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

ITA 798/BANG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0620 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI CITII
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 80C; 143(3); 80HHC; 260A; 148

Judgement Text

PAGE 1 OF 17 ITA NO.79 8/BANG/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.798/BANG/2012 (ASST. YEAR 2005-06) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE- 11(5), BANGALORE. VS M/S JINDAL ALUMINIUM LIMITED, JINDAL NAGAR, TUMKUR ROAD, BANGALORE-73. PA NO. AAACJ 4324 M (APPELLANT) (RESPONDENT) DATE OF HEARING : 27.02.2013 DATE OF PRONOUNCEMENT : 27.02.2013 APPELLANT BY : SHRI FARHAT HUSSAIN QURESHI, C IT-II RESPONDENT BY : SMT. SHEETAL, ADVOCATE OR DER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED AT THE INSTANCE OF THE DEP ARTMENT IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, BANGALO RE DATED 30.03.2012. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THOUGH THE REVENUE HAS RAISED SIX GROUNDS IN TH E MEMORANDUM OF APPEAL, ALL THE GROUNDS RELATE TO THE SOLITARY IS SUE, WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING THE ASSESSEES CLAIM OF DEDUC TION UNDER SECTION 80IA OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- PAGE 2 OF 17 ITA NO.79 8/BANG/2012 2 THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE B USINESS OF MANUFACTURE AND SALE OF ALUMINIUM EXTRUSIONS AND GE NERATION AND SALE OF WING ENERGY. THE RETURN OF INCOME WAS FILED FOR THE CONCERNED ASSESSMENT YEAR ON 28/10/2005 DECLARING A TOTAL INCOME OF RS.8, 70,55,300/-. THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 28/12/2007. THEREAFTER, THE ASSESSMENT WAS REOPENE D BY ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR THE FOLLOWI NG REASONS:- FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS DECLARED AN INCOME OF RS.8,70,55,300/-. THIS WAS ACCEPTED AND ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT ON 28/12/2007. THE ASSESSEE HAD 4 UNITS OF WIND MILL; OUT OF WHICH THREE ARE PROFIT MAKING UNI TS AND ONE INCURRING LOSSES. THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.4,51,83,841/- UNDER SECTION 80IA OF THE ACT. SEC.80IA(5) OF THE ACT PROVIDES THAT FOR THE PURPOSE OF COMPUTING THE QUANTUM OF DEDUCTION, THE ELIGIBLE BUSINESS SHALL BE TREATED AS BEING THE ONL Y SOURCE OF INCOME OF THE BUSINESS DURING THE PREVIOUS YEAR. THE DEDUCTION IS FOR THE TOTAL PROFITS OF THE ELIGIBLE BUSINESS. THIS HAS TO BE CALCULATED BY CONSIDERING THE PROFITS AND LOSS OF ALL THE UNITS AND DEDUCTION ALLOWED FOR THE NET PROFIT. IN THIS CASE, THE ASSESSEE HAD FOUR ELIGIB LE BUSINESS UNITS AND IF THE PROFITS/LOSS OF ALL THE F OUR UNITS ARE CONSIDERED, THE TOTAL PROFIT OF ELIGIBLE BUSINE SS WORKS OUT TO (-) RS.3,40,13,187/- AND THERE BEING A NEGAT IVE INCOME, THE ASSESSEE WILL NOT BE ELIGIBLE FOR DEDUC TION UNDER SECTION 80IA OF RS.4,51,83,841/- FOR THE ASSESSMENT YEAR 2005-06. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.4,51,83,841/- HAS ESCAPED ASSESSMENT. 3.1 THE OBJECTIONS RAISED BY THE ASSESSEE FOR RE-AS SESSMENT WAS REJECTED AND THE RE-ASSESSMENT WAS COMPLETED VIDE O RDER DATED PAGE 3 OF 17 ITA NO.79 8/BANG/2012 3 30/12/2010. IN THE RE-ASSESSMENT COMPLETED, THE AS SESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA OF THE ACT AMOUNTING T O RS.4,51,83,841/- WAS DENIED. 4. AGGRIEVED BY THE DENIAL OF CLAIM OF DEDUCTION UN DER SECTION 80IA OF THE ACT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE FIRST APPELLATE AUTHORITY ALLOWED THE APPEAL BY FOLLOWING THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.448/BANG/2009 DATED 4/9/2009. 6. THE DEPARTMENT BEING AGGRIEVED IS IN APPEAL BEF ORE US RAISING THE FOLLOWING EFFECTIVE GROUNDS:- 1) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING TH E ASSESSEES APPEAL AND IN DIRECTING THE ASSESSING OF FICER TO ALLOW THE DEDUCTION CLAIMED UNDER SECTION 80IA OF THE ACT, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UN DER WHICH THE DISALLOWANCE WAS MADE BY THE ASSESSING OFF ICER. 2) THE LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING TH E ASSESSEES APPEAL WITHOUT APPRECIATING THAT THE DED UCTION UNDER SECTION 80IA IS ON THE PROFITS OF ELIGIBLE B USINESS AND NOT ON ELIGIBLE UNITS AND THE PROVISIONS OF SEC TION 80IA HAVE TO BE UNDERSTOOD ALONG WITH THE PROVISIONS OF SECTION 80B(5) AND 80AB OF THE IT ACT, 1961. 3) THE LEARNED CIT(A) HAS ERRED IN ALLOWING RELIEF TO THE ASSESSEE BASED ON THE DECISION OF THE HONBLE TRIBU NAL DT.4.9.2009 IN ASSESSEES OWN CASE FOR ASSESSMENT YE AR 2006-07 WITHOUT APPRECIATING THAT THE DECISION OF T HE TRIBUNAL HAS NOT REACHED FINALITY AND APPEAL UNDER S ECTION 260A HAS BEEN FILED BEFORE THE HONBLE HIGH COURT A GAINST SUCH ORDER. PAGE 4 OF 17 ITA NO.79 8/BANG/2012 4 7. THE LEARNED DR RELIED ON THE REASONING GIVEN IN THE ASSESSMENT ORDER. 8. THE LEARNED AR ON THE OTHER HAND SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDERS OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2006-07 AND 2004-0 5 IN ASSESSEES OWN CASE. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE TRIBUNAL, IN ASSESSEES OWN CASE, F OR THE ASSESSMENT YEAR 2006-07, HAD HELD AS FOLLOWS:- 6.1. THE HONBLE I.T.A.T., BANGALORE BENCH A HAD AN OCCASION TO DEAL WITH AN IDENTICAL ISSUE IN ITA NO:294/BANG/2009 DATED: 10/712009 IN THE CASE OF M/ S. KARNATAKA POWER CORPORATION LTD. V. CIT. THE ISSUE BEFORE THE HONBLE TRIBUNAL, IN BRIEF, WAS THAT HE ASSESSEE WAS HAVING SEVEN UNITS IN WHICH POWER WAS BEING GENERATED. OUT OF THE SEVEN UNITS, THE ASSESSEE HAD LOSS IN TWO UNITS. IN ONE OF THE UNITS, THERE WAS PROFIT FOR THE CURRENT YEAR BUT AFTER ADJUSTING BROUGHT FORWARD LOS S, THE RESULTANT FIGURE WAS THE LOSS. IN RESPECT OF TH ESE THREE UNITS, THE ASSESSEE HAD NOT CLAIMED DEDUCTION U/S 801A. THE ASSESSEE HAD CLAIMED DEDUCTION ON THE FOU R UNITS AND COMPUTED THE DEDUCTION ON THE BASIS OF TH E PROFITS OF THE FOUR UNITS WITHOUT SETTING OFF OF LO SS OF THREE UNITS. HOWEVER, THE AD, RELYING ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATOR Y LTD. V. DCIT (266 ITR 521), COMPUTED THE DEDUCTION AFTER SETTING OFF OF THE LOSS OF THREE UNITS FROM T HE PROFIT OF FOUR UNITS ON AN APPEAL, THE CIT(A), RELYI NG ON THE FINDINGS OF THE HONBLE APEX COURT IN THE CASES OF IPCA LABORATORY LTD. REFERRED SUPRA AND ALSO IN CIT V. PAGE 5 OF 17 ITA NO.79 8/BANG/2012 5 B MOHANACHANDRAN NAIR REPORTED IN 285 ITR 226, UPHE LD THE ACTION OF THE AO. 6.2. THE ISSUE WAS BROUGHT BEFORE THE HONBLE TRIBU NAL FOR FURTHER ADJUDICATION. AFTER CONSIDERING THE RIV AL SUBMISSIONS AND ANALYZING THE, PROVISIONS OF SECTION S 8OAB, 801A (1) AND 801A (5), THE HONBLE TRIBUNAL H AD DELIBERATED THE ISSUE THUS 2.6. AS PER SECTION 801A (1), THE DEDUCTION IS ADM ISSIBLE IN CASE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTA KING; THE DEDUCTION IS 20%OF SUCH PROFIT AND GAINS. THE W ORD SUCH MENTIONED IN 80IA(1) REFERS TO THE PROFIT AND GAINS OF INDUSTRIAL UNDERTAKING AND NOT TO THE PROF IT AND GAINS OF THE ELIGIBLE BUSINESS, 801A (5,) REQUIRES THAT PROFIT AND GAINS OF AN UNDERTAKING IS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOM E OF THAT UNDERTAKING. A HARMONIOUS CONSTRUCTION IS PLAC ED ON 801A AND 801(5) (SIC) 8OIA(5) CLEARLY SHOWS THAT THE DEDUCTION IS TO BE CONSIDERED UNDERTAKING-WISE AND ONE HAS NOT TO CONSIDER ALL THE UNDERTAKINGS TOGETHER E VEN THOUGH BUSINESS OF ALL THE UNDERTAKINGS IS COVERED UNDER ELIGIBLE BUSINESS. THE PURPOSE OF SECTION 801A IS T HAT DEDUCTION UNDER CHAPTER VIA SHOULD NOT EXCEED GROSS TOTAL INCOME. IN THE INSTANT CASE, THE DEDUCTION CL AIMED U/S 8OIA IS LESS THAN THE GROSS TOTAL INCOME. 2.7. THE SPECIAL BENCH, AHMEDABAD IN THE CASE OF A SST. CIT V. GOLDMINE SHARES & FIN. (P) LTD. 113 JTR 209 HAS HELD AS UNDER: THE ONLY HARMONIOUS CONSTRUCTION OF SECTION 801A(5) CONSISTENT WITH THE OBJECT OF ALLOWING DEDUCTION ON LY TO PROFITS AND GAINS OF THE ELIGIBLE BUSINESS WOULD BE THAT -- PAGE 6 OF 17 ITA NO.79 8/BANG/2012 6 (A) THE DEDUCTION UNDER THAT SECTION WOULD BE COMPU TED WITH REFERENCE TO PROFITS OF THE ELIGIBLE UNIT, UNA FFECTED BY LOSSES SUFFERED IN OTHER UNITS; (B) IN CASE OF LOSS SUFFERED BY THE ELIGIBLE UNIT, S UCH LOSS WOULD NOT BE SET OFF AGAINST PROFITS OF OTHER UNITS /OTHER BUSINESS/OTHER INCOMES IN THE INITIAL YEAR OF THE ASSESSMENT OR SUBSEQUENT YEARS OF ELIGIBLE YEARS OF ASSESSMENT; (C) WHERE LOSSES OF THE ELIGIBLE UNIT REMAINED TO B E ADJUSTED AGAINST THAT VERY SOURCE, THEY ARE TO BE CAR RIED FORWARD TO SUBSEQUENT YEAR(S) AND SET OFF IN THE SUCCEEDING YEAR(S) AND ON THE BALANCE PROFIT ALONE T HE DEDUCTION ADMISSIBLE WOULD BE COMPUTED; (D) WHERE THERE ARE NO LOSSES OF THE ELIGIBLE UNIT CARRIED FORWARD (IN VIEW OF SET OFF AGAINST PROFITS OF THAT VERY SOURCE), IT IS THE MANDATE OF LAW THAT THE LOSSES O F EARLIER YEARS, THOUGH ALREADY ABSORBED AGAINST OTHER SOURCES, THEY ARE ONCE AGAIN TO BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF THE ELIGIBLE UNIT TO COMPUTE ELIGIBLE DEDUCTION; (E) THE DEDUCTION WOULD BE LIMITED TO GROSS TOTAL I NCOME. THUS VIEW OF THE SPECIFIC PROVISIONS OF SECTION 800 A(5) (SIC) 8OLA(5), THE PROFIT FROM THE ELIGIBLE BUSINES S FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDUCTION UNDER SECTION 801A HAS TO BE COMPUTED AF TER DEDUCTION OF THE NOTIONAL BROUGHT FORWARD LOSSES AN D DEPRECIATION OF ELIGIBLE BUSINESS, EVEN THOUGH THEY HAVE BEEN ALLOWED TO BE SET OFF AGAINST OTHER INCOME IN THE EARLIER YEARS. 2.8. HENCE, FOLLOWING THE DECISION OF THE SPECIAL BENCH, WE HOLD THAT THE DEDUCTION U/S 801A IS TO BE COMPUT ED UNDERTAKING-WISE. IN CASE, THERE IS A LOSS IN AN UNDERTAKING, THEN IT WILL NOT BE SET OFF AGAINST TH E PROFIT PAGE 7 OF 17 ITA NO.79 8/BANG/2012 7 OF ANOTHER UNDERTAKING THOUGH THE LOSS OF THIS UNDERTAKING WILL BE ADJUSTED AGAINST THE PROFIT IN SUBSEQUENT YEAR IN CASE THE DEDUCTION IS CLAIMED U/S 801A IN RESPECT OF THAT UNIT. THUS, THE LOSSES WHIC H HAVE NOT BEEN CONSIDERED FOR THE YEAR UNDER CONSIDERATION WILL HAVE TO BE SET OFF AGAINST THE PROFIT OF THESE UNIT S AS AND WHEN THERE IS PROFIT FROM SUCH UNITS AND THE ASSESSEE CLAIMED DEDUCTION U/S 801A. IN CASE OF ONE UNIT THERE IS PROFIT DURING THE YEAR BUT AFTER ADJUSTING CARRY FORWARD LOSS, THE RESULTANT FIGURE IS THE LOSS AND THE ASSESSEE HAS NOT CLAIMED DEDUCTION WS 801A IN RESPE CT OF THIS UNIT.. . 6.3. AS THE ISSUE ON HAND IS IDENTICAL TO THAT OF T HE ISSUE DEALT BY THE HONBLE TRIBUNAL REFERRED SUPRA, WE ARE OF THE CONSIDERED VIEW THAT THE STAND OF THE LOWER AUTHORITIES WAS NOT IN ACCORDANCE WITH LAW. THE AO IS, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 801A, IN CONFORMITY WITH THE DIRECTIONS OF THE HONBLE TRIBUN AL CITED SUPRA. 9.1 FURTHER, FOR THE ASSESSMENT YEAR 2004-05, THE I SSUE WAS CONSIDERED BY THE TRIBUNAL IN ITS RECENT ORDER DATED 31/8/2012 (ITA NO.1021/11) AND THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDING OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05 IS AS FOLLOWS:- 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 FO R OIL DIVISION IN SIROHI AND A UNIT FOR CHEMICAL DIVISION IN JODHPUR. FOR THE ASSESSMENT YEARS 1990-91 AND 1991-9 2 IT HAD EARNED PROFITS IN BOTH THE UNITS. BUT IN THE EARLIER YEARS THE ASSESSEE HAD SUFFERED LOSSES IN THE OIL DI VISION. IN RELATION TO THE DEDUCTIONS UNDER SECTIONS 80HH A ND PAGE 8 OF 17 ITA NO.79 8/BANG/2012 8 80-I OF THE INCOME-TAX ACT, 1961, IT CLAIMED THAT E ACH UNIT SHOULD BE TREATED SEPARATELY AND THE LOSSES SUFFERED IN THE EARLIER YEARS BY THE OIL DIVISION WER E NOT ADJUSTABLE AGAINST THE PROFITS OF THE CHEMICAL DIVI SION. BUT SINCE THE GROSS TOTAL INCOME WAS NIL THE ASSESS ING OFFICER HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTIONS UNDER CHAPTER VI-A. THE APPEL LATE TRIBUNAL AND THE HIGH COURT AFFIRMED THE VIEW OF TH E ASSESSING OFFICER. ON APPEAL TO THE SUPREME COURT H ELD, AFFIRMING THE DECISION OF THE HIGH COURT, THAT THE HIGH COURT WAS JUSTIFIED IN HOLDING THAT THE LOSS FROM T HE OIL DIVISION WAS REQUIRED TO BE ADJUSTED BEFORE DETERMI NING THE GROSS TOTAL INCOME AND AS THE GROSS TOTAL INCOM E WAS NIL THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCT IONS UNDER CHAPTER VI-A WHICH INCLUDED SECTIONS 80HH AND 80-I. THE HONBLE COURT HELD THAT THE EFFECT OF C LAUSE (5) OF SECTION 80B OF THE INCOME-TAX ACT, 1961, IS THAT GROSS TOTAL INCOME WILL BE ARRIVED AT AFTER MAKIN G THE COMPUTATION AS FOLLOWS: (I) MAKING DEDUCTIONS UNDER THE APPROPRIATE COMPUTATION PROVISIONS ; (II) INCLUDING THE INCOMES, IF ANY, UNDER SECTIONS 60 TO 64 IN THE TOTA L INCOME OF THE INDIVIDUAL ; (III) ADJUSTING INTRA-HE AD AND/OR INTER-HEAD LOSSES ; AND (IV) SETTING OFF BROUGHT FO RWARD UNABSORBED LOSSES AND UNABSORBED DEPRECIATION, ETC. ONLY IF THE GROSS TOTAL INCOME SO DETERMINED IS POSI TIVE THE QUESTION OF ALLOWING THE DEDUCTIONS UNDER CHAPT ER VI-A WOULD ARISE, NOT OTHERWISE. THE WORDS INCLUD ES ANY PROFITS IN SECTION 80-I(1) ARE IMPORTANT AND INDIC ATE THAT THE GROSS TOTAL INCOME OF AN ASSESSEE SHALL IN CLUDE PROFITS FROM A PRIORITY UNDERTAKING. WHILE COMPUTING THE QUANTUM OF DEDUCTION UNDER SECTION 80-I(6) THE ASSESSING OFFICER, NO DOUBT, HAS TO TREAT THE PROFI TS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS THE ONLY S OURCE OF INCOME IN ORDER TO ARRIVE AT THE DEDUCTION UNDER CHAPTER VI-A. HOWEVER, THE NON OBSTANTE CLAUSE IN SECTION 80-I(6) IS APPLICABLE ONLY TO THE QUANTUM OF DEDUCTION, WHEREAS, THE GROSS TOTAL INCOME UNDER SE CTION 80B(5) WHICH IS ALSO REFERRED TO IN SECTION 80-I(1) IS PAGE 9 OF 17 ITA NO.79 8/BANG/2012 9 REQUIRED TO BE COMPUTED IN THE MANNER PROVIDED UNDE R THE ACT WHICH PRESUPPOSES THAT THE GROSS TOTAL INCO ME SHALL BE ARRIVED AT AFTER ADJUSTING THE LOSSES OF T HE OTHER DIVISION AGAINST THE PROFITS DERIVED FROM AN INDUSTRIAL UNDERTAKING. TO SAY THAT UNDER SECTION 80 -I(6) THE PROFITS DERIVED FROM ONE INDUSTRIAL UNDERTAKING CANNOT BE SET OFF AGAINST LOSS SUFFERED FROM ANOTHE R AND THAT THE PROFIT IS REQUIRED TO BE COMPUTED AS IF TH E PROFIT MAKING INDUSTRIAL UNDERTAKING WAS THE ONLY SO URCE OF INCOME WOULD ALMOST RENDER THE PROVISIONS OF SEC TION 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 AMO UNT OF DEDUCTION AND THEREFORE THE NON OBSTANTE CLAUSE IN SECTION 80-I(6) CANNOT RESTRICT THE OPERATION OF SE CTIONS 80A(2) AND 80B(5) WHICH OPERATE IN DIFFERENT SPHERE S. THE GROSS TOTAL INCOME OF THE ASSESSEE HAS FIRST GO T TO BE DETERMINED AFTER ADJUSTING LOSSES ETC., AND IF T HE GROSS TOTAL INCOME OF THE ASSESSEE IS NIL THE ASS ESSEE WOULD NOT BE ENTITLED TO DEDUCTIONS UNDER CHAPTER V I-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 ITS RETURN FOR THE ASSESSMENT YEAR 2003-04 DECLARING TOTAL INCOME AT RS . 51,95,406. IN COMPUTING THE TOTAL INCOME IT HAD CLA IMED DEDUCTION UNDER SECTION 80-IB OF THE INCOME-TAX ACT,1961, IN RESPECT OF UNIT NO. 3 AT RS. 1 CRORE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD THREE UNITS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IB AN D THAT THE LOSS INCURRED IN UNIT NOS. 1 AND 2 WAS REQUIRED TO BE ADJUSTED AGAINST THE PROFIT OF UNIT 3 BEFORE ALLOWI NG DEDUCTION UNDER SECTION 80-IB AT 100 PER CENT. OF S UCH PROFIT. HE, THEREFORE, REDUCED THE AMOUNT OF DEDUCT ION FROM RS. 1 CRORE TO RS. 87.61 LAKHS. THE COMMISSION ER PAGE 10 OF 17 ITA NO.7 98/BANG/2012 10 (APPEALS) AFFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. ON APPEAL THE TRIBUNAL HELD THAT SUB-SECTI ON (1) OF SECTION 80-IB PROVIDES THAT WHERE THE GROSS TOTA L INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTION S (3) TO (11B), THERE SHALL BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFI TS 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 SECTION A PPLIES TO ANY INDUSTRIAL UNDERTAKING WHICH FULFILS ALL THE CONDITIONS STIPULATED IN THIS SUB-SECTION. THE ACT OF THE ASSESSING OFFICER ALLOWING DEDUCTION UNDER THIS SEC TION, ALBEIT AT A LOWER PROFIT, SHOWED THAT ALL OTHER REQ UISITE CONDITIONS MAKING THE ASSESSEE ELIGIBLE FOR DEDUCTI ON, HAD BEEN SATISFIED. IF THERE WAS A PROFIT DERIVED F ROM A PARTICULAR INDUSTRIAL UNDERTAKING, THAT WOULD QUALI FY FOR DEDUCTION WITHOUT REDUCTION OF LOSS SUFFERED BY ANY OTHER ELIGIBLE INDUSTRIAL UNDERTAKING(S). THE GROSS TOTAL INCOME OF THE ASSESSEE 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 FORWAR D LOSSES OR UNABSORBED DEPRECIATION. THE CLAIM OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF ELIGIBL E UNIT NO. 3 AT RS. 100.13 LAKHS WAS LESS THAN THE GROSS T OTAL 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 UNIT S BE REDUCED FROM THE INCOME OF THE OTHER ELIGIBLE UNIT FOR GRANTING THE DEDUCTION UNDER SECTION 80-IB . THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80 -IB ON THE PROFIT DERIVED BY IT FROM ELIGIBLE UNIT NO. 3 AT RS. 100.13 LAKHS. 10. THE MUMBAI BENCH OF ITAT IN THE CASE OF MEERA COTTON AND SYNTHETIC MILLS LTD., (SUPRA) DISTINGUISH ED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PAGE 11 OF 17 ITA NO.7 98/BANG/2012 11 SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2008] 29 9 ITR 444 (SC) AS FOLLOWS: AT THIS JUNCTURE IT WILL BE RELEVANT TO CONSIDER THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT RELIED UPON BY THE AUTHORITIES BELOW IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2002] 254 ITR 608 WHICH NOW STANDS APPROVED BY THE HONBLE APEX COURT IN SYNCO INDUSTRIES LTD. V. ASSESSING OFFICER [2008] 299 ITR 444. THE FACTS OF THIS CASE ARE THAT THE ASSESSEE HAD A UNIT FOR OIL DIVISION AND ALSO ANOTHER UNIT FOR CHEMICAL DIVISION. THE ASSESSEE EARNED PROFITS IN BOTH THE UNITS IN THE YEAR IN QUESTION. HOWEVER IT HAD SUFFERED LOSSES IN THE OIL DIVISION IN THE EARLIER YEARS. THE ASSESSEE CLAIMED DEDUCTIONS UNDER SECTIONS 80HH AND 80-I BY CLAIMING THAT EACH UNIT SHOULD BE TREATED SEPARATELY AND THE LOSSES SUFFERED BY THE OIL DIVISION IN EARLIER YEARS BE NOT ADJUSTED AGAINST THE PROFITS OF THE CHEMICAL DIVISION WHILE CONSIDERING THE QUESTION OF GRANTING DEDUCTIONS UNDER SECTIONS 80HH AND 80-I. THE ASSESSING OFFICER OBSERVED THAT THE GROSS TOTAL INCOME OF THE ASSESSEE BEFORE GRANTING DEDUCTIONS UNDER THIS SECTION WAS NIL. HE, THEREFORE, HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION. THE FIRST APPELLATE AUTHORITY CONFIRMED THE VIEW OF THE ASSESSING OFFICER. SIMILAR WAS THE FATE OF THE ASSESSEE BEFORE 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 ONLY SOURCE OF INCOME OF THE ASSESSEE PAGE 12 OF 17 ITA NO.7 98/BANG/2012 12 DURING THE PREVIOUS YEAR RELEVANT 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 DEDUCTION UNDER THESE SECTIONS IN THE CURRENT YEAR. JETTISONING THE ASSESSEE S POINT OF VIEW THE HON BLE SUPREME COURT HELD THAT THE DEDUCTIONS UNDER CHAPTER VI- A ARE ALLOWED FROM THE GROSS TOTAL INCOME IN ACCORDANCE WITH SECTION 80A AND SINCE THE GROSS TOTAL INCOME OF THE ASSESSEE WAS NIL, HENCE THERE WAS NO SCOPE FOR ALLOWING ANY DEDUCTION. WE FIND THAT THERE IS ABSOLUTELY NO SIMILARITY IN THE FACTS OF THAT CASE WITH THOSE UNDER CONSIDERATION FOR T HE REASON THAT THE GROSS TOTAL INCOME OF THE ASSESSE E IS RS. 152.08 LAKHS WHEREAS THE AMOUNT OF DEDUCTION UN DER SECTION 80-IB IS ONLY AT RS. 100.13 LAKHS, THEREBY LE AVING THE TOTAL INCOME AT A POSITIVE FIGURE OF RS. 51.9 5 LAKHS. THAT WAS A CASE IN WHICH THE GROSS TOTAL INCOME W AS NIL AND THE HONBLE SUPREME COURT HELD THAT IN THE ABSE NCE OF POSITIVE GROSS TOTAL INCOME, THERE CANNOT BE G RANTED ANY DEDUCTION UNDER THOSE SECTIONS. MOREOVER IN TH AT CASE THERE WAS A BROUGHT FORWARD LOSS FROM THE EL IGIBLE INDUSTRIAL UNDERTAKING, WHICH IS NOT SO IN THE PRES ENT CASE. 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 S ECTIONS 80C TO 80U. SUB-SECTION (2) FURTHER PROVIDES THAT T HE AGGREGATE AMOUNT OF THE DEDUCTIONS UNDER THIS CHAPT ER SHALL NOT, IN ANY CASE, EXCEED THE GROSS TOTAL IN COME OF THE ASSESSEE. THE GROSS TOTAL INCOME HAS BEEN DEFIN ED UNDER SECTION 80B(5) TO MEAN THE TOTAL INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, PAGE 13 OF 17 ITA NO.7 98/BANG/2012 13 BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER . IT THEREFORE FOLLOWS THAT THE PRIMARY STEP FOR CONSID ERING 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 ADJUSTING THE LOSSES OF T HE CURRENT YEAR UNDER ANY HEAD. THE BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION ETC. ARE ALSO REDUCED. THE RESULTANT FIGURE IS DETERMINED AS GROSS TOTAL INC OME. TO PUT IT SIMPLY GROSS TOTAL INCOME IS THE