2013 (11) TMI 135 - AT - Income Tax

Loss on account of windmill business eligible for deduction as per section 80-IA - Set-off of business loss from priority undertaking against income under other heads Held that - Following case of Synco Industries Ltd. v. Assessing Officer (Incometax) 2008 (3) TMI 13 - Supreme court If the gross total income includes any profits and gains derived from an industrial undertaking u/s 80-I deduction of 20 per cent of profits is allowed. The words includes any profits which indicate that the gross total income of an assessee shall include profits from a priority undertaking. While computing the quantum of deduction under section 80-I(6), the Assessing Officer has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deductions under Chapter VI-A - The non obstante clause appearing in section 80-I(6), is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80-I(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. Section 80A(2) and section 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceiling on the total amount of deduction and, therefore, the non obstante clause in section 80-I(6) cannot restrict the operation of sections 80A(2) and 80B(5) - Section 80-I(6) deals with actual computation of deduction whereas section 80-I(1) deals with the treatment to be given to such deductions in order to arrive at the total income of the assessee and, therefore, while interpreting section 80-I(1), which also refers to gross total income one has to read the expression gross total income as defined in section 80B(5) Decided against Revenue.

Summary

Issues:
- Interpretation of section 80-IA(5) of the Income-tax Act, 1961 regarding set off of losses from eligible business against income under other heads.
- Applicability of section 70(1) for setting off losses from one source against income from another source under the same head of income.
- Consideration of judicial precedents including judgments of the Income-tax Appellate Tribunal and the High Court in similar cases.

Analysis:
The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) related to the assessment year 2008-09. The key issue was whether the assessee, engaged in power generation through windmills, could set off the loss from this business against income from other sources. The Revenue contended that the loss on account of the windmill business, though eligible under section 80-IA, should not be allowed for set off against income under other heads. The Tribunal analyzed the relevant provisions and judicial precedents to determine the correct interpretation.

The Tribunal referred to a previous case involving a similar issue, where it was held that the deduction under section 80-IA should be computed as if the eligible business was the only source of income for the assessee. However, the Tribunal emphasized that the provisions of section 80-IA should be liberally construed to promote economic growth. It noted that while section 80-IA provides for deductions, section 70(1) allows for setting off losses from one source against income from another source under the same head.

The Tribunal also considered the judgment of the jurisdictional High Court, which affirmed the Tribunal's decision in a previous case. The High Court emphasized that the interpretation of section 80-IA should not render other provisions of the Act nugatory. It clarified that while section 80-IA deals with the computation of deduction, sections 80A(2) and 80B(5) impose a ceiling on the total amount of deduction and operate in different spheres. Therefore, the non obstante clause in section 80-IA(5) cannot restrict the operation of these sections.

Based on the precedents and legal principles discussed, the Tribunal concluded that the order of the first appellate authority directing the set off of the loss from the windmill business against other heads of income was justified. It upheld the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal filed by the Revenue. The judgment was delivered on October 1, 2012, confirming the set off of losses against income under other heads for the assessee engaged in power generation through windmills.