The Commissioner of Income Tax and Others vs Komarla Feeds and Foods Pvt. Ltd.

N. Kumar, J.—The revenue has preferred this appeal challenging the order passed by the Tribunal setting aside the order passed by the Commissioner under Section 263 of the Income-tax Act (hereinafter referred to as ''the Act'') interfering with the assessment order passed by the Assessing Authority.

The assessee is a company engaged in the manufacture of poultry and cattle feed. The assessee claimed deduction under Section 80-IB of the Act in respect of the profit of Rs. 1,63,84,963/-, without adjusting loss of Rs. 39,75,115/- suffered in the rearing division. The Assessing Officer accepted said method of computation. The Commissioner of Income-Tax considered the said assessment order as erroneous and prejudicial to the interest of the revenue and he was of the view that the deduction under Section 80-B is different on the gross amount after adjusting the loss of Rs. 39,75,115/-. Therefore, he remanded the matter back to the Assessing Authority to re-compute the same.

Aggrieved by the said order, assessee preferred an appeal to the Tribunal. The Tribunal relying on the judgment of the Apex Court in the case of Synco Industries Ltd. Vs. Assessing Officer, Income Tax, Mumbai and Another, (2008) 1 CLT 804 : (2008) 215 CTR 385 : (2008) 299 ITR 444 : (2008) 4 JT 1 : (2008) 4 SCALE 263 : (2008) 4 SCC 22 : (2008) 168 TAXMAN 224 has held the profits of the eligible units have to be computed without the loss from the rearing division being adjusted against the same and he held that the assessee was right in quantifying deductions in respect of Section 80-IB without adjusting the loss of Rs. 39,75,115/- against the profit of Rs. 1,63,84,963/- in the eligible unit. Thus he allowed the appeal. Aggrieved by the said order, the revenue is in this appeal.

The substantial question of law that arises for our consideration is as under:

"Whether the Tribunal was correct in holding that the Commissioner was not correct in exercising jurisdiction u/S. 263 of the Act in proceeding to hold that a sum of Rs. 39,17,115/- loss sustained in the rearing division should be adjusted against the profits of the eligible units before granting deduction u/S. 80-IB of the Act in view of Section 80-AB of the Act?"

Learned counsel appearing for the revenue sought to make difference between the words "undertaking" and "business" used in Section 80-IB and contended that insofar as the benefit under Section 80-IB is concerned, as both units are eligible businesses, while computing the deduction, it has to be done only after adjusting the income of the loss making unit and therefore, he submits the impugned order passed by the Tribunal calls for interference.

Per contra, the assessee supported the impugned order.

Though, the word used in business at Section 80-IB, the careful reading makes it clear that, business has to be understood with reference to the business referred in Sections 3 and 2 of the 11(a) and 11(b) where the reference is to industrial undertaking only. In substance it makes no difference. The judgment of the Apex Court in the case of SYNCO INDUSTRIES LTD. v. ASSESSING OFFICER (INCOME-TAX) AND ANOTHER squarely applies to the facts of this case, on which, the reliance is placed by the Tribunal. In the said case, the Apex Court at Para No. 13 has held as under:

"It is true that under Section 80-I(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section 6 contemplates that only the profits shall be taken into account as if it was the only source of income. However, section 80A(2) and section 80B(5) are declaratory in nature. They apply to all the Sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and, therefore the non-obstante clause in Section 80-I(6) cannot restrict the operation of Sections 80A(2) and 80B(5) which operate in different spheres. As observed earlier Section 80-I(6) deals with actual computation of deduction whereas Section 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and, therefore while interpreting Section 80-I(1), which also refers to gross total income one has to read the expression ''gross total income'' as defined in Section 80B(5)."

In view of the aforesaid judgment, the order passed by the Tribunal is in accordance with law. We do not see any infirmity. Hence, we pass the following:

ORDER

The substantial question of law framed is answered in favour of the assessee and against the revenue.

Appeal is dismissed.

No costs.