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2021 (4) TMI 1237 - SC - Income TaxDeduction u/s 80-IA - AO held by the Assessing Officer that deduction computed under Section 80-IA of the Act could not be allowed against any source other than business - HELD THAT - In the case before us, there is no discussion about Section 80-IA(5) by the Appellate Authority, nor the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub-section (1) of Section 80-IA of the Act. We hold that the scope of sub-section (5) of Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating eligible business as the only source of income . Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to business income . An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase derived from in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act.
Issues Involved:
1. Extent of deduction under Section 80-IA of the Income Tax Act, 1961. 2. Applicability of Section 80AB in determining the quantum of deduction. 3. Interpretation of Section 80-IA(5) regarding the computation of deduction. Issue-wise Detailed Analysis: 1. Extent of Deduction under Section 80-IA: The primary issue in this case was whether the deduction under Section 80-IA should be restricted to 'business income' only or should it extend to 'gross total income'. The Assessing Officer restricted the deduction to 'business income' only, while the Appellate Authority, the Tribunal, and the High Court allowed the deduction to be set off against the 'gross total income'. The Supreme Court held that the scope of Section 80-IA is to allow deduction of profits and gains derived from the eligible business in computing the total income of the assessee. The Court agreed with the Appellate Authority that there is no limitation on deduction admissible under Section 80-IA to income under the head 'business' only. 2. Applicability of Section 80AB: Section 80AB was introduced to determine the quantum of deductible income included in the 'gross total income'. The Assessing Officer held that Section 80AB limits the deduction to the income of the nature specified in the relevant section alone, implying that deduction under Section 80-IA should be restricted to 'business income'. However, the Appellate Authority and the Supreme Court clarified that Section 80AB pertains to the computation of deduction on the basis of 'net income' and does not curtail the width of Section 80-IA. The Supreme Court agreed with the Appellate Authority that Section 80AB is limited to determining the quantum of deductible income and should not restrict the deduction under Section 80-IA to 'business income' only. 3. Interpretation of Section 80-IA(5): The Revenue contended that Section 80-IA(5) mandates that the quantum of deduction should be computed by treating the eligible business as the only source of income, thereby restricting the deduction to 'business income'. The Assessee argued that Section 80-IA(5) is concerned with the computation of deduction and not with the extent of deduction allowed. The Supreme Court held that Section 80-IA(5) is limited to determining the quantum of deduction by treating the eligible business as the only source of income and does not impose a limitation on the deduction under Section 80-IA to 'business income' only. The Court emphasized that Section 80-IA(5) should not be interpreted to restrict the deduction to 'business income'. Conclusion: The Supreme Court dismissed the Revenue's appeal, affirming that the deduction under Section 80-IA should not be restricted to 'business income' but should be set off against the 'gross total income'. The Court clarified that Section 80AB pertains to the computation of deduction on the basis of 'net income' and does not limit the deduction under Section 80-IA. Additionally, Section 80-IA(5) is concerned with the computation of the quantum of deduction and does not restrict the deduction to 'business income'. The appeals were disposed of in terms of the above judgment, except for Civil Appeal No. 1509 of 2021, which was de-tagged as it involved different issues.
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