12. The provisions of sections 80IB/80IA are the code by themselves as they contains both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe to the issue of the manner of `computation of the profits and gains of the eligible business’. In this regard, the relevant sub-sections ie 80-IB(l), 80-IB(13) & 80-IA(5) of the said sections are important and they are reproduced here under for ready reference.
“Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings.
80-IB(l) Where the gross total income of an assessee includes any profits and gains derived from any business referred in sub section (3) to (11) (11 A) and (11B) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, 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.
80-IB(13) The provisions contained in subsection (5) and subsection (7) to (12) of section 80IA shall, so far as may be , apply to the eligible business under this section.
80-IA(5) Notwithstanding anything contained in any other provisions 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 the initial assessment year and to every subsequent assessment year up t o and including the assessment year for which the determination is to be made.”
13. From the above, it is evident that section 80IB provides for the allowing deduction in respect of the profits and gains derived from the eligible business. Sub section (13) of section 80IB provides for the applicability of the provisions of sub section (5) and sub-sections (7) to (12) of sections 80-IA, so far as may be, applicable to the eligible business under section 80-IB. On perusal of the provisions of the said sub section (5), it is noticed that it provides for manner of computation of the profits and gains of an eligible business. Accordingly, such profits and gains are computed as if such eligible business were the only source of income of the assessee. What is essence of the phrase ‘as if such eligible business were the only source of income’ used in the said sub section (5)’, To answer, so far as the expenses of the business of the assessee are concern, which is the issue before us, though it is unfair to consider all the expenditures of all the sources of incomes of the business of the assessee against the ‘profits and gains of the eligible business, the said only source of income, at lease all the expenses of the business are to be considered as if such expenses relate to the eligible business as if it were the only source of income. In other words, all the expenses of the business, whether direct or indirect; project specific or common expenses, have to be considered for computation of the profits and gains of an eligible business. Further, the devices adopted to reduce or inflate the profits and gains of eligible business, the only source of income’, should be rejected in view of the overriding provisions of section 80-IA(5).
14. To take the discussion further, the determination of the allowable revenue expenses for the purposes of computing the profits and gains of the eligible business of the instant assessee, in our opinion, all the provisions relating to the head of income “Profits and gains from business of profession” apply without any mutation. In other words, the all the direct as well as the indirect expenses have to be adjusted from the profits and gains of the eligible business. Further, on finding that the subsection (5) refers to phrases ie ‘the profits and gains of an eligible business to which the provisions of sub section (1) apply . . , , shall be computed as if such eligible business were the only source of income of the assessee’, we proceed to interpret and understand them by the meaning that the stand alone unit has to be given to the such eligible business. In other words, “as if such eligible business were the only source of income ‘shall mean that the alleged indirect expenditure or common or head expenses were incurred for such eligible business, the only source of income of the assessee. Consequently, all the indirect expenses or common expenses have to be considered for the said computation. This view is authenticated by the finding of the Delhi Bench in the case of DCIT vs Eastern Medkit Ltd (100 TTJ 382) where it is held as mentioned in para 6.4 of the order, that’any allocation of the expenditure of the Head office has to be done to all the units which are operating under the head office, unless there are valid reasons to exclude any particular unit’. As seen from para 7.2 of the said decision, the same was delivered in the context of section 80IA (7) only. thus, the provisions of section 80IB(1) convincingly advocate for the allocation of indirect expenses towards to Silvasa Unit as well and, in principle, the decision of the revenue authorities is free from any mistake.