Pidilite Industries Limited Vs DCIT (ITAT Mumbai)- Section 80-IA(5) provides that notwithstanding anything contained in 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 determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.
It is noticed that by virtue of sub-section (5), section 80-IA has become a stand alone provision. The effect of sub-section (5) is that for the purpose of granting deduction in the initial year or a subsequent year it shall be considered as if the assessee is having eligible business as the only source of its income. In other words if there is a loss in the initial year and in the subsequent year there is a profit, deduction shall be allowed by considering the brought forward loss in the year of profit. Firstly such brought forward loss shall be set off against the profit of the eligible unit for such succeeding year and the deduction shall be allowed only if there is net profit of the eligible unit, that is, the profit of the year is sufficient enough to absorb the brought forward loss of the unit and also thereby leaving some positive profit for the current year. This position remains notwithstanding the fact that the assessee may have set off such loss from the eligible unit against the income of non-eligible unit in the year of incurring of such loss. By means of sub-section (5), the loss incurred in the eligible unit is notionally carried forward to the subsequent years and considered as such in the subsequent years until it is wiped out with the profits of the eligible unit for the succeeding years. This position stands despite the fact that such loss may have been actually set off against the income of non-eligible units in an earlier year or even the very year in which commercial production started. The Special Bench of the Tribunal in Goldmine Shares and Finance (P) Ltd. (supra) has held to this extent by laying down that : “in view of the specific provisions of section 80-IA(5), the profit from the eligible business for the purpose of determination of the quantum of deduction u/s.80-IA has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years”.
