Income Tax Appellate Tribunal - Delhi
Deputy Commissioner Of Income Tax vs Delhi Iron And Steel Co. Ltd. on 30 July, 2004
Equivalent citations: (2004)85TTJ(DELHI)103
ORDER
Diva Singh, J.M.
1. This is an appeal filed by the Revenue against the order dt. 29th June, 1998 of CIT(A)-II, Meerut, pertaining to 1995-96 assessment year.
2. The grounds raised by the Revenue read as under :
"1. The learned CIT(A) has erred on facts and in law in directing to allow enhanced deduction under Section 80-IA of the IT Act, 1961 at Rs. 47,59,806, whereas the AO restricted the deduction at Rs. 22,33,156.
2. Learned CIT(A) is not justified in directing that the deduction under Section 80-IA is admissible with regard to the profits of the entitled industrial undertaking without setting off of losses of other unit against the profits of the entitled industrial undertaking. The order of learned CIT(A) is not justified in view of the provisions contained in Section 80AB and 80B(5) of the IT Act.
3. The learned CIT(A) has erred in law and on facts in allowing relief under Section 80-IA without adequately appreciating the ratio of decision given by Hon'ble Courts as follows:
(i) Cambay Electric Supply Industrial Co. Ltd. v. CIT (1978) 113 ITR 84 (SC),
(ii) H.H. Sir Rama Varma v. CIT (1994) 205 ITR 433 (SC),
(iii) CIT v. Rockweld Electrodes India Ltd. (1995) 215 ITR 358 (Mad)."
3. The relevant facts of the case are that the assessee had claimed a sum of Rs. 47,59,806 being 30 per cent of Rs. 1,58,66,020 under Section 80-IA (mentioned as 80-I by the AO). It had been claimed by the assessee that Rs. 1,58,66,020 represent the income of the new unit called as CV Cable Unit. It was stated before the AO that Continuous Vulcanisation Process Unit became fully operative during the year under consideration. With respect to the same it was also stated that out of total sales of Rs. 10,76,06,000, sales from new unit were worth Rs. 5,31,78,000 and the sales from the old unit at Rs. 5,44,28,000. In this background it was contended that the income from the CV Unit had been computed separately' by keeping separate records for consumption of raw material, production and sales. It was also admitted that no separate accounts have been maintained in the CV Unit. It was stated that the remaining expenses have been allocated on the proportionate basis between the two units. Regarding profits of the new unit, it was claimed that the GP rate in respect of the new unit during the year under consideration had been 24.22 per cent as against 6.12 per cent of the old unit. The combined GP rate, it was stated, stood at 24.95 per cent. The corresponding figure in respect of earlier year was given at 59.75 per cent in respect of new unit, 17.38 per cent in respect of the old unit and the combined GP rate in that year was given 23.34 per cent. The AO was of the view that on consideration the arguments of the assessee could not be considered on account of the following reasons :
"The assessee has worked out the profit of the new unit at Rs. 1,58,66,020 on which deduction under Section 80-I has been claimed at Rs. 47,59,806. However, in view of provisions contained under Section 80AB which reads as under for ready reference, states that deduction under Section 80-I has to be allowed to the assessee in respect of the income from the new industrial undertaking which is included in the gross total income of the assessee:
"Section 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 (except Section 80M) included in this Chapter under the heading "C-Deductions in respect of certain incomes" in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income."
A simple reading of the provisions mentioned above clearly states that notwithstanding anything contained in that Section (80-I) for the purpose of computing the deduction, the amount of income of that nature as computed in accordance with the provisions of the IT Act shall alone be deemed to be the amount of income of that nature which is (i) derived or received by the assessee, and (ii) which is included in the gross total income. Thus, the income entitled for deduction under Section 80-I has to be derived from the new industrial undertaking and has to be computed in accordance with the provisions of the IT Act, 1961 as an independent unit. Thereafter in order to get deduction, it has to be included in the gross total income which has again been defined as under :
Gross Total Income :
According to Section 80B(5), "gross total income" for the purposes of Chapter VI-A (Sections 80C to 80U) means the total income computed in accordance with the provisions of the Act without making any deduction under Chapter VI-A. "Computed in accordance with the provisions of the Act" implies:
(1) that deductions under appropriate computation sections have already been given;
(2) that income of other persons, if includible under Sections 60 to 64, has been included;
(3) that intra-head and/or inter-head losses have been adjusted; and (4) that unabsorbed business losses etc., unabsorbed depreciation, unabsorbed investment allowance, etc., have been set off.
