AO right in computing quantum of deduction u/s 80-I (of Income Tax Act, 1961) out of profits & gains, HC.

1. The assessee manufactured automobile parts. It was entitled to deduction under section 80-I (of Income Tax Act, 1961). The Assessing Officer, while computing same took into account loss of the assessee in another manufacturing unit holding that the benefit under section 80-I (of Income Tax Act, 1961) was referable to total income which was required to be worked out after taking into account loss, if any. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the same view.

On appeal HC held as under:

2. It is clear from the reading of provisions of sections 80-A, 80-AB, 80B(5) and 80-I that component on which deduction is permissible under section 80-I (of Income Tax Act, 1961) is gross total income which is defined in section 80B(5) (of Income Tax Act, 1961) and is also referred to in sections 80A(2) and 80AB. If component of deduction under section 80-I (of Income Tax Act, 1961) is to refer total income without excluding loss therefrom, it will be against statutory provisions.

3.Therefore, the Tribunal was right in holding that in computing the quantum of deduction under section 80-I (of Income Tax Act, 1961) out of the profits and gains of unit No. 1 the loss incurred in another independent unit No. 2 should be set off against the profits of unit No. 1. 

Case Reference-Bajaj Motors (P.) Ltd. v. Commissioner of Income-tax*, Faridabad

HIGH COURT OF PUNJAB AND HARYANA