2015 (2) TMI 1040 - 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. In the decision of Velayudhaswamy Spinning Mills V. Asst. CIT reported in (2010 (3) TMI 860 - Madras High Court), there appears to be no distinction on facts. - Decided in favour of the assessee

Summary

Issues Involved:
1. Entitlement to claim deduction under Section 80-IA of the Income Tax Act.
2. Application of the decision in Velayudhaswamy Spinning Mills V. Asst. CIT.
3. Consideration of losses and unabsorbed depreciation in computing deductions under Section 80-IA.
4. Pending appeals before the Supreme Court against the decision in Velayudhaswamy Spinning Mills V. Asst. CIT.

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 Tribunal was correct in law in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The Court examined the eligibility criteria and the relevant provisions of Section 80-IA, which provide for a deduction of 100% of the profits and gains derived from eligible businesses for ten consecutive assessment years.

2. Application of the Decision in Velayudhaswamy Spinning Mills V. Asst. CIT:
The learned counsel for the assessee argued that the issue had already been decided by the Court in the case of Velayudhaswamy Spinning Mills V. Asst. CIT, reported in (2012) 340 ITR 477. The Court agreed, noting that this precedent was applicable and should be followed in the present case. The Court reiterated the principles established in Velayudhaswamy, emphasizing that Chapter VI-A of the Income Tax Act, which includes Sections 80-I, 80-IA, and 80-IB, provides for profit-linked incentives and that the computation of deductions should not reopen losses and deductions already set off against the income of previous years.

3. Consideration of Losses and Unabsorbed Depreciation in Computing Deductions under Section 80-IA:
The Court discussed the interpretation of Section 80-IA(5) and related provisions, highlighting that the losses and unabsorbed depreciation of earlier years, which have been set off against other sources of income, should not be brought forward for the purpose of computing the current year's income under Section 80-IA. The Court cited its previous decision and the Rajasthan High Court's ruling in CIT v. Mewar Oil and General Mills Ltd., affirming that once losses are set off, they should not be reopened for the computation of deductions under Section 80-IA.

4. Pending Appeals Before the Supreme Court:
The learned Standing Counsel for the Revenue informed the Court that appeals against the decision in Velayudhaswamy Spinning Mills V. Asst. CIT were pending before the Supreme Court. However, the Court noted that these appeals had not yet been admitted, and only notices had been issued. Therefore, the Court did not find any compelling reason to deviate from its previous ruling.

Conclusion:
The Court concluded that the facts of the present case were identical to the Velayudhaswamy Spinning Mills case, and there was no distinction on facts. The Court, therefore, dismissed the Tax Case (Appeal), confirming the order passed by the Tribunal. The questions of law raised were answered in favor of the assessee and against the Revenue. The appeal was dismissed with no costs.