What is arrived in this manner can, broadly be termed as "gross total income".
This clearly indicates that whatever income has been derived has to be part of the gross total income. Now, in case the gross total income is zero after inclusion of the income from new industrial undertaking, no deduction can be allowed to the assessee. However, the deduction in any case cannot be more than the gross total income. The provisions contained under Section 80A(2) clearly lays down this condition which is as under:
"Section 80A(2) : The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee."
In view of abovementioned discussions, the gross total income of the assessee is the income computed before any deduction under Chapter VI-A is allowed to ' the assessee. Further, the deduction under Chapter VI-A cannot exceed the gross total income. Even otherwise, in view of provisions contained under Section 80AB, only that portion of the income is entitled for deduction which is derived from a particular unit entitled for deduction and which is included in the gross total income. Thus, the deduction admissible to the assessee in respect of new industrial undertaking is limited to the extent of net income from the new industrial undertaking and included in the gross total income and not the gross income.
The provisions contained under Section 80AB were brought on the statute book w.e.f. 1st April, 1981, i.e., relevant to asst. yr. 1981-82. Prior to this, the correct legal position was that the allowance was made on the gross total income from the new industrial undertaking etc. In view of the above discussions, deduction under Section 80-I cannot be granted to the assessee on the gross total income computed by it at Rs. 1,58,66,020 instead, the same will be allowed on the amount of the income from new industrial undertaking included in the gross total income."
4. Aggrieved by this in appeal before the CIT(A), the assessee agitated this point further. The facts as appreciated by the learned CIT(A) are as under:
"5. The fourth and the main ground in this appeal is against restricting the deduction under Section 80-IA to the extent of Rs. 22,33,156 as against claimed at Rs. 47,59,806. The brief facts of the case are that the assessee is a cable manufacturing unit. On the new unit started last year, the assessee claimed a deduction of Rs. 47,59,806 being 30 per cent of the income of the unit at Rs. 1,58,66,020 and this deduction was claimed under Section 80-IA. As far as the income of the unit or the deduction admissible under Section 80-IA is concerned, there was no objection from the side of the AO. There was objection to the computation of deduction admissible under Section 80-IA (inadvertently taken as Section 80-I by the AO). The AO noticed that though there was a profit in the new unit, but there was a loss in the old unit and, therefore, the gross total income of the assessee would be much less than the income of the new unit and, therefore, the deduction under Section 80-IA has to be calculated on this gross total income as provided in Section 80AB and 80B(5) and 80A(2). The AO referred to the Section 80AB and stated that according to this section, the deduction under Section 80-IA is admissible only in respect of income of the new industrial undertaking which is included in the gross total income. The AO then referred to the Section 80B(5) whereby it was stated that the gross total income means the income of the assessee before allowing deduction under Chapter VI-A meaning thereby all brought forward losses, etc., has to be set off before allowing deduction under Chapter VI-A. The AO has then referred to Section 80A(2) that the aggregate amount of deduction under Chapter VI-A cannot exceed the gross total income. The AO, thus, held that the deduction under Section 80-IA can only be allowed on the gross total income which was computed by him at Rs. 74,43,853. Allowing the deduction @ 30 per cent on this gross total income, the AO computed deduction under Section 80-IA at Rs. 22,33,156 and thus, computed the taxable income at Rs. 51,10,700. The deduction allowed under Section 80-IA was thus Rs, 22,33,156 as against claimed at Rs. 47,59,806. The assessee being aggrieved against this findings has taken this ground of appeal. The arguments advanced before the CIT(A) by the assessee were as under :
