M/s Globe Precision Industries Pvt. Ltd., Solan V. ITO, Solan

ITA 871/CHANDI/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7902 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 12-11-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANKUR ALYA SR DR
• Keywords: Question of law
• Section: 143(3); 80HHC; 80IB

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH , !' # $ % &' , '( BEFORE: SH. SANJAY GARG, JUDICIAL MEMBER & SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 871/CHD/2017 / ASSESSMENT YEAR : 2011-12 M/S GLOBE PRECISION INDUSTRIES P.LTD., PLOT NO. 11, INDL. AREA, BADDI, DISTT. SOLAN. THE ITO, WARD 2, SOLAN. ./ PAN NO: AAACG6736G / APPELLANT / RESPONDENT & ./ ITA NO. 784 & 1180/CHD/2017 / ASSESSMENT YEAR : 2010-11 & 2011-12 M/S HIM TECHNOFORGE LTD., VILLAGE BILLIANWALI, LABANA, BADDI. THE DCIT, CIRCLE, PARWANOO. ./ PAN NO: AAACH3906R / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI VINEET KRISHAN # ! ' / REVENUE BY : SHRI ANKUR ALYA, SR.DR $ % ! &/ DATE OF HEARING : 12.11.2018 '()* ! &/ DATE OF PRONOUNCEMENT : 08.01.2019 ')/ ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE ABOVE ARE APPEALS FILED BY THE DIFFERENT ASSESS EES AGAINST SEPARATE ORDERS PASSED BY THE COMMISSIONER OF INCOM E TAX (APPEALS) SHIMLA [IN SHORT REFERRED TO AS CIT(A)] U/S 250 SUB -SECTION (6) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS ' ACT') DATED 24.03.2017, 16.02.2017 AND 25.05.2017 RESPECTIVELY. ITA -871,784 & 1180/CHD/2017 PAGE 2 OF 12 2. IT WAS COMMON GROUND THAT THE ISSUES INVOLVED IN ALL THE THREE APPEALS ARE IDENTICAL, THEREFORE, THEY WERE ALL TAK EN UP TOGETHER FOR HEARING. 3. FOR THE SAKE OF CONVENIENCE, WE SHALL BE DEALING WITH THE APPEAL OF THE ASSESSEE IN ITA 871/CHD/2017 AND THE DECISIO N RENDERED THEREIN WILL APPLY MUTATIS-MUTANDIS TO THE OTHER AP PEALS ALSO. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE ORDER PASSED UNDER SECTION 250(6) OF THE I NCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHIMLA IN APPEAL NO. IT- /447/2013-14/SML, DATED 24.03.2017 IS CONTRARY TO L AW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ID. COMMISSIONER OF INCOME TAX (APPEALS), GRAVELLY ERRED IN UPHOLDING THE ACTI ON OF THE ID. ASSESSING OFFICER IN HOLDING THAT THE APPELLANT IS NOT ENTITLED TO 10 0% DEDUCTION UNDER SECTION 80IB IN RESPECT OF BADDI UNIT ON ACCOUNT OF SUBSTANTIAL EXPANSION MADE BY APPELLANT DURING THE 7 TH YEAR FOR WHICH DEDUCTION IS ALLOWABLE AS PER SECTI ON 80IC OF THE INCOME TAX ACT, 1961. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ID. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTIO N OF THE ID. ASSESSING OFFICER IN RESTRICTING THE DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 AT 30% AS AGAINST 100% IN RESPECT OF BADDI UNIT CLAIME D BY THE APPELLANT AS THE SUBSTANTIAL EXPANSION WAS DONE BY THE APPELLANT WHI CH FACT HAS NOT BEEN CONTROVERTED BY THE ID. ASSESSING OFFICER. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. COMMISSIONER OF INCOME TAX (APPEALS), GRAVELLY ERRED IN UPHOLDING THAT FOR QUA NTIFICATION OF DEDUCTION UNDER SECTION 80IC, THE LOSS OF ONE PRIORITY UNIT IS TO B E SET OFF AGAINST THE PROFIT OF OTHER PRIORITY UNIT. WHEREAS AS PER THE PROVISIONS OF INC OME TAX ACT FOR QUANTIFICATION OF DEDUCTION EACH ELIGIBLE UNIT IS TO BE CONSIDERED SE PARATELY FOR DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961. 