$~6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% DECIDED ON: 19.12.2012
+ REVIEW PETITION 154/2012, CM APPL.4744/2012
& 4745/2012 IN ITA 1660/2006
COMMISSIONER OF INCOME TAX DELHI ..... Appellant
Through: Mr. N.P. Sahni, Sr. Standing Counsel.
versus
INDOVAX P.LTD. ..... Respondent
Through: None.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)
CM APPL.4745/2012 (Exemption)
Allowed, subject to all just exceptions.
CM APPL.4744/2012 (condonation of delay)
In the facts and circumstances of the case, the delay in filing Review
Petition No.154/2012 is condoned.
CM APPL.4744/2012 is disposed of.
REVIEW PETITION 154/2012
After considering the submissions, the Court is of the opinion that
matter deserves to be heard on merits. The Review Petition No.154/2012 is
accordingly allowed.
REV.PET.154/2012 & ITA 1660/2006 Page 1
ITA 1660/2006
1. The question of law urged by the Revenue in respect of its appeal
against the order of the ITAT dated 31.3.2006 in ITA 1840/del/2002, is
whether the amount of loss suffered in the Avitech Division was rightly set
off by the AO against the profits from the eligible vaccine unit for the
purpose of computing the deduction under Section-80IA, thereby reducing
the deduction.
2. The brief facts are that the assessee company was engaged in the
business of manufacturing poultry vaccines in collaboration with Vineland
Laboratories, USA. It claimed that it had opened another unit, i.e., Animal
Healthcare Products Division under the name of "Avitech". Being a Section
80 (IA) undertaking, it reported losses in respect of "Avitech" Unit and
profit from its vaccine centre/undertaking. The Assessing Officer adjusted
the amount of loss so claimed towards the profits earned in the Poultry
Vaccine Division and computed the deduction only on the balance of profits.
The assessee carried the matter in appeal. The relevant part of the Appellate
Commissioner's order is as follows: -
"12. The 5th and the last ground of appeal is regarding the
action of the AO in not enhancing the deduction admissible u/s
80IA by Rs.8,80,345/- and on account of loss of Rs.29,34,485/-
of the companys Avitech Division. The order of the ld. AO is
silent on this point however, the ld. AR has contended that the
company commenced manufacture of Poultry vaccine (in
collaboration with Vineland Laboratories, USA) from its
manufacturing facility located at Village Siswala, Kirian Road,
District Hissar (Haryana) in June, 1991. The deduction u/s
115JA is admissible and has been allowed on profits of this
vaccine division in the past years. It is argued that on account
of growing severe competition in Poultry vaccines (itself a
limited market) that the company from the current financial
REV.PET.154/2012 & ITA 1660/2006 Page 2
year diversified into dealing in Animal health care products.
This business was commenced as a separate division under
name ,,Avitech. This is the first year of its operation and there
was a net loss of Rs.29,34,485/-. In this division, it is
submitted that during the financial year 1999-2000, the
business of this division reached stability and earned a net
profit of Rs.24,89,324/- and the deduction u/s 80IA has not
been claimed on this profit. A copy of the Profit & Loss A/c of
M/s Avitech Division has been enclosed. The deduction u/s
80IA has been allowed on the profit of the company after
reducing the loss of Avitech from profit of Vaccine Division,
and in this respect the copies of computation of total income for
the assessment year 2000-01 and 2001-02 have been filed
revealing that the company has not claimed deduction u/s 80 on
the profits of this Division. In view of the same and keeping in
view the provisions of section 90IA of the I.T. Act. The same is
directed to be allowed as per the claim of the appellant. The
above-said finding is supported by the division of the Honble
Supreme court in the case of CIT vs. Canara Workshop P.
Ltd."
3. The Revenue unsuccessfully appealed to the ITAT which rejected its
contention on the claim for disallowance of the adjustment. The relevant
discussion by the ITAT is as follows: -
"10.1 We have heard both the parties. Under sec. 80IA, profits
and gains derived by an undertaking or an enterprises from any
business referred to in sub-section (4) shall be allowed as
deduction. From the plain reading of the language used in
sec.80-IA (1), it is clear that deduction under this section is
available in respect of industrial activities of an undertaking
and not in respect of gross total income of the assessee.
Therefore, the loss suffered in another industrial undertaking
cannot be set off against the income in respect of which
deduction under sec.80-IA has been claimed. This view is
supported by the decision of Honble Supreme Court in the
case of CIT vs. Canara Workshop (P) Ltd. (supra) wherein it
REV.PET.154/2012 & ITA 1660/2006 Page 3
has been held that in computing the profits for the purpose of
deduction under sec.80-E of Income-tax Act, 1961, the loss
incurred by the assessee in the manufacture of Alloy Steels (a
priority industry) could not be set off against the profit of the
manufacture of Automobile Ancillaries (another priority
industry). Accordingly, we do not find any infirmity in the
order passed by learned CIT (Appeals)."
4. It is argued by Mr. N.P. Sahni, Sr. Standing Counsel for the Revenue
that a fair and objective reading of the record would reveal that the
assessee's claim was inadmissible under Section-80IA because the second
Unit was located within the same premises and could not, therefore, be
characterised as a "separate undertaking". Learned counsel especially
relied upon paragraph-12 of the Commissioner (A)'s order and also
emphasizes that in the question of law framed this aspect has been
highlighted in the pleadings of the Revenue. Counsel urged that once the
assessee decided to open the separate division in the same premises, he
cannot claim the benefit of Section 80IA as far as that activity is concerned.
5. The relevant submissions in the appeal of the Revenue before this
Court are as follows: -
(i) "The assessee is a company engaged in the business of
manufacturing poultry vaccines in collaboration with
Vineland Laboratories, USA. The above manufacturing
is done by the assessee from its manufacturing facility in
District Hissar (Haryana). The assessee had been
claiming deduction under section 80IA on the profits of
this division.
(ii) It may be mentioned here that during the year under
consideration, assessee had commenced separate
division under the name of "Avitech" dealing in animal
health care products. Assessee suffered loss of Rs.29,
34, 485/- in this division."
REV.PET.154/2012 & ITA 1660/2006 Page 4
6. This Court observes in none of the orders, i.e., Assessing Officer, nor
the CIT (A), in fact dealt with this issue as squarely or clearly as is being
urged today. Furthermore, no such contention that the Avitech undertaking
was located within the same premises as the other poultry vaccine division
or undertaking was raised before the Tribunal. Certainly, the grounds
recorded by the Tribunal do not reflect this. In the absence of these basic
facts, this Court is left to surmise as to whether in fact the claim of the
Revenue at this third appellate stage is created. Being a pure question of
fact, this Court would be slow in interfering with the conclusions of the
authorities below on this aspect and there is no specific fact finding on the
aspect. As far as the legality of the conclusions are concerned, the Court
notices that the Tribunal and the CIT (A) relied upon the ruling of the
Supreme Court in CIT v. Canara Workshops, 161 ITR 320.
7. In view of the above discussion, the Court is satisfied that no
substantial question of law arises for consideration.
8. The appeal is accordingly dismissed.
S. RAVINDRA BHAT
(JUDGE)
R.V. EASWAR
(JUDGE)
DECEMBER 19, 2012
/vks/
REV.PET.154/2012 & ITA 1660/2006 Page 5
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