5.2 The learned counsel who appeared before me has vehemently argued that the AO has not appreciated the provisions of the Act in correct perspective. It is stated that the provisions of the Act which grant incentive to prompt growth and development should construed liberally as held by the Hon'ble Supreme Court in Bajaj Tempo Ltd. v. CIT (1992) 62 Taxman 480 (SC). The learned counsel argued that the AO has taken a very narrow view in the interpretation of various sections. The learned counsel then stated that there is no objection to the claim of Section 80-IA or to the computation of income of the new unit from the side of the AO but the only objection is with regard to the computation of deduction under Section 80-IA. The learned counsel stated that the AO has allowed deduction only on the gross total income disregarding the profit of the industrial undertaking as prescribed under Section 80-IA. It is stated that this deduction under Section 80-IA is admissible on the profit and gains derived from such industrial undertaking. The learned counsel then referred to the provisions of Section 80-IA whereby it is provided that the profits and gains from the eligible business shall be computed if such eligible business were only the source of income of the assessee. The learned counsel then referred to the provisions of Section 80-IA(5)(b) which laid down that in the case of an industrial undertaking referred to this section, 100 per cent of the profits and gains derived from such industrial undertaking would be exempt provided that where the assessee is a company, the provisions of this clause shall have the effect as if for the words 25 per cent, the words 30 per cent has been substituted. It is stated that this sub-section makes it clear that the deduction @ 30 per cent is confined to the profits and gains derived from such industrial undertaking. It is, therefore, argued that the deduction is admissible on the profits and gains derived from such industrial undertaking. It is, therefore, argued that the deduction is admissible on the profits of the industrial undertaking only as provided under Section 80-IA. The learned counsel then referred to the decision of the Hon'ble Calcutta High Court in CIT v. Belliss & Morcom (I) Ltd. (1982) 136 ITR 481 (SC) and stated that this decision is directly applicable to the facts of the case whereby the Hon'ble High Court held that deduction under Section 80-I should be given on the profits of the priority industry without deducting therefrom any loss arising in any other business activity. The learned counsel then referred to the decision of the Hon'ble Supreme Court in CIT v. Canara Workshops (P) Ltd. (1986) 161 ITR 320 (SC) where the Hon'ble Court held that the deduction under Section 80E is intended for application of the provisions of that section to the profits and gains of that industrial undertaking on the ground that a priority industry has been set up and further that it was never intended that the money earned by such industry should be lost or diminished because of loss suffered by other industry. The learned counsel then referred to another decision of Hon'ble Supreme Court in CIT v. V. Venkatachalam (1993) 201 ITR 737 (SC) whereby the Hon'ble Court held that the words 'such income' in the main part of Section 80-I meant and referred to the capital gains and not to the total income of the assessee. In the present case, such income is the profit derived from the industrial undertaking under Section 80-IA. The learned counsel, therefore, argued that in view of these decisions, the AO is not justified in restricting the deduction under Section 80-IA on the gross total income only, disregarding the profit derived from the eligible industrial undertaking as provided under Section 80-IA. It is argued that the deduction claimed by the assessee was correct and should be upheld."
5. Considering these submissions the learned CIT(A) decided the issue in the following manner:
"5.3 I have carefully considered the submissions of the learned counsel. I have also perused the reasons given by the AO in the assessment order. There is no dispute about the profit derived from the industrial undertaking as eligible under Section 80-IA at Rs. 1,58,66,020 or to the admissibility of deduction under Section 80-IA. The assessee has claimed deduction under Section 80-IA @ 30 per cent on such profit while the AO has allowed it on the gross total income as arrived at Rs. 74,43,853.
5.4 There are two separate issues involved in the computation of such deduction under Chapter VI-A. First is the computation of gross total income as per the various pronouncements of the Hon'ble Supreme Court while the second is the computation of a particular deduction under a particular section of Chapter VI-A. The Hon'ble Supreme Court in a number of decisions viz., Distributors (Baroda) (P) Ltd. v. Union of India and Ors. (1985) 155 ITR 120 (SC), CIT v. United General Trust Ltd. (1993) 200 ITR 488 (SC), CIT v. V. Venkatachalam (1993) 201 ITR 737 (SC), H.H. Sir Rama Varma v. CIT (1994) 205 ITR 433 (SC) and CIT v. Kotagiri Industrial Co-operative Tea Factory Ltd. (1997) 224 ITR 604 (SC), has held that in view of the provisions of Section 80A(2), 80AB and 80B(5), the gross total income has to be computed as per the provisions of the IT Act before allowing deduction under Chapter VI-A and after setting off all the brought forward losses and deficiencies. It is further clear that the deductions as admissible under Chapter VI-A cannot exceed the gross total income which is computed after adjusting all brought forward losses. But as far as the deduction under any particular section of Chapter VI-A is concerned, that deduction is to be computed as per the provisions of that section. Since the deduction under Section 80-IA is admissible @ 30 per cent of the profit of eligible industrial undertaking, this deduction is, therefore, to be computed on the profit of that industrial undertaking which, in the present case, is Rs. 1,58,66,020. Therefore, the deduction under Section 80-IA in respect of this industrial undertaking @ 30 per cent comes to Rs. 47,59,806. The computation of such deduction under a particular section of Chapter VI-A is further confirmed by a number of decisions of Hon'ble High Courts and Supreme Court. As stated by the learned counsel, the decision of the Hon'ble Supreme Court in the case of Canara Workshops (P) Ltd. (1986) 161 ITR 320 (SC) supports this view that the deduction has to be calculated on the profit of that industrial unit only. Similarly, the Hon'ble Supreme Court in V. Venkatachalam case (supra) observed in respect of deduction under Section 80T the words "such income" in that section refers to capital gains and not to the total income of the assessee and further that the deduction under Section 80T has to be made out of the capital gains and no question could arise of the business loss being set off against this amount of capital gains. Following the judgment of the Hon'ble Supreme Court, the Hon'ble Kerala High Court in CIT v. V.T. Joseph (1997) 225 ITR 731 (Ker) held that the deduction under Section 80HHC was to be allowed only to the extent of income from export business which was included in the gross total income. Similarly, the Hon'ble Bombay High Court in CIT v. Smt. Shanta Behen D. Shah (1997) 228 ITR 305 (Bom) held that while computing deduction under Section 80T for long-term capital gains, the question of taking into consideration the short-term capital gains or short-term capital loss cannot be taken into account in computing the deduction under Section 80T which has to be calculated on the long-term capital gains only. The decision cited by the learned counsel, of the Hon'ble Calcutta High Court in Belliss & Morcom (I) Ltd. also supports this viewpoint.
5.5 In view of the various pronouncements on this issue as to how the deduction under a particular section of Chapter VI-A is to be computed, there is no doubt that the deduction under a particular section of this chapter has to be calculated with reference to the profit of that industrial unit which is eligible though the deduction cannot exceed the gross total income so as to result in an overall loss which is prohibited under Section 80A(2). It is, therefore, held that the deduction under Section 80-IA is to be computed on the profit of such industrial undertaking which, in the present case, is Rs. 1,58,66,020. The deduction admissible on this profit @ 30 per cent is Rs. 47,59,806. Since the gross total income as computed by the AO is more than this deduction, the deduction under Section 80-IA is admissible as a whole out of the gross total income so computed by the AO. Accordingly, the deduction under Section 80-I is admissible to the assessee at Rs. 47,59,806 as against allowed by the AO at Rs. 22,33,156. The AO should allow necessary relief to this extent. This ground of appeal is, therefore, allowed."
