2015 (1) TMI 1120 - HC - Income Tax

Entitlement to claim deduction under section 80-IA - Held that - All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their 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. - Decided in favour of assessee.

Summary

Issues Involved:
1. Entitlement to claim deduction under Section 80-IA of the Income Tax Act.
2. Impact of prior set-off losses on current year deductions under Section 80-IA.
3. Applicability of previous judgments and pending appeals in 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 this Tax Case (Appeal) is whether the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The Tribunal had ruled in favor of the assessee, allowing the deduction. The counsel for the assessee argued that this issue had already been decided by the High Court in the case of Velayudhaswamy Spinning Mills V. Asst. CIT (2012) 340 ITR 477, and sought to apply the same precedent here.

2. Impact of Prior Set-off Losses on Current Year Deductions under Section 80-IA:
The High Court, in its previous decision in Velayudhaswamy Spinning Mills, relied on the Supreme Court's interpretation in Liberty India V. CIT (2009) 317 ITR 218, which considered the scope of Sections 80I, 80IA, and 80IB. The Court concluded that once losses and other deductions have been set off against the income of previous years, they should not be reopened for the purpose of computing current year income under Section 80I or 80IA. This principle was reaffirmed in the present case, where the Court noted that the losses incurred by the assessee were already set off and adjusted against the profits of earlier years. Hence, during the relevant assessment year, the assessee was entitled to the deduction under Section 80-IA without considering the previously set-off losses.

3. Applicability of Previous Judgments and Pending Appeals in the Supreme Court:
The Revenue's counsel noted that appeals against the Velayudhaswamy Spinning Mills decision were pending before the Supreme Court. However, the High Court found no compelling reason or contrary judgment to deviate from its previous ruling. The Court reiterated that the fiction created in sub-section (5) of Section 80-IA does not contemplate bringing forward set-off amounts notionally. The standing counsel for the Revenue failed to provide any material or compelling reason to take a different view. Thus, the High Court dismissed the Revenue's appeal, confirming the Tribunal's order in favor of the assessee.

Conclusion:
The High Court dismissed the Tax Case (Appeal) filed by the Revenue, confirming the Tribunal's order that the assessee is entitled to the deduction under Section 80-IA of the Income Tax Act. The Court held that losses of earlier years, which were already set off, should not be reopened for computing current year income for the purpose of Section 80-IA deductions. The questions of law were answered against the Revenue and in favor of the assessee. No costs were imposed.