5. THAT THE APPELLANT CRAVES TO ADD, AMEND OR AL TER ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL, WITH THE PERMISSION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH. 4. GROUND NO. 1 & 5 ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 5. GROUND NO. 2 & 3 RAISED BY THE ASSESSEE RELATE T O THE ISSUE OF RESTRICTION OF DEDUCTION CLAIMED U/S 80IC OF THE AC T TO30% OF THE ELIGIBLE PROFITS AS AGAINST 100% CLAIMED BY THE ASS ESSEE ON ACCOUNT OF SUBSTANTIAL EXPANSION CARRIED OUT BY IT. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE MANUFACTURING OF AXELS, GEARS AND SHAFTS HAVING UNITS AT BADDI AND R UDRAPUR. IN THE ITA -871,784 & 1180/CHD/2017 PAGE 3 OF 12 BADDI UNIT, THE ASSESSEE HAD DECLARED BUSINESS PROF IT OF RS. 1,39,26,245/- AND HAD CLAIMED 100% DEDUCTION OF THE SAME. THE AO NOTED THAT THE ASSESSEE COMPANY HAD STARTED ITS BUS INESS ACTIVITIES W.E.F. 17.09.1986 AND THE BADDI UNIT HAD COMPLETED SUBSTANTIAL EXPANSION FOR THE FIRST TIME DURING THE ASSESSMENT YEAR 2005-06 AND CLAIMED DEDUCTION U/S 80IC OF THE ACT FROM ASSESSME NT YEAR 2005-06 BY SHOWING IT TO BE THE INITIAL ASSESSMENT YEAR. T HE CLAIM OF DEDUCTION U/S 80IC WAS ALLOWED BY THE AO FOR ASSESS MENT YEAR 2005-06. THEREAFTER, DEDUCTION U/S 80IC WAS ALLOWE D TO THE ASSESSEE U/S 143(3) UPTO ASSESSMENT YEAR 2009-10 FOR A PERIO D OF FIVE YEARS. IN THE IMPUGNED ASSESSMENT YEAR, WHICH WAS THE SEVE NTH YEAR OF PRODUCTION SINCE THE FIRST TIME THE ASSESSEE CARRIE D OUT SUBSTANTIAL EXPANSION, THE ASSESSEE AGAIN CLAIMED DEDUCTION @ 1 00% OF ITS PROFITS SINCE IT HAD COMPLETED SECOND SUBSTANTIAL E XPANSION IN ASSESSMENT YEAR 2010-11. THE AO DENIED THE SAME HO LDING THAT AS PER SECTION 80IC, THE ASSESSEE WAS ELIGIBLE FOR DED UCTION OF PROFITS @ 100% ONLY FOR THE FIRST FIVE YEARS AND THEREAFTER @ 30% OF THE PROFITS. 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT( A) WHO UPHELD THE ORDER OF THE AO FOLLOWING THE ORDER OF THE ITAT CHANDIGARH BENCH IN THE CASE OF HYCRON ELECTRONICS VS ITO IN ITA 798 /CHD/2012 AND OTHER RELATED CASES. 7. BEFORE US, LD. COUNSEL FOR THE ASSESSEE FAIRLY C ONCEDED THAT THE ISSUE WAS NOW SETTLED AND COVERED AGAINST THE ASSES SEE BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF C IT VS M/S CLASSIC BINDING INDUSTRIES & ORS. IN CIVIL APPEAL NO. 7208 AND OTHERS OF 2018 DATED 20.08.2018. ITA -871,784 & 1180/CHD/2017 PAGE 4 OF 12 8. IN VIEW OF THE ABOVE, WE FIND NO REASON TO INTER FERE IN THE ORDER OF THE LD. CIT(A) AND THE GROUND OF APPEAL NO. 2 & 3 RAISED BY THE ASSESSEE IS, THEREFORE DISMISSED. 9. IN GROUND NO. 4, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE CIT(A) IN UPHOLDING THE ORDER OF THE AO THAT FOR TH E PURPOSES OF QUANTIFICATION OF DEDUCTION U/S 80IC, THE LOSS OF O NE PRIORITY UNIT IS TO BE SET OFF AGAINST THE PROFIT OF THE OTHER PRIOR ITY UNIT. 10. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD TWO MANUFACTURING UNITS ELIGIBLE FOR DEDUCTION U/S 80IC, ONE IN BADDI AND THE OTHER AT RUDRAPUR. WHILE THE BADDI U NIT HAD SHOWN PROFITS OF RS. 1,39,26,245/-, THE RUDRAPUR UNIT HAD SHOWN LOSS OF RS. 45,34,8923/-. THE ASSESSEE HAD CLAIMED DEDUCTION W ITH RESPECT TO THE PROFIT OF THE BADDI UNIT ONLY WHILE THE AO HELD THAT THE PROFITS OF THE BADDI UNIT HAD TO BE SET OFF WITH THE LOSSES OF THE RUDRAPUR UNIT AND ON THE BALANCE PROFITS ONLY, DEDUCTION U/S 80IC WAS TO BE ALLOWED AS PER THE PROVISIONS OF THE ACT. THE AO RE LIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S HIM TEKNOFORGE LTD. REPORTED IN 256 CTR 393 (HP) IN THIS REGARD. THE LD. CIT(A) UPHELD THE ORDER OF THE AO STATING THAT THE ISSUE W AS CLEARLY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT. 11. DURING THE COURSE OF HEARING BEFORE US, BOTH TH E PARTIES STATED THAT IDENTICAL ISSUE HAD BEEN HEARD BY THE CHANDIGA RH BENCH OF THE ITAT IN A GROUP OF APPEALS IN MILESTONE GEARS PVT. LTD. VS ACIT IN ITA 883 TO 885/CHD/2017 ON 10.09.2018. IT WAS STATED B Y BOTH THE PARTIES THAT THEIR CONTENTIONS VIS--VIS THE ISSUE WERE IDENTICAL TO THAT RAISED IN THE SAID APPEAL. 12. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE COORDINATE BENCH OF THE ITAT SINCE THEN HAS PASSED ITS ORDER O N THE ISSUE IN THE ITA -871,784 & 1180/CHD/2017 PAGE 5 OF 12 CASE OF MILESTONE GEARS PVT. LTD. (SUPRA) ON 6 TH DECEMBER,2018. THE COORDINATE BENCH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, HOLDING THAT THE DECISION IN THE CASE OF HIM TEKNOF ORGE (SUPRA) WAS DISTINGUISHABLE WITH THAT IN THE PRESENT CASE.THE I TAT HAS POINTED OUT THAT IN THE CASE OF HIMTEKNOFORGE(SUPRA) IT WA S HELD THAT THE PROFITS AND LOSSES OF THE PRIORITY UNITS WERE TO BE NETTED FOR THE PURPOSE OF CALCULATING OF DEDUCTION U/S 80IC ON THE BASIS OF THE DECISION OF THE APEX COURT IN THE CASE OF IPCA LA BORATORIES LTD. VS DCIT (2004) 266 ITR 521 AND ITO VS INDUFLEX PRODUCT S PVT. LTD. (2006) 280 ITR 1, WHICH DECISIONS HAD BEEN RENDERE D IN THE CONTEXT OF SECTION 80HHC WHEREIN THE HON'BLE APEX COURT HAD HELD THAT SECTION 80AB WHICH DEALT WITH THE INCOMES ON WHICH DEDUCTION WAS TO BE ALLOWED UNDER CHAPTER VIA, HAD A NOT WITHSTAN DING CLAUSE AND SINCE SECTION 80HCC DID NOT HAVE THE SAME, THE PROV ISIONS OF SECTION 80AB OVERRULED THE PROVISIONS OF SECTION 80HHC AND ON READING THE PROVISIONS OF SECTION 80AB, THE PROFIT AND LOSS OF PRIORITY UNIT HAD TO BE NETTED BEFORE CALCULATING DEDUCTION. THE ITAT N OTED THAT IN CASE OF THE ASSESSEES THE CLAIM OF DEDUCTION WAS U/S 80I C WHICH HAD A NOTWITHSTANDING CLAUSE AND THEREFORE, THE PROVISION S OF SECTION 80IC WOULD OVERRIDE THAT OF SECTION 80AB. THE ITAT, THE REFORE, HELD THAT READING THE PROVISIONS OF SECTION 80IC, THE DEDUCTI ON WAS TO BE ALLOWED ON PROFITS OF ELIGIBLE UNIT IGNORING THE LO SS. THE ITAT FURTHER HELD THAT WHILE THE DECISION IN THE CASE OF HIM TEK NOFORGE (SUPRA) WAS RENDERED IN THE CONTEXT OF SECTION 80IA, THE AS SESSEE'S IN THE PRESENT CASE WERE CLAIMING DEDUCTION U/S 80IC OF TH E ACT AND THE TWO SECTIONS WERE DIFFERENTLY WORDED WITH SECTION 80IA ALLOWING DEDUCTION ON THE PROFITS OF THE BUSINESS WHILE SECTION 80IC A LLOWED DEDUCTION ON THE PROFITS OF ENTERPRISE/UNDERTAKING. THE ITAT HELD, THEREFORE ITA -871,784 & 1180/CHD/2017 PAGE 6 OF 12 THE DEDUCTION U/S 80IC WAS UNDERTAKING SPECIFIC. T HE RELEVANT FINDINGS OF THE ITAT AT PARAS 12 TO 22 ARE AS UNDER : 12. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES CAREFULLY AND HAVE EVEN CAREFULLY GONE THROUGH THE ORDERS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F HIM TEKNOFORGE LTD. (SUPRA) WHICH HAVE BEEN HEAVILY REL IED UPON BY THE REVENUE IN SUPPORT OF THE ORDER OF THE LOWER AUTHORITIES ON THE PROPOSITION THAT THE PROFITS AND LOSSES OF ALL THE ELIGIBLE UNDERTAKINGS ARE TO BE NETTED AND ON THE BALANCE OF PROFITS THE DEDUCTION IS TO BE CALCULATE D U/S 80IC OF THE ACT. 13. THE FACTS BEFORE THE HON'BLE JURISDICTIONAL HIG H COURT WERE THAT THE ASSESSEE WAS HAVING SEPARATE UNITS, S OME OF WHICH WERE ENTITLED TO BENEFIT IN TERMS OF SECTION 80HH AND 80IA OF THE ACT AND WHICH WERE REFERRED TO AS PRIOR ITY UNITS. IN ALL THE CASES NONE OF THE PRIORITY UNITS