6. Aggrieved by this the Revenue is in appeal before us.
7. The learned Departmental Representative placed heavy reliance upon the assessment order. Attention was invited to Section 80AB of the IT Act which had been invoked by the AO. Referring to Section 80A(2) which also had been invoked by the AO, learned Departmental Representative placed heavy reliance upon the same. The definition of gross total income as per Section 80B(5) which had also been taken into consideration by the AO was also relied upon. In the ultimate analysis, reliance was placed upon the assessment order. However, the decisions relied upon by the CIT(A) were not distinguished.
8. The learned Authorised Representative, on the other hand, apart from relying upon the impugned order addressed the background of the case, referred to his written submissions, Relying upon the same it was stated by him that the assessee-respondent is a private limited company, Inter alia, engaged in the business of manufacturing and supplying different varieties of cables to Indian Railways. For this purpose the assessee has two units, one of which had commenced production only in October, 1993, i.e., during the financial year 1993-94 relevant to asst. yr. 1994-95. The new unit, it was stated, is an industrial undertaking which is eligible for deduction under Section 80-IA of the Act.
9. It was further argued referring to the written submissions filed before the Bench that, for the instant assessment year, the appellant-company had filed a return of income declaring an income of Rs. 31,34,340 on 30th Nov., 1995 which, income was subsequently revised by assessee-company to a figure of Rs. 26,22,850. In doing so, it was submitted, the appellant-company had claimed deduction under Section 80-IA of the Act of Rs. 47,59,806 being 30 per cent of the profits of the new industrial undertaking of Rs. 1,58,06,020. However, the learned Addl. CIT, Special Range, Ghaziabad vide an order of assessment dt. 24th Nov., 1997, it was stated, restricted the claim of deduction under Section 80-IA of the Act. The learned Addl. CIT, it was submitted, had restricted the claim of deduction under Section 80-IA of the Act to Rs. 22,33,156 as against the claim made by assessee of a sum of Rs. 47,59,806 by computing the deduction on the total income of the assessee-company of Rs. 73,82,657 by interpretation of the provisions contained in Sections 80AB, 80B(5) and 80A(2) of the Act. The total income of the assessee-company, it was stated, had been computed after setting off the losses of the old unit against the profits of the new unit. In other words, it was stated that although the learned Addl. CIT upheld the claim of the appellant inasmuch as he was of the view that the assessee was entitled to deduction under Section 80-IA on the profits of the new industrial unit but restricted the quantum of deduction by setting off the losses of the old unit against the profits of the new industrial undertaking. It was stated that it is an undisputed position that only profits of the new industrial undertaking are entitled to deduction under Section 80-IA of the Act and not the profits of the old unit. However, while determining the profits of the new industrial undertaking for the purpose of computation of deduction under Section 80-IA of the Act, the learned AO held that the same is to be equivalent to the net income of the new industrial undertaking included in the gross total income of the assessee-company instead only to the profits of the new unit, which, it was argued, is undisputedly a separate industrial undertaking.
10. It was vehemently contended by him that there is no dispute about the fact that the profit derived from industrial undertaking which is eligible under Section 80-IA is Rs. 1,58,66,020. It was also contended that the fact that the second unit is eligible for deduction under Section 80-IA is also an admitted fact since deduction under the said section has been granted to the assessee by the AO. It was further contended by him that there is no quarrel with the issue that deduction admissible under Chapter VI-A cannot exceed the gross total income which has to be computed as per provision of the IT Act before allowing deduction under the said Chapter and after setting off all brought forward losses and deficiency. The fact that the deduction under Section 80-IA has to, be calculated with reference to the profit of that industrial undertaking which is eligible is also not in dispute. It was further stated that it is also not in dispute that the deduction cannot exceed gross total income which is the profit under Section 80A(2) of the Act. Referring to Section 80AB and Circular No. 281 dt. 22nd Sept., 1980 as well as the judgment of the Orissa High Court in CIT v. Agency Marketing Co-operative Society Ltd., it was contended that the action of the CIT(A) is justified. Reliance was also placed upon CIT v. Vishaka Industries (2001) 251 ITR 471 (AP) and Canara Workshops (P) Ltd. (1986) 161 ITR 320 (SC). Reliance was also placed upon CIT v. Belliss Morcom (1982) 136 ITR 481 (Cal) which judgment, it was stated, was approved by the apex Court in the judgment of Canara Workshop. It was put to the learned Authorised Representative by the Bench that he should address the Bench on the basis of the judgment given by the Madras High Court and Bombay High Court in the case of CIT v. McMillan Co. India Ltd. (2000) 243 ITR 403 (Mad) and Synco Industries Ltd. v. AO (2002) 254 ITR 608 (Bom).
