2016 (9) TMI 1588 - HC - Income Tax

Entitled for deduction u/s 80-IA - Tribunal allowed deduction - Whether for the purpose of computing deduction under Section 80-IA(5) of the Act the lossess of the year prior to the initial year which had already been absorbed cannot be brought back notionally and adjusted against the income of the initial and subsequent assessment years? - HELD THAT - In judgment rendered in the said Velayudhaswamy Spinning Mills P.Ltd. case 2010 (3) TMI 860 - MADRAS HIGH COURT this Court has subscribed to the view of the Rajasthan High Court rendered in the case of CIT Vs. Mewar Oil and General Mills Ltd. 2003 (10) TMI 12 - RAJASTHAN HIGH COURT and came to the conclusion that it is not at all required that the losses which have already been set-off against the income of the previous year should be revoked again for computation of current income under Section 80-IA for the purpose of computing the admissible deductions thereunder. Hence this Court came to the conclusion that the order passed by the Tribunal deserves to be confirmed by answering the question framed before it in favour of the assessee and against the Revenue. In the instant case the Tribunal has followed the ratio laid down by this Court in the said Velayudhaswamy Spinning Mills P.Ltd. case which judgment of this Court has since attained finality now by the dismissal of the SLP before the Supreme Court 2016 (11) TMI 373 - SC ORDER For the purpose of consistency and also the judicial discipline it requires us to follow the earlier judgment of this Court rendered in the said Velayudhaswamy Spinning Mills P.Ltd. case particularly when no serious legal infirmity has been shown for the reason that weighed with this Court in the said Velayudhaswamy Spinning Mills P.Ltd. case for reaching the conclusions to which it did. We are of the opinion that the judgment rendered by this Court in the said Velayudhaswamy Spinning Mills P.Ltd case answers the questions correctly in favour of the assessee

Summary

Issues:
1. Entitlement for deduction under Section 80-IA of the Income Tax Act.
2. Treatment of losses for computing deduction under Section 80-IA(5) of the Act.

Analysis:
1. The respondent, engaged in the hotel and resort business, claimed deduction under Section 80-IA for the assessment year 2010-2011, which was disallowed by the assessing officer. The Commissioner of Income Tax (Appeals) allowed the claim, citing a judgment in the case of Velayudhaswamy Spinning Mills. The Revenue objected, stating that the Supreme Court had a pending appeal against the Velayudhaswamy judgment. However, the Supreme Court later dismissed the appeal, upholding the judgment without providing reasons. The High Court noted that the losses need not be revoked for computing current income under Section 80-IA, as per the Rajasthan High Court's view. The Court upheld the Tribunal's decision to follow the Velayudhaswamy judgment, which had now attained finality post the Supreme Court's dismissal of the appeal.

2. The Court emphasized the importance of consistency and judicial discipline in following its earlier judgment in the Velayudhaswamy case. It found no serious legal infirmity to deviate from the established precedent. Consequently, the Court held that the Tribunal did not err in applying the Velayudhaswamy judgment in the current case. Therefore, the appeal was dismissed in favor of the assessee, with no costs incurred at the admission stage.