rs. 3,84,012/-. 4. Aggrieved against the intimation, the assessee filed an appeal before National Faceless Appeal Centre (NFAC). The assessee submitted that the adjustment made by CPC is not covered by any limb specified under section 143(1)(a) of the Act. Therefore the denial of claim of deduction u/s. 80IE is without jurisdiction and the same is liable to be deleted. On merits the assessee submitted that the Deduction u/s. 80IE is allowable on the Gross total income of an assessee which includes any profits and gains derived by an undertaking on the eligible business prescribed in sub-section (2) of Section 80IE of the Act. Thus the assessee claimed the issue is I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 3 squarely covered by the recent Judgment of the Hon’ble Supreme Court of India in the case of CIT Vs. Reliance Energy Ltd. reported in 127 taxmann.com 69 (SC) where it is held that Scope of sub- section (5) of section 80IA is limited to determination of quantum of deduction under sub-section (1) of section 80IA by treating ‘eligible business’ as ‘only source of income’. Sub-section (5) cannot be pressed into service for reading a limitation of deduction under sub-section (1) only to ‘business income’. 4.1. The assessee further relied upon Hon’ble Bombay High Court judgment in the case of V.M. Salgaocar & Brother Pvt. Ltd. Vs. ACIT reported in [2017] 81 taxmann.com 357 and thereby claimed that the deduction u/s. 80IE of the Act should be allowed on the amount of Gross Total Income and not up to the amount of Income from Business or Profession. 5. The Ld. CIT(A) considered the above submission of the assessee and deleted the disallowance made by CPC following Supreme Court Judgment in the case of Reliance Energy Ltd. observing as follows: “...Since, the same logic had been applied to restrict the deduction in sec.80IE therefore, the same will also not stand. Thus, the addition cannot be sustained. Further, the assessing officer during the assessment proceeding u/s 143(3) for the A. Y. 2018-19 has made the following observation in para no. 9 at page no. 22 of the assessment order u/s 143(3) of the Act dated 26.09.2021. 9. During the year under consideration, the assessee had total Capital gains of Rs.13,97,31,310/- part of Gross total income Rs.259,26,91,794/- as per ITR for which it has claimed as Chapter VI-A deduction u/s 80IE. AS per section 80-IE(1), deduction under the section is available only for profits and gains from any business. Hence, Capital gains of Rs. 13,97,31,310/- claimed part of deduction u/s 801E was proposed to be added back to the total income of the assessee. Accordingly, a Show Cause Notice dated I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 4 22.04.2021 was issued to the assessee and the assessee submitted its response through written submissions dated 26.04.2021 and 29.04.2021 and the same has been considered. The assessee relied on the judgement of the Hon'ble Supreme Court dated 28.04.2021 in the case of Commissioner of Income tax Vs M/s Reliance Energy Ltd, where the Hon'ble Supreme Court laid down that for the purpose of computation of deduction under the section, eligible business as a whole is to be treated as source of income and cannot be restricted to business income. Accordingly, the deduction u/s 80- IE is recomputed to Rs.254,39,59,717/- and reduced from Gross total income to arrive at Total assessed Income". In nutshell, the appeal of the assessee on this ground is allowed.” 6. Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: The appellant has raised the following grounds of appeal:- "1. "The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of deduction u/s SOIE of the Act of Rs.13,97,31,310/- without considering the facts of this case. As per the decision relied upon by the Ld.CIT(A) in the case of CIT Vs. Reliance Energy Ltd. (Civil Appeal No.1327 of 2021), is not applicable on the facts and law because Sec.801E specifically mentions about Where the gross total income of an assessee includes any profits and gains derived by un undertaking, to which this section applies, from any business referred to in sub-section (2), there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years commencing with the initial assessment year and income from Other sources not included." 2. "The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary?" 3. "It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored". 7. The Ld. CIT-DR Shri Akhilendra Pratap Yadaw appearing for the Revenue supported the order passed by the CPC and requested to uphold the same. I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 5 8. Per contra, Ld. Counsel Shri Biren Shah appearing for the assessee heavily relied upon the judgment of Hon’ble Supreme Court in the case of Reliance Energy Ltd. (cited supra) which has been duly followed by the Assessing Officer while completing the regular assessment u/s. 143(3) for the very same assessment year 2018-19 and thereby allowed the deduction u/s. 80IE on the Gross Total Income of the assessee. Therefore the Revenue appeals are liable to be dismissed. 9. We have given our thoughtful consideration and perused the materials available on record. The recent supreme court judgment in the case of Reliance Energy has held that the scope of sub-sec(5) of 801A is limited to determination of quantum deduction under sub sec.(1) of sec.801A by treating eligible business as the only source of income and sub-section (5) cannot be pressed into service for reading a limitation of deduction under sub-sec. (1) only to “business income” and held as follows: “....15. In the case before us, there is no discussion about Section 80-IA(5) by the Appellate Authority, nor the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub-section (1) of Section 80-IA of the Act. We hold that the scope of sub-section (5) of Section 80-IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-1A of the Act by treating 'eligible business' as the 'only source of income'. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to 'business income'. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase 'derived... from' in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub- section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act.” I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 6 9.1. Further as it can be seen from the Ld. CIT(A) order and the regular assessment passed u/s. 143(3) dated 26-09-2021, the Ld. Assessing Officer followed the Hon’ble Supreme Court judgment in the case of Reliance Energy Ltd. and granted deduction under 80IE on the Gross Total Income of the Assessee. Therefore the grounds raised by the Revenue is devoid of merit and the same is liable to be rejected. 10. In the result, the appeal filed by the Revenue is hereby dismissed. 11. ITA No. 35/Ahd/2023 is relating to the Assessment Year 2019-20, wherein the claim of deduction u/s. 80IE was restricted while processing the return u/s. 143(1) of the Act. There is no change in facts of the above case with that of the earlier assessment year. For the detailed reasons stated in Para 9 & 9.1 of the above order, therefore the above decisions is squarely applicable to the present facts of this case. Following the ratio of the above decision, the appeal filed by the Revenue is hereby dismissed. 12. In the result, both the appeals filed by the Revenue are hereby dismissed. Order pronounced in the open court on 19-07-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 19/07/2023 I.T.A Nos. 34 & 35/Ahd/2023 A.Ys. 2018-19 & 2019-20 Page No ACIT Vs. Eris Lifesciences Ltd. 7 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद