Madras High Court
The Commissioner Of Income - Tax-I vs M/S. Bannari Amman Sugars Limited on 8 February, 2022
T.C.A. No. 373 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 08.02.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
AND
THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD
T.C.A. No. 373 of 2010
The Commissioner of Income - tax-I,
Coimbatore. .. Appellant
Versus
M/s. Bannari Amman Sugars Limited,
1212, Trichy Road, Coimbatore - 641 018.
PAN-AAACB8933G .. Respondent
Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961
against the order dated 06.11.2009 passed by the Income Tax Appellate
Tribunal, Chennai “C” Bench, in I.T.A.No. 423/Mds/2009.
For Appellant : Mr.M.Swaminathan
Senior Standing Counsel
For Respondent : Mr. Subbaraya Aiyar
1/8
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T.C.A. No. 373 of 2010
JUDGMENT
(Judgment of the Court was delivered by R. MAHADEVAN, J.)
This tax case appeal has been filed by the appellant / Revenue,
challenging the order dated 06.11.2009 passed by the Income 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 the aforesaid tax
case appeal on the following substantial questions of law:
“1. Whether in the case where a company engaged
apart from its regular business in the business of generation
and distribution of power, owing more than one industrial
undertaking, deduction under Section 80IA of the Act is to be
allowed to single industrial unit or to all the units taken
together? And
2. Whether the Tribunal was right in holding that for
the purpose of computing deduction under Section 80IA, the
assessee was entitled to exemption in respect of the unit
situated in Karnataka for which claim was made even though
only combined profit and loss account and balance sheet in
respect of all business was maintained?"
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T.C.A. No. 373 of 2010
3. When the matter was taken into consideration, the learned counsel for
the appellant/Revenue fairly submitted that a Co-ordinate Bench of this court by
judgment dated 28.01.2019 in T.C.A.No.1045 of 2009 in respect of the
assessee's own case, decided the identical questions of law against the Revenue.
The relevant passage of the said judgment can profitably be extracted below:
"11. The Tribunal has found as a fact that independent
Power Purchase Agreements (PPA) in respect of each unit have
been entered into by the assessee with the Karnataka
Transmission Limited and Tamil Nadu Electricity Board
respectively, being i) Power Purchase Agreement with Karnataka
Power Transmission Corporation Ltd. dated 25.09.2000 for 16
MW Cogeneration Plant situated at Alaganchi, Mysore District,
ii) Power Purchase Agreement with Tamil Nadu Electricity
Board dated 24.04.2002 for 20 MW Co-generation Plant situated
at Alathukombai, Erode District and iii) Power Purchase
Agreement with Karnataka Power Transmission Corporation Ltd
dated 11.03.2004 for 20 MW Co-generation Plant situated at
Alaganchi, Mysore District.
12. The terms and conditions contained in each PPA are
different and distinct from each other. Thus the mere fact that
consolidated financials have been prepared for the entire
business would not disentitle the assessee from claiming
deduction under section 80IA in respect of the one undertaking
of its choice. In fact, separate statements have been maintained
by the assessee and filed before the Commissioner of Income
Tax (Appeals) detailing separate project cost and source of
finance in respect of each unit. The assessee has categorically
exercised its claim before the Assessing Officer for deduction
under section 80IA in respect of only the 16 MW unit at
Karnataka.
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T.C.A. No. 373 of 2010
13. We may, at this juncture, usefully refer to the
provisions of section 80IB(5) of the Act which provides that in
determining the quantum of deduction under section 80IA, the
eligible business shall be treated as the only source of income of
the assessee during the previous year relevant to the initial
assessment year and to every subsequent assessment year upto
and including the assessment year for which the determination is
to be made. There is thus no doubt that each unit, including a
CPP, has to be seen independently as separate and distinct from
each other and as units for the purposes of grant of deduction
under section 80IA of the Act.
14. Coming to the computation itself, reliance is placed by
the Department on a judgment of the Supreme Court in the case
of Synco Industries Ltd. v. Assessing Officer, Income-Tax,
Mumbai (299 ITR 444). The Supreme Court was considering the
case of an assessee managing multiple units, some earning a
profit and others, losses. The question before the Bench was
whether the losses suffered by the eligible oil division ought to
be adjusted against the profits of the chemical division in
finalizing the 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 industrial undertaking cannot
be set off against loss suffered from another and the
profit is required to be computed as if profit making
industrial undertaking was the only source of income,
has no merits. Section 80-I (1) lays down that where the
gross total income of the assessee includes any profits
derived from the priority undertaking/unit/division, then
in computing the total income of the assessee, a
deduction from such profits of an amount equal to 20%
has to be made. Section 80-I (1) lays down the broad
parameters indicating circumstances under which an
assessee would be entitled to claim deduction. On the
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T.C.A. No. 373 of 2010
other hand Section 80-I (6) deals with determination of
the quantum of deduction. Section 80-I (6) lays down the
manner in which the quantum of deduction has to be
worked out. After such computation of the quantum of
deduction, one has to go back to Section 80-I (1) which
categorically states that where the gross total income
includes any profits and gains derived from an
industrial undertaking to which Section 80-I applies
then there shall be a deduction from such profits and
gains of an amount equal to 20%. The words "includes
any profits'' used by the legislature in Section 80-I(1)
are very important which indicate that the gross total
income of an assessee shall include profits from a
priority undertaking. While computing the quantum of
deduction under Section 80-I(6) the Assessing Officer,
no doubt, has to treat the profits derived from an
industrial undertaking as the only source of income in
order to arrive at the deduction under Chapter VI-A.
However, this Court finds that the non-obstante clause
appearing in Section 80-I(6) of the Act, 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) is required to be computed
in the manner provided under the Act which
presupposes that the gross total income shall be arrived
at after adjusting the losses of the other division against
the profits derived from an industrial undertaking. If the
interpretation as suggested by the appellant is accepted
it would almost render the provisions of Section 80A(2)
of the Act nugatory and therefore the interpretation
canvassed on behalf of the appellant cannot be
accepted. It is true that under Section 80-I(6) for the
purpose of calculating the deduction, the loss sustained
in one of the units, cannot be taken into account because
Sub-Section 6 contemplates that only the profits shall be
taken into account as if it was the only source of income.
However, Section 80A(2) and Section 80B (5) are
declaratory in nature. They apply to all the Sections
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T.C.A. No. 373 of 2010
falling in Chapter VI-A. They impose a ceiling on the
total amount of deduction and therefore the non-
obstante clause in Section 80-I(6) cannot restrict the
operation of Sections 80A(2) and 80B(5) which operate
in different spheres. As observed earlier Section 80-I(6)
deals with actual computation of deduction whereas
Section 80- I(1) deals with the treatment to be given to
such deductions in order to arrive at the total income of
the assessee and therefore while interpreting Section
80-I(1), which also refers to gross 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 the High Court was justified in holding that the loss
from the oil division was required to be adjusted before
determining the gross total income and as the gross
total income was 'Nil' the assessee was not entitled to
claim deduction under Chapter VI-A which includes
Section 80-I also.
15. The conclusion was thus to the effect that where the
assessee deserves profits from multiple units, all being eligible
for deduction under Chapter VIA, the profits or losses arising
from the respective units have to be considered in totality and
only if the resultant figure were positive, would the assessee be
entitled to its claim. Thus, the judgment considers the interplay
between the income and losses arising from eligible units alone,
all of which are eligible for deduction under Chapter VIA, and
would not apply to the facts and circumstances of the present
case whether the claim under Section 80I was restricted only to
the 16 MW unit at Karnataka. Mr.Senthil Kumar, fairly, does not
dispute this position.
16. In the light of the above discussion, the questions of
law are answered in favour of the Assessee and against the
Revenue and the Tax Case (Appeal) is dismissed. No costs."
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T.C.A. No. 373 of 2010
4. Following the aforesaid decision, which squarely applies to the facts of
the present case, the substantial questions of law are answered against the
appellant/Revenue and in favour of the respondent / assessee. Accordingly, the
tax case appeal is dismissed. No costs.
(R.M.D., J.) (J.S.N.P., J.)
08.02.2022
av
Internet : Yes
Index : Yes/No
To
1. The Income Tax Appellate Tribunal,
Chennai “C” Bench
2. The Commissioner of Income - tax-I,
Coimbatore.
3. The Assistant Commissioner of Income - tax,
Company Circle -I(2), Coimbatore.
https://www.mhc.tn.gov.in/judis
T.C.A. No. 373 of 2010
R. MAHADEVAN, J.
and
J.SATHYA NARAYANA PRASAD, J.
av
T.C.A. No. 373 of 2010
08.02.2022
https://www.mhc.tn.gov.in/judis
