Pragati Power Corporation Ltd Vs ACIT (ITAT Delhi)
ITAT Delhi held that eligible unit deduction u/s 80IA of the Income Tax Act has to be granted on gross basis treating that is the only undertaking with the assessee without set off losses of other industrial units of the assessee.
Facts- The matter involved in the present case is that according to assessee deduction u/s. 80IA has to be computed in respect of the profit of the eligible unit only in terms of section 80-IA(5) of the Act, which according to the assessee is Rs.203,36,83,278/-. But according to the section 80A(2), deduction under Chapter VIA has to be restricted to the extent of the gross total income. According to the assessee, the gross total income for the year under consideration, being Rs.187,58,66,703/-, the deduction u/s. 80-IA of the Act was accordingly restricted to Rs.187,58,66,703/- and net taxable income of nil was declared in the return of income.
But, according to the Revenue for computing eligible profit for deduction u/s. 80IA the Act, loss of non-eligible units should be first adjusted with the profit of the eligible unit and deduction should be allowed in respect of net profit under the head profit and gain of the business/profession of the assessee.
Thus, the dispute is whether any loss of non-eligible unit should be adjusted with the profit of the eligible unit for determining profit eligible for deduction under section 80IA of the Act.
Conclusion- Hon’ble Madras High Court, in the case of ACIT vs Velayudhaswamy Spinning Mills (P) Ltd, has held that the eligible unit deduction u/s 80IA of the Act has to be granted on gross basis treating that is the only undertaking with the assessee without set off of any loss thereon.
Held that set off of loss of another unit with the profits of eligible unit u/s 80IA of the Act need not be done and accordingly, we modify the order passed by this tribunal to that effect.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the assessee against the order of ld. CIT(A)-7, New Delhi dated 11.12.2017.
2. Following grounds have been raised by the assessee:
“1. That the order of the learned Commissioner of Income Tax (Appeals) is bad both on law and facts.
2. The part of impugned order is contrary to the evidence and material on record, contrary to the principles of law and binding judgments of the Court, contrary to the relevant provisions of the Act and deserves to be quashed and set aside.
3. That the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of learned Assessing Officer in restricting the claim of deduction u/s 80IA to Rs.189,92,38,797/- against the appellant claim of deduction u/s 80IA of the Act of Rs.228,41,50,029/- in complete disregard to the fact that in view of provisions of section 80IA(5) of the Income Tax Act, 1961 the profit from the eligible business for the purpose of deduction u/s 80IA of the Act has to be computed before set off losses of the other undertaking of the assessee.”
3. Since, the deduction eligible is more than the gross total income, deduction to the extent of eligible profits is to be allowed. To clarify further since one of the eligible units ended up in loss, the interest income earned and computed under the head income from other sources is allowed to be set off of the losses of the eligible undertaking.
4. The similar issue stands adjudicated by the order of the Co-ordinate Bench of ITAT for A.Y. 2012-13 in ITA No. 2712/Del/2017 and in MA No. 206/Del/2020 in assessee’s own case. For the sake of ready reference, the said MA is reproduced hereunder:
“3. We have heard the rival submissions and perused the materials available on record. For the sake of convenience, the adjudication of claim of deduction u/s 80IA of the Act has been addressed by the tribunal in its order dated 10.1.2020 in the following manner:-
“5. We have heard rival submissions and perused the relevant material on record. The assessee is a company of Government of National Capital Territory of Delhi. The assessee has been operating two separate undertakings termed as project GT-1 at Raj Ghat and another undertaking engaged in the business of generation and distribution of power located at Bawana. It is claimed by the assessee that commercial operations in respect of GT-1 Raj Ghat commenced in July, 2002 and as such the income arising out the business of generation and distribution of power by GT-1 Raj Ghat (undertaking) was eligible for deduction under section 80IA of the Act. The unit-wise profit allocation has been provided by the assessee in the computation of total income, which is reproduced as under:
5.1 The assessee has explained that it has claimed deduction under section 80-IA of the Act on the basis of the certificate issued by the Auditor in form No. 10CCB dated 28/08/2012, a copy of which has been placed at pages 35 to 41 of the paper book. According to the certificate, after making adjustment to the book profit of the eligible units, the eligible deduction has been computed at Rs.203,36,83,278/-. While working this deduction, the interest from bank of Rs.15,37,81,256/- has been reduced from the eligible profit for deduction. The assessee, then computed the gross total income at Rs.187,58,66,703/- as under and claimed the deduction limited to the gross total income:
