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

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 21.06.2021 CORAM: THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE R.HEMALATHA T.C.A.No.868 of 2010 The Commissioner of Income Tax – I,Coimbatore. ... Appellant v. M/s. Bannari Amman Sugars Ltd.,1212, Trichy Road, Coimbatore. (PAN No. ) ... Respondent Tax Case Appeal preferred under Section 260A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal, Madras, "C" Bench, dated 05.03.2010 inI.T.A.No.1196/Mds/2009 for the Assessment Year 2006-2007against the Commissioner of Income Tax (Appeals) I, Coimbatoreand made in P.A.No.AAACB8933G, dated 25.05.2009 for theAssessment year 2006-2007 preferred against the AssistantCommissioner of Income Tax Circle-1(2), Coimbatore, and madein PAN No. , dated 31.12.2008 for the Assessment year2006-07. For Appellant : Mr.T.R. Senthil Kumar Senior Standing Counsel Assisted by K.G. Usha Rani For Respondent : Mr.R.Venkatnarayanan Challenging the order passed in I.T.A.No.1196/Mds/2009 inrespect of the Assessment Year 2006-2007 on the file of theIncome Tax Appellate Tribunal, Chennai,"C" Bench (for brevity,the Tribunal), the Revenue has filed the above appeal. 2. The above appeal was admitted on the followingsubstantial question of law: “ Whether on the facts and In thecircumstances of the case, the Income-Taxhttps://hcservices.ecourts.gov.in/hcservices/Appellate Tribunal was right in law in holding that the assessee is entitled deduction undersection 80IA of the Act, even though where acompany apart from his regular business and inthe business of generation and distribution ofpower, owning more than one IndustrialUndertaking, deduction under Section 80IA ofthe Act is to be allowed to a single IndustrialUnit not all the units taken together?” 3. When the appeal is taken up for hearing, T.R.Senthil Kumar, learned Senior Standing Counsel appearing forthe appellant-revenue fairly submitted that the substantialquestion of law arise for consideration in this appeal iscovered against the revenue by a Judgment of the DivisionBench of this Court reported in [2019] 104 Taxmann.com 1(Madras) [Commissioner of Income Tax, Coimbatore v.M/s.Bannari Amman Sugars Ltd.] wherein the Hon'ble DivisionBench held as follows:- " .......... 13. We may, at this juncture,usefully refer to the provisions of section 80IB(5)of the Act which provides that in determining thequantum of deduction under section 80IA, theeligible business shall be treated as the onlysource of income of the assessee during the previousyear relevant to the initial assessment year and toevery subsequent assessment year upto and includingthe assessment year for which the determination isto be made. There is thus no doubt that each unit,including a CPP, has to be seen independently asseparate and distinct from each other and as unitsfor the purposes of grant of deduction under section80IA of the Act. 14. Coming to the computation itself, reliance isplaced by the Department on a judgment of theSupreme Court in the case of Synco Industries Ltd.v. Assessing Officer, Income-Tax, Mumbai [2008] 168Taxman 224/299 ITR 444 (SC). The Supreme Court wasconsidering the case of an assessee managingmultiple units, some earning a profit and others,losses. The question before the Bench was whetherthe losses suffered by the eligible oil divisionought to be adjusted against the profits of thechemical division in finalizing the grant ofdeduction under Section 80I of the Act. Afterconsidering the provisions of Section 80I, 80A, 80ABand 80B, the Bench holds as follows: 14. Coming to the computation itself, reliance isplaced by the Department on a judgment of theSupreme Court in the case of Synco Industries Ltd.v. Assessing Officer, Income-Tax, Mumbai [2008] 168Taxman 224/299 ITR 444 (SC). The Supreme Court wasconsidering the case of an assessee managingmultiple units, some earning a profit and others,losses. The question before the Bench was whetherthe losses suffered by the eligible oil divisionought to be adjusted against the profits of thechemical division in finalizing the grant ofdeduction under Section 80I of the Act. Afterconsidering the provisions of Section 80I, 80A, 80ABand 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 sourcehttps://hcservices.ecourts.gov.in/hcservices/ of income, has no merits. Section 80-I (1)lays down that where the gross total incomeof the assessee includes any profits derivedfrom the priority undertaking/unit/division,then in computing the total income of theassessee, a deduction from such profits ofan amount equal to 20% has