WERE RU NNING IN LOSSES AND THE REVENUE HAD CONTENDED THAT THE LOSSE S OF THE NON PRIORITY UNITS HAD ALSO TO BE TAKEN INTO CONSIDERATION FOR WORKING OUT THE INCOME OF PRIORIT Y UNITS FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/SS 80HH A ND 80IA OF THE ACT. IT WAS THE CONTENTION OF THE REVENUE TH AT THE INCOME WHETHER POSITIVE OR NEGATIVE OF ALL THE UNI TS PRIORITY OR NON PRIORITY WERE TO BE CLUBBED TOGETHER FOR WOR KING OUT GROSS TOTAL INCOME FOR THE PURPOSE OF GRANT OF TAX BENEFITS. THE CONTENTION OF THE ASSESSEE, ON THE OTHER HAND, WAS THAT THE DEDUCTION WAS TO BE COMPUTED ONLY ON THE PROFIT S AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKINGS TO WHICH THE BENEFIT WAS GRANTED AND WAS NOT RELATABLE TO THE GR OSS TOTAL INCOME OF THE ASSESSEE BUT ONLY TO THE GROSS INCOME FROM THAT PARTICULAR INDUSTRIAL UNDERTAKING. ON GOING THROUGH THE ORDER OF THE HON'BLE HIGH COUR T IN THE CASE OF HIM TEKNOFORGE LTD. (SUPRA), WE FIND THAT T HE QUESTION OF LAW BEFORE THE HON'BLE JURISDICTIONAL H IGH COURT WAS THAT WHETHER DEDUCTIONS U/S 80HH/80IA OF THE AC T WERE ALLOWABLE ON THE PROFITS OF EACH UNIT SEPARATE LY. THE HON'BLE HIGH COURT AFTER CONSIDERING THE PROVISIONS OF THE ACT AND VARIOUS JUDICIAL DECISIONS IN THIS REGARD, HELD THAT WHILE CALCULATING THE DEDUCTION UNDER CHAPTER VI-A, UNDER WHICH THE DEDUCTIONS WERE ALLOWED, ONLY THE PROFITS OF PRIORITY UNITS, MEANING THEREBY THE ELIGIBLE UNITS, WERE TO BE TAKEN INTO CONSIDERATION. 14. THE HONBLE HIGH COURT ANALYZED THE RELEVANT PROVISIONS OF CHAPTER VI A ,SPECIFICALLY REFERRING TO SECTION 80AB INCLUDED THEREIN AND WHICH DEALT WITH DEDUCT ION TO BE MADE WITH REFERENCE TO INCOME INCLUDED IN THE GR OSS TOTAL INCOME. THE SAME IS REPRODUCED HEREUNDER FOR CLARIT Y: 80AB. [DEDUCTIONS TO BE MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTAL INCOME. WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UNDER ANY SECTION [][* * *] INCLUDED IN THIS CHAPTER UNDER THE HEADING CDEDUCTIONS IN RESPECT OF CERTAIN INCOMES IN RES PECT OF ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, T HEN, ITA -871,784 & 1180/CHD/2017 PAGE 7 OF 12 NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION, F OR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTI ON, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCO RDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY D EDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AM OUNT OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOM E.] 15. READING THE SAME, THE HON'BLE HIGH COURT HELD T HAT THERE CAN BE NO MANNER OF DOUBT THAT ONLY INCOME F ROM A PRIORITY UNDERTAKING IS TO BE TAKEN INTO CONSIDERAT ION WHILE MAKING THE DEDUCTION AND THE PROFITS OR LOSSES OF N ON PRIORITY UNDERTAKINGS ARE NOT TO BE CONSIDERED. GOI NG FURTHER, THE HON'BLE HIGH COURT HELD THAT IF THERE WERE MORE THAN ONE PRIORITY UNDERTAKING, THE PROFITS AND LOSS ES OF ALL THE PRIORITY UNDERTAKINGS HAD TO BE CLUBBED TOGETHE R AND DEDUCTION WAS TO BE CALCULATED ON THE PROFITS REMAI NING. WHILE LAYING DOWN THIS PROPOSITION THE HON'BLE HIGH COURT STATED THAT THOUGH THE HON'BLE APEX COURT IN THE CA SE OF CIT(CIVIL) MADRAS VS. CANARA WORKSHOPS PVT. LTD. (1 986) 61 ITR 120 HAS CLEARLY HELD THAT NO CLUBBING OF PROFIT S AND LOSSES OF PRIORITY UNDERTAKING SHALL TO BE DONE FOR CALCULATING THE QUANTUM OF ELIGIBLE DEDUCTION, THE LATER DECISIONS OF THE HON'BLE APEX COURT IN IPCA LABORAT ORIES LTD. VS. DCIT (2004) 266 ITR 521, ITO VS. INDUFLEX PRODUCTS PVT. LTD. (2006) 280 ITR 1 AND THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF SYNCO INDUSTRIES LTD. VS. AO & ANOTHER (2008) 299 ITR 444, DILUTED THE SAID DECISI ON AND RELYING ON THE LATER DECISIONS OF THE HON'BLE APEX COURT, THE HON'BLE HIGH COURT HELD THAT THE PROFITS AND LOSSES OF THE PRIORITY UNITS WERE TO BE CLUBBED AND THEREAFTER TH E DEDUCTION CALCULATED. THE HON'BLE HIGH COURT FOUND THAT THE HON'BLE APEX COURT IN THE SAID CASES I.E. IPCA LABO RATORIES LTD. (SUPRA) AND INDUFLEX PRODUCTS PVT. LTD. (SUPRA ), WHILE DEALING WITH THE ISSUE OF DEDUCTION ALLOWABLE U/S 8 0HHC, HAD HELD THAT SECTION 80AB HAD A NOTWITHSTANDING CL AUSE AND THUS HAD A OVERRIDING EFFECT OVER ALL OTHER SEC TIONS IN CHAPTER VIA, WHICH INCLUDED SECTION 80HHC ALSO. THE HONBLE APEX COURT NOTED IN THE SAID DECISION THAT SECTION 80HHC DID NOT PROVIDE THAT ITS PROVISION WOULD PREV AIL OVER SECTION 80AB OR ANY PROVISIONS OF THE ACT. THUS TH E HON'BLE APEX COURT HELD THAT THE SECTION 80HHC WOULD BE IGN ORED BY 80AB AND, THEREFORE, AS PER SECTION 80AB OF THE ACT THE AMOUNT OF INCOME ELIGIBLE FOR DEDUCTION WOULD HAVE TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT WHICH MEANT THAT THE PROFITS AND LOSSES OF UNITS WOULD HA VE TO BE SET OFF AGAINST EACH OTHER, SINCE THE SECTION PROVI DING FOR SET OFF OF LOSSES PRECEDED THE CHAPTER VI-A DEALING WITH DEDUCTION UNDER THE ACT. FOLLOWING THIS PROPOSITION LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. (SUPRA) THE HON'BLE HIGH COURT HE LD THAT THE HON'BLE APEX COURT HAD CLEARLY LAID DOWN THE LA W IN THIS REGARD THAT SECTION 80AB WOULD PREVAIL OVER TH E OTHER SECTIONS PROVIDED IN CHAPTER VI A OF THE ACT DEALIN G WITH THE DEDUCTION OF INCOMES ,AND SINCE SECTION 80AB PR OVIDED FOR THE COMPUTATION OF INCOME ELIGIBLE FOR DEDUCTIO N IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, THE PROF ITS AND LOSSES OF ALL PRIORITY UNITS NEEDED TO BE SET OFF A ND IN THE BALANCE INCOME ONLY DEDUCTION WAS TO BE CALCULATED. ITA -871,784 & 1180/CHD/2017 PAGE 8 OF 12 16. THE POINT TO BE NOTED IS THAT THE HON'BLE HIGH COURT FOLLOWED THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. (SUPRA) WHEREIN THE HON'B LE APEX COURT WAS SEIZED WITH THE ISSUE OF DEDUCTION U/S 80 HHC OF THE ACT AND THE HON'BLE APEX COURT HAD HELD THAT SI NCE SECTION 80AB OF THE ACT PROVIDED FOR A NOTWITHSTAND ING CLAUSE AND THERE BEING NO SUCH CORRESPONDING CLAUSE PROVIDED FOR IN SECTION 80HHC THE PROVISION OF SECT ION 80AB WOULD OVERRIDE THE PROVISIONS OF SECTION 80HHC OF T HE ACT. THIS IS A VERY IMPORTANT OBSERVATION OF THE HON'BLE HIGH COURT AND IT IS FROM THIS THAT A DISTINCTION CAN BE DRAWN VIS--VIS DEDUCTION CLAIMED U/S 80IC OF THE ACT, WH ICH IS THE FACT IN THE PRESENT CASE. FOR CLARITY THE RELEV ANT PROVISIONS OF SECTION 80IA & 80IC OF THE ACT ARE BE ING REPRODUCED HEREUNDER: 80-IA [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAF TER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF PROFITS AND GAINS DERIVED FROM SUCH BUS INESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.] (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB- SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERM INING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMEN T YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING TH E PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 80-IC [SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES (1) 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 SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). 7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTIONS (7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPL Y TO THE ELIGIBLE UNDERTAKING OR ENTERPRISE UNDER THIS SECTION. 17. AS PER SECTION 80IC(7), THE PROVISIONS OF SECTI ON 80IA(5) HAVE BEEN MADE APPLICABLE TO THE UNDERTAKIN G OR ENTERPRISES ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. AND, SECTION 80IA(5) BEGINS WITH A NOTWITHSTANDING CLAUS E . THUS ITA -871,784 & 1180/CHD/2017 PAGE 9 OF 12 WHEN PROVISIONS OF SECTION 80IC ARE READ ALONGWITH THE PROVISIONS OF SECTION 80AB OF THE ACT, WE FIND THAT SECTION 80IC OF THE ACT CLEARLY PROVIDES THAT ITS PROVISION S ARE TO PREVAIL OVER THE PROVISIONS OF SECTION 80AB OF THE ACT WHICH WAS ABSENT IN THE CASE OF SECTION 80HHC, AS NOTED B Y THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES LTD. (SUPRA). THEREFORE, THE PROPOSITION LAID DOWN BY TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIM TEKNOF ORGE LTD. (SUPRA) THAT THE PROFITS AND LOSSES OF THE PRIORITY UNITS ARE TO BE CLUBBED FOR CALCULATING ELIGIBLE DEDUCTION UN DER CHAPTER VI A HAVING BEEN BORROWED FROM THE LAW LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF IPCA LABOR ATORIES LTD. (SUPRA), WHICH IS CLEARLY DISTINGUISHABLE FROM THE PRESENT CASE, AS POINTED OUT ABOVE, THE SAME WILL N OT APPLY TO DEDUCTION CLAIMED U/S 80IC OF THE ACT. AS STATE D ABOVE, THE PROVISIONS OF SECTION 80IC WILL PREVAIL OVER SE CTION 80AB OF THE ACT AND THE DEDUCTION WILL HAVE TO BE CALCUL ATED AS PROVIDED FOR IN SECTION 80IC(7) OF THE ACT, AS PER WHICH FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION THE ELIGIBLE UNDERTAKING IS TO BE TREATED AS THE ONLY S OURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR, TH US TREATING EACH ELIGIBLE UNDERTAKING OR ENTERPRISE AS A SEPARATE UNIT FOR THE PURPOSE OF CALCULATING DEDUCT ION. 18. EVEN OTHERWISE AS CORRECTLY POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE, WHILE THE DECISION IN THE CASE OF HIM TEKNOFORGE LTD. (SUPRA) WAS RENDERED IN THE CONTEXT OF SECTION 80IA, THE ASSESSEE IN THE PRESENT CASE H AS CLAIMED DEDUCTION U/S 80IC AND THE RELEVANT PROVISI ONS OF TWO SECTIONS WHICH DEAL WITH THE CALCULATION OF QUA NTUM OF DEDUCTION ARE DIFFERENTLY WORDED IN THE TWO SECTION S HAVING AN IMPACT OF THE INTERPRETATION OF THE SAME. 19. SECTION 80IA(5) STATES THAT THE PROFITS AND GAI NS OF ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF SUCH EL IGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF A DURI NG PREVIOUS YEARS. THUS SECTION 80IA(5) APPLIES TO ELI GIBLE BUSINESS, THE MEANING FOR WHICH CAN BE GATHERED F ROM SECTION 80IA(1) WHEREIN BUSINESS CARRIED OUT BY ELI GIBLE UNDERTAKING HAVE BEEN REFERRED TO AS ELIGIBLE BUSIN ESS. SECTION 80IC, ON THE OTHER HAND, HAS NO REFERENCE T O BUSINESS AND USES ONLY THE WORK UNDERTAKING OR ENTERPRISE. THIS DISTINCTION, IN OUR VIEW, IS VERY CRITICAL AND IMPORTANT. LITERALLY INTERPRETING THE APPLICABI LITY OF THE PROVISIONS OF SECTION 80IA(5) IS BUSINESS SPECIFI C AND, THEREFORE, INCLUDES ALL ELIGIBLE UNDERTAKINGS CARRY ING OUT ELIGIBLE BUSINESS. ON THE OTHER HAND, SECTION 80IC (7) STATES THAT THE PROVISIONS OF SECTION 80IA(5) WOULD APPLY TO ELIGIBLE UNDERTAKING OR ENTERPRISES MEANING THEREBY THAT THE WORD BUSINESS USED IN SECTION 80IA(5) IS TO BE SUBSTIT UTED WITH ELIGIBLE UNDERTAKING. THEREFORE, FOR THE PURPOSE OF SECTION 80IC(7), WE AGREE WITH THE LD. COUNSEL FOR ASSESSEE , IT IS