LexM/S SYNCO INDUSTRIES LTD. versus ASSESSING OFFICER, INCOME TAX, MUMBAI & ANR.
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[2008] 4 S.C.R. 919 MIS SYNCO INDUSTRIES LTD. II. ASSESSING OFFICER, INCOME TAX, MUMBAI & ANR. (Civil Appeal No. 4190-4191 of 2002) MARCH 13, 2008 [ASHOK BHAN AND J.M. PANCHAL, JJ.] Income tax Act, 1961 - Chapter VI-A, ss. 80 HH, 80 I 80 B (5), 71, 72 and 32 (2)-Assessee-company running two units A B - Both the units earned profit in the relevant assessment years c - However, one of the units had suffered loss in previous years - Demand of deduction u/ss. 8 HH and 80 I by treating both the units separately - Denial of by authorities/courts below - In appeal, held: Assessee was not entitled to claim the deduction - The gross total income of the assessee has first D got to be determined after adjusting losses, and then if the gross total income is 'Nil', assessee not entitled to deduction. Practice and Procedure - Interpretation of statutory provisions - Held: Where the predominant majority of the High Courts have taken certain view on interpretation of certain E provisions, Supreme Court would lean in favour of that view. Appellant-assessee was a company, engaged in the business of oil and chemicals. It had two units for its respective business. It earned profit in the assessment years 1990-91 and 1991-92 in both the units. But it had F suffered losses in its oil division in earlier years. Assessee claimed deductions under s. 80 HH and 80 I of Income tax Act, claiming that each unit should be treated separately and the loss suffered in the oil division should be treated separately and the loss suffered in the oil division in the G earlier years should not be adjustable against the profits of the chemical division while considering the question of deduction under the provisions. Assessing Officer as well as appellate authorities/courts, including High Court 919 H 920 SUPREME COURT REPORTS [2008] 4 S.C.R. A held that the assessee was not entitled to deductions 'f under Chapter VI-A, opining that the gross total income must be determined by setting off against the income, the business losses of the earlier years, before allowing .. deduction under ChapterVl-A and if the resultant income B is 'Nil', the assessee cannot claim deduction under Chapter VI-A. Hence the present appeal. Other appeals also raise common question. ,r.,.J Dismissing the appeals, the Court A "' c HELD: 1.1 The gross total income of the assessee has first got to be determined after adjusting losses etc., and if the gross total income of the assessee is 'Nil' the assessee would not be entitled to deductions under Chapter VI-A of Income Tax Act. The High Court was justified in holding that gross total income must be ., D \~, determined, by setting off against the income, the business losses of earlier years, before allowing deduction ~ under Chapter VI-A and if the"resultant income is 'Nil', then the asessee cannot claim deduction under Chapter VI-A. E [Paras 13 and 11] [935-A, 933-8, C] 1.2 If the gross total come of the assessee is determined as 'Nil' then there is no question of any deduction being allowed under Chapter VI-A in computing the total income. The Assessing Officer has to take into F account the provisions of Section 71 providing for set off t- of loss from one head against income from another and ~ Section 72 providing for carry forward and set off of business losses. Section 32(2) makes provisions for carry forward and set off of the unabsorbed depreciation of a G particular year. While computing the total income, the losses carried forward and depreciation have to be adjusted and thereafter the Assessing. Officer has to work out the gross total income of the assessee. Sub-Section (2) of Section BOA specifically enacts that the aggregate H of deductions under Chapter VI-A should not exceed the MIS SYNCO IND. LTD. v. ASSESSING OFFICER, 921 INCOME TAX, MUMBAI & ANR. gross total income of the assessee. If the gross total A income is found to be a net loss on account of the adjustment of losses of the earlier years or 'Nil', no deduction under this Chapter can be allowed. [Para 8] [927-8, C, D, E] 1.3 Clause (5) of Section 808 defines the expression 8 'gross total income' to mean the total income computed in accordance with the provisions of the Act before making any deductions under Chapter VI-A of the Act. It follows, therefore, that deductions under Chapter VI-A can be given only if the gross total income is positive and not C negative. Th
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