2015 (1) TMI 1460 - HC - Income Tax

Deduction u/s 80IA - claim to be computed undertaking wise, i.e., in the manner in which the assessee has claimed deduction - Whether the Tribunal was justified in holding that in granting deduction under Section 80IA of the Act, it is only the income of the loss making units should be taken into consideration and not all the units of the assessee, some of which were making profits? - HELD THAT - This Court had an occasion to consider the said substantial question of law in case of Komarla Feeds and Foods Pvt. Ltd. Vs. Commissioner of Income-tax 2015 (1) TMI 1458 - KARNATAKA HIGH COURT where this Court has answered the said substantial question of law in favour of the assessee and against the revenue.

Summary

Issues:
Interpretation of Section 80IA of the Income-tax Act, 1961 regarding computation of deduction based on profit/loss of individual units.

Detailed Analysis:
The case involved a dispute regarding the computation of deduction under Section 80IA of the Income-tax Act, 1961. The appellant, a power generation company with seven units, had claimed deduction based on the profits of only four units without setting off the losses of the remaining units. The assessing authority contended that all units' profits and losses should be considered for determining the eligible deduction. The Tribunal, citing relevant legal precedents, held that the deduction under Section 80IA should be computed undertaking-wise. Losses from one unit should not be set off against profits from another unit, but can be adjusted against future profits of the same unit if deduction is claimed for that unit. The Tribunal remitted the matter back to the assessing authority to calculate profits of each unit and allow deduction accordingly.

The main issue before the Court was whether the Tribunal was correct in considering only the income of loss-making units for granting deduction under Section 80IA, excluding the profits from other units. The Court referred to a previous judgment and the Apex Court's decision in a related case, where a similar issue was addressed. The Court upheld the Tribunal's decision, stating that deduction under Section 80IA should be computed undertaking-wise, as claimed by the assessee. The Court dismissed the appeal in favor of the assessee, following the precedent set in previous cases.

In conclusion, the High Court of Karnataka affirmed the Tribunal's decision that the deduction under Section 80IA of the Income-tax Act should be calculated undertaking-wise, without offsetting losses from one unit against profits from another unit. The Court's ruling was based on legal precedents and upheld the assessee's method of computation. The judgment serves as a significant interpretation of the provisions of Section 80IA in the context of profit/loss computation for eligible deductions in the case of power generation companies.