11. The learned Authorised Representative on the next date of hearing addressed the Bench on the judgments specially referred by the Bench. It was contended that the judgment of the Madras High Court has been referred in the context of the provisions of Section 80QQ of the Act which did not have similar provision as contained in Section 80-IA(7). With respect to the judgment of the Bombay High Court, it was contended that this decision is also distinguishable. It was stated that it has been rendered in the context of the deduction under Section 80-I which had been denied on the. ground that the gross total income of the assessee prior to the claim of deduction was nil and as such, on an interpretation of Section 80A(2) of the Act, the claim of the assessee has been denied. It was also argued that the issue in the present context is fully covered by the Canara Workshop (supra) and other decisions relied upon. It was also his contention that in any case if two views are possible then relying upon the judgment of CIT v. Vegetable Products (1973) 88 ITR 192 (SC) incentive granting provision to the assessee should be liberally construed. It was further stated that the fact that the principle that the incentive granting provision should be interpreted liberally had been upheld by the apex Court again in Bajaj Tempo Ltd. (supra). It was also stated that in 1993-94 assessment year i.e., immediately preceding assessment year under Section 143(3), the AO has allowed the deduction under Section 80-IA without making any adjustment on account of the profits of the old unit. Further reliance was placed upon Union of India v. Onkar S. Kanwar and Ors. (2002) 258 ITR 761 (SC)
12. We have heard the rival submissions and perused the material available on record and have taken into consideration various decisions relied upon before the CIT(A) as well as before us by either side.
13. After a careful analysis of the entire conspectus of facts and circumstances and the provisions of law involved as well as the judgments brought to our notice, we would like to first refer to the undisputed facts. The undisputed facts, as per the assessment order are that the assessee has been held entitled to claim deduction under Section 80-IA in the new unit. The bone of contention between the assessee and the Revenue is that the assessee is claiming deduction on the profits of the new unit and the Revenue on an interpretation of various provisions and judgments is of the view that the quantum of deduction has to be reduced by the losses of the old unit. The fact that the old unit is not eligible for deduction under Section 80-IA, as its period for claiming deduction has been exhausted is not in dispute. The only eligible unit is the new unit, is also not a disputed point.
14. We are of the view that the facts that the deduction has to be reduced on an interpretation of Section 80A(2) is also not an issue in the facts of the case. There can be no contrary view in the face of the specific stipulation provided by the statute and interpretation by various judgments that the deduction under Chapter VI-A cannot be more than the gross total income of the assessee. In the peculiar facts and circumstances of the case, we are of the view that this section has wrongly been invoked by the Revenue because from an appraisal of the facts it is seen that the deduction claimed by the assessee does not exceed the gross total income. The understanding of the AO that the assessee was claiming deduction which was more than gross total income is not correct as is evident from the assessment order itself.
15. There is also no dispute about the fact that the profit and gains derived from the industrial undertaking eligible for deduction under Section 80-IA is Rs. 1,58,66,020. On an appraisal of facts, it is also seen that the deduction admissible under Chapter VI-A cannot exceed the gross total income, which has to be computed as per the provisions of IT Act before allowing deduction under Chapter VI-A and after setting off all the brought forward losses and deficiencies.