to be made.Section 80-I (1) lays down the broadparameters indicating circumstances underwhich an assessee would be entitled to claimdeduction. On the other hand Section 80-I(6) deals with determination of the quantumof deduction. Section 80-I (6) lays down themanner in which the quantum of deduction hasto be worked out. After such computation ofthe quantum of deduction, one has to go backto Section 80-I (1) which categoricallystates that where the gross total incomeincludes any profits and gains derived froman industrial undertaking to which Section80-I applies then there shall be a deductionfrom such profits and gains of an amountequal to 20%. The words "includes anyprofits'' used by the legislature in Section80-I(1) are very important which indicatethat the gross total income of an assesseeshall include profits from a priorityundertaking. While computing the quantum ofdeduction under Section 80-I(6) theAssessing Officer, no doubt, has to treatthe profits derived from an industrialundertaking as the only source of income inorder to arrive at the deduction underChapter VI-A. However, this Court finds thatthe non-obstante clause appearing in Section80-I(6) of the Act, is applicable only tothe quantum of deduction, whereas, the grosstotal income under Section 80B(5) which isalso referred to in Section 80I(1) isrequired to be computed in the mannerprovided under the Act which presupposesthat the gross total income shall be arrivedat after adjusting the losses of the otherdivision against the profits derived from anindustrialundertaking.Iftheinterpretation as suggested by the appellantis accepted it would almost render theprovisions of Section 80A(2) of the Actnugatory and therefore the interpretationcanvassed on behalf of the appellant cannotbe accepted. It is true that under Section80-I(6) for the purpose of calculating thededuction, the loss sustained in one of theunits, cannot be taken into account because https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ Sub-Section 6 contemplates that only theprofits shall be taken into account as if itwas the only source of income. However,Section 80A(2) and Section 80B (5) aredeclaratory in nature. They apply to all theSections falling in Chapter VI-A. Theyimpose a ceiling on the total amount ofdeduction and therefore the non-obstanteclause in Section 80-I(6) cannot restrictthe operation of Sections 80A(2) and 80B(5)which operate in different spheres. Asobserved earlier Section 80-I(6) deals withactual computation of deduction whereasSection 80- I(1) deals with the treatment tobe given to such deductions in order toarrive at the total income of the assesseeand therefore while interpreting Section 80-I(1), which also refers to gross totalincome one has to read the expression 'grosstotal income' as defined in Section 80B(5).Therefore, this Court is of the opinion thatthe High Court was justified in holding thatthe loss from the oil division was requiredto be adjusted before determining the grosstotal income and as the gross total incomewas 'Nil' the assessee was not entitled toclaim 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 fromthe respective units have to be considered intotality and only if the resultant figure werepositive, would the assessee be entitled to itsclaim. Thus, the judgment considers the interplaybetween the income and losses arising fromeligible units alone, all of which are eligiblefor deduction under Chapter VIA, and would notapply to the facts and circumstances of thepresent case whether the claim under Section 80Iwas restricted only to the 16 MW unit atKarnataka. Mr.Senthil Kumar, fairly, does notdispute 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. Mr.R.Venkatnarayanan, learned counsel appearing forthe respondent also submitted that in view of the Judgment ofthe Hon'ble Division Bench of this Court cited supra, theappeal is liable to be dismissed. 5. Having regard to the submissions made by the learnedcounsel on either side, following the ratio laid down by theHon'ble Division Bench of this Court in the Judgment reportedin [2019] 104 Taxmann.com 1 (Madras) [cited supra], thequestion of law is decided against the Revenue and infavour of the assessee. The Tax Case Appeal isdismissed. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarRjTo1. The Income Tax Appellate Tribunal, Chennai, "C" Bench2. The Commissioner of Income Tax-I, Coimbatore3. The Assistant Commissioner of Income Tax Circle-1(2), Coimbatore+1CC to Subbaraya Aiyar, Sr.No.28498+1CC to Mr.T.R.Senthilkumar, Advocate, Sr.No.28497 T.C.A.No.868 of 2010 LN (CO) A.SK (12.07.2021)