THE PROFITS OF EACH ELIGIBLE UNDERTAKING WHICH ARE TO BE TREATED AND TAKEN SEPARATELY AS BEING THE ONLY SOUR CE OF THE INCOME DURING THE IMPUGNED YEAR AND ALLOWED DEDUCTI ON THEREOF AS OPPOSED TO TREATING THE ELIGIBLE BUSINES S OF ALL ELIGIBLE UNDERTAKINGS U/S 80IA(5) OF THE ACT AS BEI NG THE ONLY SOURCE OF INCOME FOR THE IMPUGNED YEARS AS STI PULATED U/S 80IA(5) OF THE ACT. 20. THE FIRST AND PRIMARY RULE OF CONSTRUCTION IS T HAT THE INTENTION OF THE LEGISLATURE MUST BE FOUND IN THE W ORDS USED ITA -871,784 & 1180/CHD/2017 PAGE 10 OF 12 BY THE LEGISLATURE ITSELF. EVERY WORD OF A STATUTE HAS TO BE ASSUMED TO HAVE BEEN DELIBERATELY AND CONSCIOUSLY INCORPORATED THEREIN BY THE LEGISLATURE AND IF THE LANGUAGE OF A STATUTE IS CLEAR AND EXPLICIT, EFFECT MUST BE GIVEN TO EACH WORD. THE HONBLE APEX COURT HAS TIME AND AGAI N REINFORCED THIS RULE OF INTERPRETATION OF STATUTES IN ITS JUDGEMENTS, RIGHT FROM PADMASUNDARA RAO VS STATE OF TN 255 ITR 147(SC), MOHAMMAD VS CWT 224 ITR 672(SC) & PANDIAN CHEMICALS LTD. VS CIT 262 ITR 278(SC).IN VI EW OF THE SAME SINCE THE WORDS USED IN SECTION 80IC CATEGORICALLY STATE THAT THE PROVISIONS OF SUB SECT ION 5 TO SECTION 80IA SHALL APPLY TO THE ELIGIBLE UNDERTAKIN G OR ENTERPRISE, THEY HAVE TO BE READ AS SUCH AND APPLIE D TO EACH UNDERTAKING, MEANING THEREBY THAT THE PROFITS OF EACH ELIGIBLE UNDERTAKING HAS TO BE TREATED AS IF IT WER E THE ONLY SOURCE OF INCOME OF THE ASSESSEE. 21. FURTHER AS RIGHTLY POINTED OUT BY THE LD. COUNS EL FOR ASSESSEE THAT IF THE INTERPRETATION GIVEN IN THE CA SE OF HIM TEKNOFORGE LTD. (SUPRA) IS APPLIED FOR THE PURPOSE OF SECTION 80IC, IT WOULD LEAD TO AN ANOMALOUS SITUATION CREAT ING A DIFFICULTY FOR CALCULATING THE QUANTUM OF DEDUCTION , SINCE AS RIGHTLY POINTED OUT BY THE LD. COUNSEL FOR ASSESSEE , THE SECTION PROVIDES FOR DIFFERENT RATES OF DEDUCTION O F PROFITS FOR DIFFERENT YEARS IN CASE OF SPECIFIC UNDERTAKING S AND IF NETTING OF PROFITS AND LOSSES OF ALL ELIGIBLE UNDER TAKINGS ARE RESORTED TO, AS LAID DOWN IN THE DECISION OF HIM TE KNOFORGE LTD. (SUPRA), IN A SITUATION WHERE THE DIFFERENT EL IGIBLE UNITS ARE ENTITLED TO DIFFERENT RATES OF DEDUCTION OF PRO FITS, IT WOULD BE DIFFICULT TO DETERMINE THE RATE TO BE APPL IED TO THE REMAINING PROFITS SINCE THERE IS NO SECTION OR PROV ISION IN THE ENTIRE ACT DEALING WITH SUCH A SITUATION. WE TH EREFORE, AGREE WITH THE LD. COUNSEL FOR ASSESSEE THAT THE DE CISION IN THE CASE OF HIM TEKNOFORGE LTD. (SUPRA) HAVING BEEN RENDERED IN THE CONTEXT OF SECTION 80IA DOES NOT AP PLY IN THE PRESENT CASE WHICH DEALS WITH DEDUCTION U/S 80IC OF THE ACT AND SINCE AS PER SECTION 80IC IT IS THE PROFIT ON E ACH UNDERTAKING WHICH IS TO BE TREATED AS SEPARATELY, T HE PROFITS AND LOSSES OF ALL THE ELIGIBLE UNDERTAKINGS ARE NOT TO BE NETTED FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IC AND ARE TO BE TAKEN ON A STAND ALONE BASIS. 22. IN VIEW OF THE ABOVE, WE DIRECT THE A.O. TO ALL OW DEDUCTION TO THE ASSESSEE U/S 80IC WITH RESPECT TO THE PROFITS EARNED BY THE ASSESSEE FROM THE ELIGIBLE UNDERTAKINGS IGNORING THE LOSSES FROM OTHER ELIGIBL E UNDERTAKINGS. GROUND OF APPEAL NO.1 RAISED BY THE A SSESSEE IS ALLOWED. 13. SINCE THE ISSUE INVOLVED IN THE PRESENT CASE IS IDENTICAL TO THAT IN THE CASE OF MILESTONE GEARS (SUPRA), THE DECISIO N RENDERED BY THE ITAT IN THE SAID CASE WOULD SQUARELY APPLY TO THE P RESENT CASE ALSO FOLLOWING WHICH WE HOLD THAT THE ASSESSEE IS ELIGIB LE TO CLAIM DEDUCTION ON THE PROFITS OF EACH INDIVIDUAL UNDERTA KING WITHOUT ITA -871,784 & 1180/CHD/2017 PAGE 11 OF 12 RESORTING TO NETTING OF THE PROFIT AND LOSS OF THE ELIGIBLE UNDERTAKINGS. GROUND OF APPEAL NO. 4 RAISED BY THE ASSESSEE IS, T HEREFORE, ALLOWED. 