The bench of the Income Tax Appellate Tribunal ( ITAT ) in Delhi, has observed that the deduction claim under Section 80IA under Income Tax Act, 1961 shall be permitted on gross basis without offsetting the losses from the other industrial undertakings.
The assesssee alleged that the Commissioner of Income Tax (Appeals) [CIT(A)] made an error by upholding the Assessing Officer’s decision to limit the deduction claim under Section 80IA to Rs.189,92,38,797/-, whereas the appellant claimed a deduction of Rs.228,41,50,029/-.
It was claimed that this decision disregarded the provision of Section 80IA(5) of the Income Tax Act, which stipulated that the profit from the eligible business for the purpose of deduction under Section 80IA must be computed before offsetting losses from other undertakings of the assessee.
The Section 80IA(1) of the Income Tax Act prescribed the deduction for an amount equal to 100% of the profit and gains derived from the eligible business undertaking. Further, section (5) of the section 80-IA prescribed that while computing the profit in gains of the eligible business under sub-section (1), the source of income of the eligible business has only to be considered for deduction.
The bench of C.N.Prasad (Judicial member) and Dr. B.R.R. Kumar (Accountant member) observed that the whether the loss making unit was also eligible for deduction under section 80- IA of the Income Tax Act and if so the claim of deduction under section 80-IA of the Act has to be computed for both eligible units. It was found that the CIT (A) has not adjudicated on the addition made by the AO in respect of the interest income which was not derived from the business of the eligible undertaking.
The bench noted that as per the CBDT Circular No. 1/2016 dated 15.2.2016, once an “ ‘initial assessment year’ was determined, the assessee would be entitled to claim deduction under Section 80IA of the Income Tax Act in respect of eligible undertaking on gross basis without resorting to set off of any loss from other units. The grounds of appeal of the assessee are accordingly allowed.”
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