The Commissioner Of Income - Tax-I, Coimbatore v. M/S. Bannari Amman Sugars Limited

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE R. MAHADEVANAND THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD T.C.A. No. 373 of 2010 The Commissioner of Income - tax-I, Coimbatore. .. Appellant/RespondentVersus M/s. Bannari Amman Sugars Limited, 1212, Trichy Road, Coimbatore - 641 018. PAN- .. Respondent/ Appellant Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the order dated 06.11.2009 passed by theIncome Tax Appellate Tribunal, Chennai “C” Bench, in I.T.A.No.423/Mds/2009. For the assessment year 2005-06. Preferred against the order of The Commissioner of Income –tax (Appeals) -I, Coimbatore. In ITA No. 280/2007-08 dated04/02/2009 filed against the Assessment order of The AssistantCommissioner of Income - tax, Company Circle -I(2), Coimbatore.Dated 29/12/2007 for the Assessment year 2005-06. in PAN NOAAACB8933G. For Respondent : Mr. Subbaraya Aiyar JUDGMENT This tax case appeal has been filed by the appellant /Revenue, challenging the order dated 06.11.2009 passed by theIncome Tax Appellate Tribunal, 'C' Bench, Chennai, in I.T.A.No.423/Mds/2009, relating to the assessment year 2005-06. 2. By order dated 20.04.2010, this court admitted theaforesaid tax case appeal on the following substantial questionsof law:“1. Whether in the case where a company https://hcservices.ecourts.gov.in/hcservices/ engaged apart from its regular business in thebusiness of generation and distribution of power,owing more than one industrial undertaking,deduction under Section 80IA of the Act is to beallowed to single industrial unit or to all theunits taken together? And 2. Whether the Tribunal was right in holdingthat for the purpose of computing deduction underSection 80IA, the assessee was entitled toexemption in respect of the unit situated inKarnataka for which claim was made even thoughonly combined profit and loss account and balancesheet in respect of all business was maintained?" 3. When the matter was taken into consideration, thelearned counsel for the appellant/Revenue fairly submitted thata Co-ordinate Bench of this court by judgment dated 28.01.2019in T.C.A.No.1045 of 2009 in respect of the assessee's own case,decided the identical questions of law against the Revenue. Therelevant passage of the said judgment can profitably beextracted below: "11. The Tribunal has found as a fact thatindependent Power Purchase Agreements (PPA) inrespect of each unit have been entered into by theassessee with the Karnataka Transmission Limited andTamil Nadu Electricity Board respectively, being i)Power Purchase Agreement with Karnataka PowerTransmission Corporation Ltd. dated 25.09.2000 for16 MW Cogeneration Plant situated at Alaganchi,Mysore District, ii) Power Purchase Agreement withTamil Nadu Electricity Board dated 24.04.2002 for 20MW Co-generation Plant situated at Alathukombai,Erode District and iii) Power Purchase Agreementwith Karnataka Power Transmission Corporation Ltddated 11.03.2004 for 20 MW Co-generation Plantsituated at Alaganchi, Mysore District. 12. The terms and conditions contained in eachPPA are different and distinct from each other. Thusthe mere fact that consolidated financials have beenprepared for the entire business would notdisentitle the assessee from claiming deductionunder section 80IA in respect of the one undertakingof its choice. In fact, separate statements havebeen maintained by the assessee and filed before theCommissioner of Income Tax (Appeals) detailingseparate project cost and source of finance inrespect of each unit. The assessee has categorically exercised its claim before the Assessing Officer fordeduction under section 80IA in respect of only the16 MW unit at Karnataka. 12. The terms and conditions contained in eachPPA are different and distinct from each other. Thusthe mere fact that consolidated financials have beenprepared for the entire business would notdisentitle the assessee from claiming deductionunder section 80IA in respect of the one undertakingof its choice. In fact, separate statements havebeen maintained by the assessee and filed before theCommissioner of Income Tax (Appeals) detailingseparate project cost and source of finance inrespect of each unit. The assessee has categorically exercised its claim before the Assessing Officer fordeduction under section 80IA in respect of only the16 MW unit at Karnataka. 13. We may, at this juncture, usefully refer tothe provisions of section 80IB(5) of the Act whichprovides that in determining the quantum ofdeduction under section 80IA, the eligible businessshall be treated as the only source of income of theassessee during the previous year relevant to theinitial assessment year and to every subsequentassessment year upto and including the assessmentyear for which the determination is to be made.There is thus no doubt that each unit, including aCPP, has to be seen independently as separate anddistinct from each other and as units for thepurposes of grant of deduction under section 80IA ofthe Act. 14. Coming to the computation itself, relianceis placed by the Department on a judgment of theSupreme Court in the case of Synco Industries Ltd.v. Assessing Officer, Income-Tax, Mumbai (299 ITR444). The Supreme Court was considering the case ofan assessee managing multiple units, some earning aprofit and others, losses. The question before theBench was whether the losses suffered by theeligible oil division ought to be adjusted againstthe profits of the chemical division in finalizingthe grant of deduction under Section 80I of the Act.After considering the provisions of Section 80I,80A, 80AB and 80B, the Bench holds as follows: 12. The contention that under Section 80-I (6)the profits derived from one industrialundertaking cannot be set off against losssuffered from another and the profit isrequired to be computed as if profit makingindustrial undertaking was the only source ofincome, has no merits. Section 80-I (1) laysdown that where the gross total income of theassessee includes any profits derived from thepriority undertaking/unit/division, then incomputing the total income of the assessee, adeduction