COMMISSIONER OF INCOME TAX Vs. SYNTHETICS LTD.

JUDGEMENT

(1.) THE Tribunal, Indore has referred the following question of law to this Court: Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the allowance of deduction under Section 80 -I keeping in view the provisions of Section 80B and Section 80A of the IT Act?

(2.) THE matter relates to the asst. yrs. 1987 -88, 1988 -89 and 1989 -90. The facts relating to the issue are that the assessee owns two units, one is old and the other is new. The new unit falls within the category of priority industry. The assessee computed the deduction under Section 80 -I of the Act in respect of new unit treating it as an independent unit. For this purpose the assessee calculated the gross total income of new unit after considering brought forward losses, unabsorbed depreciation and investment allowance of new unit alone. From the gross total income of the new unit so arrived at, the assessee claimed deduction under Section 80 -I. The remaining net income of the new unit was thereafter set off against losses of old unit and carry forward of resultant unabsorbed losses, unabsorbed depreciation and investment allowance was claimed. This claim of the assessee was disallowed by the AO because he was of the view that gross total income of both the units taken together should be first determined and if the resultant gross total income is a minus figure no deduction under Section 80 -I can be allowed. Against the disallowance, the assessee carried the matter before the CIT(A). The CIT(A) relying upon the judgment of Supreme Court in CIT v. Canara Workshops (P) Ltd. : (1986) 58 CTR (SC) 108 : (1986) 161 ITR 320 (SC) case held that new unit is to be considered in isolation and deduction under Section 80 -I is to be allowed in each year where there are some profits from the new unit after considering brought forward losses and unabsorbed depreciation of such unit alone from earlier year. Similar losses etc. of other unit of earlier year as well as current year is not to be considered for this purpose. The Tribunal affirmed the order of CIT(A) by dismissing the appeals of the Revenue.

(3.) LEARNED Counsel appearing for the Revenue submitted that while computing the deduction under Section 80 -I of the Act, the gross income of the assessee from both the units should be computed first and if the resultant is a minus figure, no deduction under Section 80 -I can be allowed.