M/S.sundaram Fasteners Limited,98A, 7[Th] Floor, Dr.radhakrishnan Salai,Mylapore, Chennai – 600 004 v. The Commissioner Of Income Tax,Company Circle Vi(4), Nungambakkam,Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.06.2019 THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.408 of 2009 M/s.Sundaram Fasteners Limited,98A, 7[th] Floor, Dr.Radhakrishnan Salai,Mylapore, Chennai – 600 004. ... Appellant/Respondent -vs- The Commissioner of Income Tax,Company Circle VI(4), Nungambakkam,Chennai – 600 034. ...Respondent/Appellant Tax Case Appeal under Section 260-A of the Income Tax Act,1961, is directed against the order passed by the Income TaxAppellate Tribunal “C” Bench, Chennai in I.T.A No.205/Mds/2008dated 17.12.2008 for the assessment year 2004-05 against theorder passed by the Commissioner of Income Tax (Appeals)-V,Chennai 34, made in I.T.A.No.684/2006-07 dated 08.10.2007 andagainst the order of the Joint Commissioner, Income Tax CompanyRange-VI, Chennai made in PAN/GIR NO. Dated 29.12.2006for the Assessment Year 2004-05. This Tax Case Appeal by the assessee filed under Section260-A of the Income Tax Act, 1961, ('the Act' for brevity) isdirected against the order passed by the Income Tax AppellateTribunal “C” Bench, Chennai in I.T.A.No.205/Mds/2008 dated17.12.2008 for the assessment year 2004-05. https://hcservices.ecourts.gov.in/hcservices/ 2.The above Tax Case Appeal has been admitted on thefollowing substantial questions of law:- "(i) Whether on the facts and circumstancesof the case, the assessee is entitled to claim fordeduction under Section 80IB of the Act when theprofits are independently determinable for all thefour units of the appellant and as a consequencerelief should have been independently determined. (ii) Whether on the facts and circumstancesof the case, the Tribunal was justified in denyingrelief under Section 80IB of the Act, when theappellant has satisfied all the conditionsmentioned therein?” 3.We have heard Mr.P.J.Rishikesh, learned counsel for theappellant/assessee and Mr.T.R.Senthil Kumar, learned SeniorStanding Counsel assisted by Mrs.K.G.Usha Rani for therespondent/Revenue. 4. The short issue which falls for consideration iswhether the Tribunal was right in reversing the order passed bythe Commissioner of Income Tax (Appeals) V, Chennai, dated08.10.2007 in I.T.A.No.684/2006-07 in the matter of computingdeduction under Section 80 IB of the Act. The Tribunal in itsorder referred to the decision of the Bombay High Court indecision of Synco Industries Ltd., Vs. Assessing Officer ofIncome Tax reported in 254 ITR 608. This matter was carried onappeal to the Hon'ble Supreme Court and in the decision reportedin (2008) 4 SCC 22, dated 13.03.2008 the Hon'ble Supreme Courtheld as as follows: “29. While computing the quantum of deductionunder Section 80-I(6) the Assessing Officer, nodoubt, has to treat the profits derived from anindustrial undertaking as the only source of incomein order to arrive at the deduction under ChapterVI-A. However, this Court finds that the non-obstante clause appearing in Section 80-I(6) of theAct, is applicable only to the quantum of deduction,whereas, the gross total income under Section 80B(5)which is also referred to in Section 80I(1) isrequired to be computed in the manner provided underthe Act which presupposes that the gross total income shall be arrived at after adjusting thelosses of the other division against the profitsderived from an industrial undertaking. If theinterpretation as suggested by the appellant isaccepted it would almost render the provisions ofSection 80A(2) of the Act nugatory and therefore theinterpretation canvassed on behalf of the appellantcannot be accepted. income shall be arrived at after adjusting thelosses of the other division against the profitsderived from an industrial undertaking. If theinterpretation as suggested by the appellant isaccepted it would almost render the provisions ofSection 80A(2) of the Act nugatory and therefore theinterpretation canvassed on behalf of the appellantcannot be accepted. 30. It is true that under Section 80-I(6) forthe purpose of calculating the deduction, the losssustained in one of the units, cannot be taken intoaccount because Sub-Section 6 contemplates that onlythe profits shall be taken into account as if it wasthe only source of income. However, Section 80A(2)and Section 80B (5) are declaratory in nature. Theyapply to all the Sections falling in Chapter VI-A.They impose a ceiling on the total amount ofdeduction and therefore the non-obstante clause inSection 80-I(6) cannot restrict the operation ofSections 80A(2) and 80B(5) which operate indifferent spheres. 