Losses from One Unit Need not Offset Profits of Another for Section 80-IB Deduction: ITAT [Read Order]

In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) held that the losses from one industrial unit need not offset the profits of another for section 80-IB deduction under the Income Tax Act,1961.

This order deals with the assessee's appeal against the four separate orders passed by the Commissioner of Income Tax ( Appeals ) [ CIT( A ) ]relating to the assessment years ( AY ) 2002-03 to 2005-06.

In this case for the AY 2002-03, the assessee suffered a loss of Rs. 15.89 lakhs from Daman Unit-I. In this case, CIT( A ) was of the opinion that the loss from Daman Unit-1 should be set off against the profits from another priority undertaking at Daman Unit-II or III.

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The firm stand taken by the assessee was that the loss from a certain industrial undertaking need not necessarily be adjusted against the profit of another eligible industrial undertaking.

The CIT( A ), relying on the decision of the Supreme Court in the case of M/s Synco Industries Ltd, held that the assessee was bound to set off the loss from one priority undertaking at Daman against profit from another priority undertaking at Daman.

The ITAT, after going through the above-mentioned decision, observed that the Supreme Court held that if the gross total income of an assessee is nil, no deduction under Chapter VIA can be allowed. The ITAT observed that this view was reaffirmed by the High Court, which stated that deductions under Chapter VIA apply only when the gross total income, after adjusting carried forward losses and unabsorbed depreciation, is not nil.

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The ITAT bench noted that in the present case, the assessee had positive gross total income in all the relevant assessment years and claimed deductions under Section 80I of the Income Tax Act, 1961, for eligible profits from Daman Units. Therefore, the facts are distinguishable from the Synco Industries Ltd. case.

The ITAT, comprising Saktijit Dey ( Vice President ) and Narendra Kumar Billaiya ( Accountant Member ) found no merit in the order passed by the CIT( A ) and allowed all the appeals filed by the assessee.

To Read the full text of the Order CLICK HERE

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