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2015 (2) TMI 909 - HC - Income TaxEntitlement to deduction Section 80IA - 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. In the decision reported in Velayudhaswamy Spinning Mills V. Asst. CIT (2010 (3) TMI 860 - Madras High Court) there appears to be no distinction on facts. - Decided in favour of the assessee
Issues Involved:
1. Entitlement to claim deduction under section 80-IA of the Income Tax Act. 2. Applicability of previous judicial decisions to the current case. 3. Treatment of losses and deductions set off against income of previous years. 4. Interpretation of Section 80-IA(5) regarding the computation of profits for eligible businesses. 5. Pending appeals before the Supreme Court related to similar issues. Issue-wise Detailed Analysis: 1. Entitlement to Claim Deduction under Section 80-IA: The core issue in this 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, which the Revenue contested. 2. Applicability of Previous Judicial Decisions: The learned counsel for the assessee argued that the issue had been decided by the Madras High Court in the case of Velayudhaswamy Spinning Mills V. Asst. CIT (2012) 340 ITR 477. This precedent was cited to support the claim for deduction under section 80-IA. The Revenue acknowledged that appeals against this decision were pending before the Supreme Court, but no stay had been granted. 3. Treatment of Losses and Deductions Set Off Against Income of Previous Years: The court referred to the decision in Velayudhaswamy Spinning Mills, which relied on the Supreme Court's ruling in Liberty India V. CIT (2009) 317 ITR 218 (SC). It was held 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. The Rajasthan High Court in CIT V. Mewar Oil and General Mills Ltd. (2004) 271 ITR 311 (Raj) also supported this view, stating that losses already set off should not be reopened for current income computation under section 80-I. 4. Interpretation of Section 80-IA(5): The court emphasized that Section 80-IA(5) creates a fiction that the eligible business is the only source of income for the purposes of determining the quantum of deduction. This fiction does not allow the Revenue to bring forward losses from earlier years that have already been set off against other income. The court clarified that the initial assessment year is distinct from the year in which the business begins operations, and only losses starting from the initial assessment year should be considered. 5. Pending Appeals Before the Supreme Court: The court noted that the Revenue had filed appeals against the decision in Velayudhaswamy Spinning Mills, which were pending before the Supreme Court. However, since no stay had been granted, the High Court's decision remained binding. Conclusion: The court concluded that the facts of the present case were identical to those in Velayudhaswamy Spinning Mills. The assessee had exercised their option under section 80-IA(2), and their losses had already been set off against other income. Therefore, the assessee was entitled to the deduction under section 80-IA. The court dismissed the Revenue's appeal, confirming the Tribunal's order and answering the questions of law in favor of the assessee. Final Judgment: The Tax Case (Appeal) was dismissed, and the order of the Tribunal was confirmed. The questions of law were answered against the Revenue and in favor of the assessee. No costs were awarded, and the connected miscellaneous petition was also dismissed.
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