31. As observed earlier Section 80-I(6) dealswith actual computation of deduction whereas Section80- I(1) deals with the treatment to be given tosuch deductions in order to arrive at the totalincome of the assessee and therefore whileinterpreting Section 80-I(1), which also refers togross total income one has to read the expression'gross total income' as defined in Section 80B(5).Therefore, this Court is of the opinion that theHigh Court was justified in holding that the lossfrom the oil division was required to be adjustedbefore determining the gross total income and as thegross total income was 'Nil' the assessee was notentitled to claim deduction under Chapter VI-A whichincludes Section 80-I also. 32. The proposition of law, emerging from theabove discussion is that the gross total income ofthe assessee has first got to be determined afteradjusting losses etc., and if the gross total incomeof the assessee is 'Nil' the assessee would not beentitled to deductions under Chapter VI-A of theAct.” 5. Though the impugned order passed by the Tribunal was on17.12.2008, the Tribunal failed to notice that the abovedecision was passed on 13.03.2008. This error is sufficient toset aside the order passed by the Tribunal. However, sinceappeal has been entertained on the above mentioned substantialquestions of law, we proceed to examine as to whether theTribunal was right in reversing the order passed by theCommissioner of Income Tax (Appeals) on the above issue. The CIT(A) took note of the decision in the case of Synco Idustries(supra) and held that the methodology adopted by the AssessingOfficer of aggregating the income of all the units beforeconsidering eligible deduction under Section 80 IB was not inorder. 6. Identical issue came up for consideration before HighCourt of Delhi in the case of The Commissioner of Income Tax IIIVs. Sona Koyo Steering Systems Limited in I.T.A.No.1279/2008dated 10.02.2010, the Court after taking into consideration thedecision in the case of Synco Industries Ltd., (Supra) and thedecision in the case of Commissioner Income Tax Vs. KotagiriIndustrial Co-operative Tea Factory Ltd., reported in 224 ITR605 held as follows: “From the above extract, it is apparent that theSupreme Court did not at all hold that whilecomputing the deduction under Section 80-I(6), theloss of one eligible industrial undertaking is to beset off against the profit of another eligibleindustrial undertaking. All that the Supreme Courtsaid was that in computing the gross total income ofthe assessee, the same has to be determined afteradjusting the losses and that, if the gross totalincome of the so determined turns out to be 'Nil',then the assessee would not be entitled to deductionunder Chapter VI-A of the said Act.” “From the above extract, it is apparent that theSupreme Court did not at all hold that whilecomputing the deduction under Section 80-I(6), theloss of one eligible industrial undertaking is to beset off against the profit of another eligibleindustrial undertaking. All that the Supreme Courtsaid was that in computing the gross total income ofthe assessee, the same has to be determined afteradjusting the losses and that, if the gross totalincome of the so determined turns out to be 'Nil',then the assessee would not be entitled to deductionunder Chapter VI-A of the said Act.” 7. The above referred decision is a clear answer to thecase of the Revenue before us. To be noted that the AssessingOfficer failed to consider that the gross total income of theassessee before deduction was Rs.78,90,64,628/-, whereas in thecase of Synco Industries Ltd., (Supra) as noted by Hon'bleSupreme Court, the factual position was different. In the saidcase, the Assessing Officer, noticed that the gross total incomeof assessee therein before deductions under Section 80 IB isnil. *8. Therefore, in our considered view, the Tribunal erredin reversing the order passed by Commissioner of Income Tax(Appeals). Therefore, the appeal filed by the assessee isallowed and the order passed by the Tribunal dated 17.12.2008 isset aside and the order of Commissioner of Income Tax (Appeals)is restored and the substantial questions of law are answered infavour of the assessee. Sd/- Assistant Registrar(Insp.Cell)29.07.2019 * Substituted as per the order dated 31.07.2019 made in TCA.No.408 of 2009Sd/- Assistant Registrar(CS-III) 09.09.2019 //True Copy// Sub Assistant Registrar mrmTo1. The Income Tax Appellate Tribunal “C” Bench, Chennai. To be substituted for the2. The Commissioner of Income Tax,Order already despatchedCompany Circle VI(4), on 30.07.2019 Nungambakkam, Chennai 34.3. The Commissioner of Income Tax(Appeals)-V, Chennai 34.4. The Joint Commissioner of Income Tax, Company Range VI, Chennai.+1 cc to Mr.T.R.Senthil Kumar, Advocate SR.No.50062+1 cc to Mr.P.J.Rishikesh, Advocate SR.No.49635 Tax Case No.408 of 2009 CA(CO)CSL/29.07.2019 CS/09.09.2019