16. From the perusal of impugned order, it is seen that the learned CIT(A) himself has been careful of the fact that the deduction under Section 80-IA has to be calculated with reference to the profit of that industrial undertaking, which is eligible through deduction and has held that it cannot exceed gross total income, which is provided under Section 80A(2). He has been careful to observe that deduction under a particular section of this chapter has to be calculated with reference to the profit of that industrial unit which is eligible though the deduction, he observed, cannot exceed the gross total income so as to result in an overall loss which is prohibited under Section 80A(2). Thus, it is seen, that the presumption of the Revenue that deduction has been allowed contrary to Section 80A(2) is wrong. From an appraisal of the figures, we are of the view that this section has been wrongly invoked to deny the claim of the assessee as the claim in the present facts of the case, does not exceed the gross total income of the assessee in the year under consideration. The fact that the old unit suffered a loss of Rs. 84,83,363 is not material to decide the claim of deduction under Section 80-IA to the new unit as the unrebutted fact remains on record that it was only the new unit which was eligible for deduction and the fact also remains that the new unit had a profit of Rs. 1,58,66,020 which entitled it to claim deduction under Section 80-IA. This has been held to be so even by the AO himself.
17. The fact that assessee is entitled to claim deduction under Section 80-IA to the extent claimed is supported by Sub-section (7) of Section 80-IA of the Act which provides that for the purpose of determining the quantum of deduction under Section 80-IA(5), the profit and gains from an eligible business to which the provisions of Sub-section (1) apply, i.e. the business for which deduction is to be computed, shall be computed as if the eligible business were the only source of income of the assessee during the previous year relevant to the assessment year. This fact has been lost right of by the Revenue.
18. With respect to the decisions referred to by the Bench in the course of the hearing namely McMillan Co of India Ltd. (supra), on a careful appraisal of the same, it is seen that if is in the context of the provisions of Section 800.Q, which section, it is seen, did not have the provision similar to the one contained in Section 80-IA. It may be pertinent at this juncture to reproduce Section 80-I(7), which reads as under:
"Where the assessee is a person other than a company or a co-operative society, the deduction under Sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below Sub-section (2) of Section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant."
19. To appreciate the distinction sought to be made, it is considered necessary to reproduce Section 80QQ which was considered by the Madras High Court in the case of CIT v. McMillan (supra).
"Section 80QQ. Deduction in respect of profits and gains from the business of publication of books. (1) Where in the case of an assessee the gross total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1971, or to any one of the (fourteen assessment years) next following that assessment year, includes any profits and gains derived, from a business carried on in India of printing and publication of books or publication of books, 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 twenty per cent, thereof."
(2) In a case where the assessee is entitled also to the deduction under Section 80HH or Section 80HHA or Section 80-I or Section 80J or Section 80P, in relation to any part of the profits and gains referred to in Sub-section (1), the deduction under Sub-section (1) shall be allowed with reference to such profits and gains included in the gross total income as reduced by the deductions under Section 80HH, Section 80HHA, Section 80-I, Section 80J and Section 80P.
(3) For the purposes of this section, "books" shall not include newspapers, journals, magazines, diaries, brochures, tracts, pamphlets and other publications of a similar nature, by whatever name called".
20. A perusal of the above shows that there is no such non obstante clause in Section 80QQ as has been provided in Section 80-IA Sub-section (7). Accordingly, the judgment of the Madras High Court has been rendered in the context of provisions which are not pari materia to the provisions and the facts of the present case.
21. It would also be pertinent to discuss the other judgment referred to by the Bench, i.e., Synco Industries Ltd. (supra) at this juncture. On an appraisal of facts it is seen that the facts available on record therein were materially different from the facts as are undisputedly admitted in the present case. It is worth pointing out that there the deduction was claimed under Section 80-I by the assessee and it was denied specifically on the ground that the gross total income of the assessee prior to the claim of the deduction was nil. Thus, this significant and material distinctive fact is important as the claim was denied specifically on account of this fact and only on account of this fact the provision of Section 80A(2) came into play. However in the facts before us, the gross total income prior to the claim of deduction is a positive figure and not a nil figure. It is also seen that in the impugned order, which is a speaking order, which has taken into consideration various decisions relied upon, the decision has been arrived at only after a careful analysis of the same it came to the conclusion that the ratio laid down in Canara Workshops (P) Ltd. (supra) squarely applies to the facts of the present case. It may also be pointed out that the question which was referred to their Lordships for determination in Synco Industries Ltd. was as under:
"Whether the AO was right in rejecting the claim of the assessee on the ground that the gross total income of the assessee, computed as per the provisions of the Act before deductions under Chapter VI-A, was nil?"