INCOME AVAI L- ABLE AT THE DISPOSAL OF THE ASSESSEE IMMEDIATELY BEFORE ALLOWING DEDUCTIONS UNDER CHAPTER VI-A. IF THE GR OSS TOTAL INCOME IS SAY RS. 100 AND THE ASSESSEE IS ENTI TLED TO DEDUCTION UNDER SECTION 80-IB AT RS. 150, THEN THE AMOUNT OF DEDUCTION UNDER SECTION 80-IB WILL BE RESTRICTED TO RS. 100 AS PER THE MANDATE OF SECTI ON 80A WHICH PROVIDES THAT THE DEDUCTIONS SHALL BE ALLOW ED FROM THE GROSS TOTAL INCOME AND THE AGGREGATE AMOUN T OF ALL THE DEDUCTIONS SHALL NOT IN ANY CASE EXCEED TH E GROSS TOTAL INCOME OF THE ASSESSEE. IF HOWEVER THE AMOU NT OF ELIGIBLE RELIEF UNDER SECTION 80-IB IS SAY RS. 90 , THEN FULL AMOUNT WILL BE ELIGIBLE FOR DEDUCTION BECAUSE THE AMOUNT OF THE ELIGIBLE RELIEF DOES NOT EXCEED THE GROSS TOTAL INCOME. THEREFORE IT IS MANDATORY TO WORK OU T THE ELIGIBLE AMOUNT OF DEDUCTION UNDER VARIOUS 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), WHIC H MEANS 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 LAKHS AFTER ADJUSTING THE LOSSES SUFFERED BY IT IN THE E LIGIBLE AS WELL AS NON-ELIGIBLE UNITS. THERE ARE NO BROUG HT FORWARD LOSSES OR UNABSORBED DEPRECIATION. THE CLAI M OF DEDUCTION UNDER SECTION 80-IB IN RESPECT OF ELIGI BLE UNIT NO. 3 AT RS. 100.13 LAKHS IS OBVIOUSLY LESS THAN T HE GROSS PAGE 14 OF 17 ITA NO.7 98/BANG/2012 14 TOTAL INCOME. IN OUR CONSIDERED OPINION THE LEARN ED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN INTERPRETING THE RELEVANT PROVISION WHEN HE HELD THAT THE LOSSES SUFFERED BY THE ASSESSEE IN TWO ELIGIBL E UNITS BE REDUCED FROM THE INCOME OF THE OTHER ELIGIBLE UN IT FOR GRANTING THE DEDUCTION UNDER SECTION 80-IB. SIN CE THE FACTS OF THE CASE IN THE CASE OF SYNCO INDUST RIES LIMITED [2008] 299 ITR 444 (SC) LIE IN AN ALTOGET HER DIFFERENT COMPARTMENT, WE HOLD THAT THE RATIO OF TH AT CASE CANNOT BE CONSIDERED FOR APPLICATION TO THE ASSESSEE S CASE. ACCORDINGLY THE IMPUGNED ORDER I S OVERTURNED AND THE ASSESSEE IS ALLOWED DEDUCTION UN DER SECTION 80-IB ON THE PROFIT DERIVED BY IT FROM ELIGI BLE UNIT NO. 3 AT RS.100.13 LAKHS. 11. THE FACTS OF THE PRESENT APPEAL ARE IDENTICAL T O THE FACTS AS IT PREVAILED IN THE CASE OF MEERA COTT ON SYNTHETIC MILLS LTD. (SUPRA). THE COMPUTATION OF TO TAL 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 0 800 000 ADD: PROV. FOR DEFERRED TAX 4429369 0 0 0 44293699 ADD: DONATIONS(CONSIDERED SEPARATELY) 287000 0 0 0 287000 ADD: DEPRECIATION AS PER COMPANYS ACT) 31930163 970540 5 31953247 15852839 80441654 ADD: INTEREST PAID TO INCOME-TAX DEPT. 5423485 0 0 0 5 423485 208162611 47422928 39615151 9211366 304412058 LESS: CAPITAL GAIN (CONSIDERED SEPARATELY) 61980319 0 0.00 0.00 61980319 LESS: DEPRECIATION AS PER INCOME-TAX ACT 35054316 194785 64769038 52800000 152818139 LESS: DEDUCTION U/S 35AC 287000 287000 110840976 47228143 -25153887 -43588634 89326598 PAGE 15 OF 17 ITA NO.7 98/BANG/2012 15 INCOME FROM BUSINESS CAPITAL GAINS AS PER ANNEXURE A (..LONG TERM CAPITAL LOSS RS.49,17,717 C/F 0 LESS: DEED. UNDER/CHAPTER VIA 1551440 89326598 DEED. U/S 80HHC 47228143 487 79583 TAXABLE INCOME 40547015 12. AS CAN BE SEEN FROM THE COMPUTATION OF TOTAL I NCOME AT THE STAGE OF AGGREGATION OF INCOME UNDER SAME HE AD OF INCOME AS WELL AS UNDER DIFFERENT HEADS OF INCOM E, THE LOSSES INTRA HEAD AS WELL AS INTER HEAD HAVE TO BE ADJUSTED. IT THEREFORE FOLLOWS THAT THE PRIMARY STE P FOR CONSIDERING THE GRANT OF DEDUCTIONS UNDER CHAPT ER