14. IN EFFECT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA 784/CHD/2017 15. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE TD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE CALCU LATION OF DEDUCTION MADE BY THE ID. ASSESSING OFFICER UNDER SECTION 80IC OF THE INCOME TAX ACT. 1961 WHO WRONGLY ADJUSTED THE LOSS OF MANPURA DIVISION WITH THE PROFIT OF GEAR DIVISION FOR CALCULATION OF QUANTUM OF DEDUCTION UNDER SECTI ON 80IC OF THE INCOME TAX ACT, 1961 WHEREAS THE GROSS TOTAL INCOME IS TO BE A RRIVED BY ADJUSTING PROFIT OR LOSS OF ALL UNITS BUT THE QUANTUM OF DEDUCTION IS T O BE CALCULATED AS PER SUB SECTION (5) OF SECTION 80IA OF THE INCOME TAX ACT, 1961. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTIO N OF THE ID. ASSESSING OFFICER IN ALLOWING THE DEDUCTION UNDER SECTION 80IC AT RS. 1,04,36,482/- AS AGAINST CLAIM OF RS. 2,14,61,823/-. 16. IT WAS COMMON GROUND THAT THE SOLE ISSUE IN TH E PRESENT APPEAL RELATED TO THE NETTING OF PROFIT AND LOSS OF PRIORITY/ELIGIBLE UNITS, FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IC. THIS ISSUE HAS BEEN DEALT WITH BY US IN GROUND NO. 4 OF ITA 87 1/CHD/2017 IN FAVOUR OF THE ASSESSEE AT PARA 12-13. THE ISSUE, T HEREFORE, STANDS COVERED BY OUR DECISION IN THE SAID CASE, FOLLOWING WHICH WE ALLOW THE GROUNDS OF APPEAL NO. 2 AND 3 RAISED BY THE ASSESSE E. 17. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ITA 1180/CHD/2017 18. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE TD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE CALCU LATION OF DEDUCTION MADE BY THE ID. ASSESSING OFFICER UNDER SECTION 80IC OF THE INCOME TAX ACT. 1961 WHO WRONGLY ADJUSTED THE LOSS OF MANPURA DIVISION WITH THE PROFIT OF GEAR DIVISION FOR CALCULATION OF QUANTUM OF DEDUCTION UNDER SECTI ON 80IC OF THE INCOME TAX ACT, 1961 WHEREAS THE GROSS TOTAL INCOME IS TO BE A RRIVED BY ADJUSTING PROFIT OR LOSS OF ALL UNITS BUT THE QUANTUM OF DEDUCTION IS T O BE CALCULATED AS PER SUB ITA -871,784 & 1180/CHD/2017 PAGE 12 OF 12 SECTION (5) OF SECTION 80IA OF THE INCOME TAX ACT, 1961. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTIO N OF THE ID. ASSESSING OFFICER IN ALLOWING THE DEDUCTION UNDER SECTION 80IC AT RS. 1,74,26,762/- AS AGAINST CLAIM OF RS. 2,87,66,375/-. 19. IT WAS COMMON GROUND THAT THE SOLE ISSUE IN TH E PRESENT APPEAL RELATED TO THE NETTING OF PROFIT AND LOSS O F PRIORITY/ELIGIBLE UNITS FOR THE PURPOSE OF CALCULATING DEDUCTION U/S 80IC. THIS ISSUE HAS BEEN DEALT WITH BY US IN GROUND NO. 4 OF ITA 87 1/CHD/2017 IN FAVOUR OF THE ASSESSEE AT PARA 12-13. THE ISSUE, T HEREFORE, STANDS COVERED BY OUR DECISION IN THE SAID CASE FOLLOWING WHICH WE ALLOW THE GROUNDS OF APPEAL NO. 2 AND 3 RAISED BY THE ASSESSE E. 20. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. 21. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA 87 1/CHD/2017 IS PARTLY ALLOWED AND APPEALS OF THE ASSESSEE IN ITA 7 84/CHD/2017 AND ITA 1180/CHD/2017 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.01.2019. SD/- SD/- ( ) ( # $ % &' ) (SANJAY GARG) (ANNAPURNA GUP TA) / JUDICIAL MEMBER '( / ACCOUNTANT MEMBER POONAM (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ( )/ THE CIT(A) 5. -01 2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 # / ASSISTANT REGISTRAR