22. At the cost, of reiteration it may be mentioned yet again that, as far as the case in the present case is concerned, the figure is not nil and is a positive figure. Another material distinction which is worth highlighting is that therein the assessee was engaged in the business of oil and chemicals and as such it had an oil division and also a chemical division at two different places. The deduction under Section 80HH and 80-I had been claimed in respect of the two divisions. The AO rejected the claim on the ground that the gross total income of the assessee before deduction under Chapter VI-A was nil and for this reason the assessee was not entitled to the benefit of deduction under this Chapter. The assessee therein had earned profit in the chemical division in the year under consideration, however, in respect of the oil division the assessee had incurred a loss. The appeal of the assessee was dismissed by the High Court for the reason that in order to determine the gross total income their Lordships held that the loss of the oil division was required to be adjusted against the profit of the chemical division before making any deduction under Chapter VI-A. Thus, the action of the AO on account of these specific facts was upheld. In the facts before us the only eligible business for deduction is unit 2 and it is not the case of the AO that both the units are eligible for deduction.
23. Before discussing the other issues we would like to state that Section 80-I(6) also has similar non obstante clause as Section 80-IA(7) and as such to this limited extent both the sections are pari materia. However, the assessee has failed before the Bombay High Court only on account of the fact that the two eligible units had to adjust their losses and profits on account of the ceiling imposed by Section 80(2) and 80B(5). In the present facts, the ceiling imposed by Section 80A and 80B(5) does not come in the way of the assessee, since the resultant figure was a positive figure and only one unit was eligible for deduction.
24. Thus, for the reasons given hereinabove wherein the said decisions are not applicable.
25. Reliance as we have observed has also been placed on the decision of Hon'ble Supreme Court in CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and Bajaj Tempo Ltd.
26. Since on behalf of the assessee it has been claimed that the issue is covered by the decision of CIT v. Vishaka Industries (supra), it may also be stated briefly therein their Lordships of the Andhra Pradesh High Court on the facts which are pari-materia with the present case relying upon the judgment of the apex Court in CIT v. Canara Workshop (P) Ltd. held that :
"The deduction is referable to "such profits and gains" included in the gross total income of the assessee. To be more explicit, the deduction is to be given only in respect of the profits and gains of an industrial undertaking included in the gross, total income of the assessee and not from the gross total income of the assessee. The intention of the legislature is to provide the benefit of deduction from the profits and gains of an industrial undertaking, which fulfils the conditions specified in the respective provisions of the Act. The said benefit is an incentive intended to boost industrial activity. Hence, the proper interpretation is that the deduction shall be in respect of the profits and gains of an industrial undertaking, specified in the provisions of the Act and not with reference to the total profits of the assessee."
27. It may also be mentioned that the Bench had also placed an order dt. 25th Nov., 2002 which was authored by one of us (AM) namely ITA No. 246/Del/1998 in Asstt. CIT v. Bajaj Motors (P) Ltd. in which a contrary view had been taken. However, after a careful analysis of the said order and the arguments advanced on behalf of the assessee in the present case, it was seen that the factum of Section 80-IA(7) and the factum of 80-I(6) identical provision in Section 80QQ had not been argued before the Bench. Moreover, even there the case of the assessee was that "there were two units eligible for deduction one was a loss making unit and the other was a profit making unit thus the facts were identical to the judgment of the Bombay High Court in the case of Synco Industries Ltd. (supra). Accordingly, the said decision has been arrived at herein on account of the peculiar and difference of facts and circumstances of the case and the law applicable to these sort of facts.
28. Thus, for the reason given above, the grounds raised are rejected.
29. In the result, the appeal, filed by the Revenue is dismissed.