from such profits of an amount equalto 20% has to be made. Section 80-I (1) laysdown the broad parameters indicatingcircumstances under which an assessee would beentitled to claim deduction. On the other handSection 80-I (6) deals with determination of 12. The contention that under Section 80-I (6)the profits derived from one industrialundertaking cannot be set off against losssuffered from another and the profit isrequired to be computed as if profit makingindustrial undertaking was the only source ofincome, has no merits. Section 80-I (1) laysdown that where the gross total income of theassessee includes any profits derived from thepriority undertaking/unit/division, then incomputing the total income of the assessee, adeduction from such profits of an amount equalto 20% has to be made. Section 80-I (1) laysdown the broad parameters indicatingcircumstances under which an assessee would beentitled to claim deduction. On the other handSection 80-I (6) deals with determination of the quantum of deduction. Section 80-I (6)lays down the manner in which the quantum ofdeduction has to be worked out. After suchcomputation of the quantum of deduction, onehas to go back to Section 80-I (1) whichcategorically states that where the grosstotal income includes any profits and gainsderived from an industrial undertaking towhich Section 80-I applies then there shall bea deduction from such profits and gains of anamount equal to 20%. The words "includes anyprofits'' used by the legislature in Section80-I(1) are very important which indicate thatthe gross total income of an assessee shallinclude profits from a priority undertaking.While computing the quantum of deduction underSection 80-I(6) the Assessing Officer, nodoubt, has to treat the profits derived froman industrial undertaking as the only sourceof income in order to arrive at the deductionunder Chapter VI-A. However, this Court findsthat the non-obstante clause appearing inSection 80-I(6) of the Act, is applicable onlyto the quantum of deduction, whereas, thegross total income under Section 80B(5) whichis also referred to in Section 80I(1) isrequired to be computed in the manner providedunder the Act which presupposes that the grosstotal income shall be arrived at afteradjusting the losses of the other divisionagainst the profits derived from an industrialundertaking. If the interpretation assuggested by the appellant is accepted itwould almost render the provisions of Section80A(2) of the Act nugatory and therefore theinterpretation canvassed on behalf of theappellant cannot be accepted. It is true thatunder Section 80-I(6) for the purpose ofcalculating the deduction, the loss sustainedin one of the units, cannot be taken intoaccount because Sub-Section 6 contemplatesthat only the profits shall be taken intoaccount as if it was the only source ofincome. However, Section 80A(2) and Section80B (5) are declaratory in nature. They applyto all the Sections falling in Chapter VI-A.They impose a ceiling on the total amount ofdeduction and therefore the non-obstanteclause in Section 80-I(6) cannot restrict theoperation of Sections 80A(2) and 80B(5) which operate in different spheres. As observedearlier Section 80-I(6) deals with actualcomputation of deduction whereas Section 80- I(1) deals with the treatment to be given tosuch deductions in order to arrive at thetotal income of the assessee and thereforewhile interpreting Section 80-I(1), which alsorefers to gross total income one has to readthe expression 'gross total income' as definedin Section 80B(5). Therefore, this Court is ofthe opinion that the High Court was justifiedin holding that the loss from the oil divisionwas required to be adjusted before determiningthe gross total income and as the gross totalincome was 'Nil' the assessee was not entitledto claim deduction under Chapter VI-A whichincludes Section 80-I also. operate in different spheres. As observedearlier Section 80-I(6) deals with actualcomputation of deduction whereas Section 80- I(1) deals with the treatment to be given tosuch deductions in order to arrive at thetotal income of the assessee and thereforewhile interpreting Section 80-I(1), which alsorefers to gross total income one has to readthe expression 'gross total income' as definedin Section 80B(5). Therefore, this Court is ofthe opinion that the High Court was justifiedin holding that the loss from the oil divisionwas required to be adjusted before determiningthe gross total income and as the gross totalincome was 'Nil' the assessee was not entitledto claim deduction under Chapter VI-A whichincludes Section 80-I also. 15. The conclusion was thus to the effect thatwhere the assessee deserves profits from multipleunits, all being eligible for deduction underChapter VIA, the profits or losses arising from therespective units have to be considered in totalityand only if the resultant figure were positive,would the assessee be entitled to its claim. Thus,the judgment considers the interplay between theincome and losses arising from eligible units alone,all of which are eligible for deduction underChapter VIA, and would not apply to the facts andcircumstances of the present case whether the claimunder Section 80I was restricted only to the 16 MWunit at Karnataka. Mr.Senthil Kumar, fairly, doesnot dispute this position. 16. In the light of the above discussion, thequestions of law are answered in favour of theAssessee and against the Revenue and the Tax Case (Appeal) is dismissed. No costs."4. Following the aforesaid decision, which squarely appliesto the facts of the present case, the substantial questions oflaw are answered against the appellant/Revenue and in favour ofthe respondent / assessee. Accordingly, the tax case appeal isdismissed. No costs. //True Copy// Sub Assistant Registrar av To 1. The Income Tax Appellate Tribunal, Chennai “C” Bench 2. The Commissioner of Income - tax-I, Coimbatore. Coimbatore. 3. The Assistant Commissioner of Income - tax, Company Circle -I(2), Coimbatore. Company Circle -I(2), Coimbatore. +1cc to Mr. Subbaraya Aiyar , Advocate, S.R.No.8223 +1cc to Mr.M.Swaminathan , Advocate, S.R.No.7948 T.C.A. No. 373 of 2010 RSI(CO)CT 25/02/2021