VI-A IS TO DETERMINE THE GROSS TOTAL INCOME, WHICH , IN TURN, IS COMPUTED BY AGGREGATING THE INCOME FROM ALL THE SOURCES IN THE YEAR AFTER ADJUSTING THE LOSSES O F THE CURRENT YEAR UNDER ANY HEAD. THE BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION ETC. ARE ALSO REDUCED. THE RESULTANT FIGURE IS DETERMINED AS GROSS TOTAL INC OME. AT THE STAGE OF AGGREGATION OF INCOME THERE IS NO QUESTION OF ADJUSTING LOSS OF ANY OTHER BUSINESS AGA INST THE BUSINESS INCOME THE UNDERTAKING ELIGIBLE FOR DEDUCTION UNDER CHAPTER VIA 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. 8,03,26,598 LAKHS AFTER ADJUSTING THE LOSSES SUFFER ED BY IT IN THE ELIGIBLE AS WELL AS PROFITS OF THE NON-EL IGIBLE UNITS. THERE ARE NO BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION. THE CLAIM OF DEDUCTION UNDER SECTION 80-IA WAS IN RESPECT OF ELIGIBLE UNIT 4.14 MW WIND ENERGY DIVISION AT RS. 4,72,28,143 AND THE DEDU CTION U/S.80HHC OF THE ACT WAS CLAIMED IN RESPECT OF OTHE R UNITS AT RS.15,51,440. EVEN IF BOTH THE DEDUCTION S ARE ADDED THE SUM TOTAL IS OBVIOUSLY LESS THAN THE GRO SS TOTAL INCOME. IN OUR CONSIDERED OPINION THE LEARN ED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN PAGE 16 OF 17 ITA NO.7 98/BANG/2012 16 INTERPRETING THE RELEVANT PROVISION WHEN HE HELD THAT THE LOSSES SUFFERED BY THE ASSESSEE IN TWO ELIGIBL E UNITS BE REDUCED FROM THE INCOME OF THE OTHER ELIGIBLE UN IT BEFORE GRANTING THE DEDUCTION UNDER SECTION 80-IA. SINCE THE FACTS OF THE CASE IN THE CASE OF SYNCO INDUSTRIES LIMITED [2008] 299 ITR 444 (SC) LIE IN A N ALTOGETHER DIFFERENT COMPARTMENT, WE HOLD THAT THE RATIO OF THAT CASE CANNOT BE CONSIDERED FOR APPLICATION T O THE ASSESSEE S CASE. ACCORDINGLY THE IMPUGNED ORDER IS OVERTURNED AND THE ASSESSEE IS ALLOWED DEDUCTION UN DER SECTION 80-IA ON THE PROFIT DERIVED BY IT FROM ELIGI BLE UNIT 4.14 MW WIND ENERGY UNIT AT RS.4,72,28,143. 14. WE FIND THAT THE CIT(A) IN THE PRESENT CASE HA S DISREGARDED THE BINDING DECISION OF THE ITAT. THE BASIS ON WHICH THE CIT(A) REFUSED TO 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 ME ERA COTTON & SYNTHETICS MILLS (P) LTD., THE BOMBAY BENCH OF THE ITAT AFTER CONSIDERING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF M/S SYNCO INDUSTRIES LIMITED [2008] CITED SUPRA HAD CLEARLY HELD THAT TH E STAGE AT WHICH SET OFF HAS TO BE DONE IS ONLY AFTER AGGREGATION OF INCOME UNDER ALL HEADS. THE CIT(A) DID NOT AGREE WITH THIS REASONING OF THE ITAT. THE FAC TS OF THE PRESENT CASE ARE CLEARLY IDENTICAL TO THE FACTS, AS IT PREVAILED IN THE CASE OF M/S MEERA COTTON & SYNTHETI CS 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 BOUND TO FOLLOW THE DECISION OF THE ITAT. IN OUR VIEW, THE CIT(A) IN THE PRESENT CASE HAS FOR N O VALID REASON REFUSED TO FOLLOW THE DECISION OF THE HONBL E ITAT. 9.2 SINCE THE FACTS CONCERNING THIS ASSESSMENT YEAR IS IDENTICAL TO THE FACTS FOR THE ASSESSMENT YEAR 2006-07 AND AY 200 4-5, RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DECIDE THE PAGE 17 OF 17 ITA NO.7 98/BANG/2012 17 ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, THE CI T(A)S ORDER IN DIRECTING THE ASSESSING OFFICER TO GRANT DEDUCTION UNDER SECT ION 80IA OF THE ACT, IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERE NCE IS CALLED FOR. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF FEBRUARY, 2013. SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.