2015 (6) TMI 146 - HC - Income Tax

Entitlement to claim deduction under Section 80-IA - Held that - The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee

Summary

Issues Involved:
1. Entitlement to claim deduction under Section 80-IA of the Income Tax Act.
2. Applicability of previous court decisions to the current case.
3. Interpretation of the "initial assessment year" and set-off of losses.
4. Relevance of the pending appeals before the Supreme Court.

Issue-wise Detailed Analysis:

1. Entitlement to Claim Deduction under Section 80-IA of the Income Tax Act
The core issue in the appeals is whether the Tribunal was correct in law to allow the respondent/assessee to claim a deduction under Section 80-IA of the Income Tax Act. The court referenced the decision in (2012) 340 ITR 477 (Velayudhaswamy Spinning Mills V. Asst. CIT), which held that Chapter VI-A of the Income Tax Act provides "profit-linked incentives" and that once losses and deductions are set off against the income of previous years, they should not be reopened for the computation of current year income under Section 80-IA.

2. Applicability of Previous Court Decisions to the Current Case
The court noted that the issue had already been decided in favor of the assessee in the Velayudhaswamy Spinning Mills case. The court reiterated that the Supreme Court in Liberty India V. CIT (2009) considered the scope of Sections 80I, 80IA, and 80IB, stating that these sections provide incentives in the form of tax deductions. The court also relied on the Rajasthan High Court's decision in CIT V. Mewar Oil and General Mills Ltd. (2004), which held that losses or deductions set off in previous years should not be reopened for current income computation under Section 80-I.

3. Interpretation of the "Initial Assessment Year" and Set-off of Losses
The court emphasized that Section 80-IA(5) contains a non obstante clause and a deeming provision, indicating that the eligible business is considered the only source of income during the relevant assessment years. The court clarified that the "initial assessment year" is different from "beginning from the year" mentioned in Section 80-IA(2). The court concluded that losses from years prior to the initial assessment year, which have already been set off, cannot be brought forward notionally for set-off against the current year's profits of the eligible business.

4. Relevance of the Pending Appeals Before the Supreme Court
The court acknowledged that appeals against the Velayudhaswamy Spinning Mills decision are pending before the Supreme Court. However, since the Supreme Court has only ordered notices and has not yet admitted the appeals, the court decided to follow its earlier decision. The court noted that the facts in the present cases are identical to those in the Velayudhaswamy Spinning Mills case, and therefore, the same legal principles apply.

Conclusion
The court dismissed the appeals filed by the Revenue, confirming the Tribunal's orders. The questions of law raised were answered against the Revenue and in favor of the assessees. The court saw no compelling reason or relevant material to take a different view from its previous decisions. Consequently, the connected Miscellaneous Petition was also closed.