2015 (2) TMI 1041 - 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 deduction under Section 80-IA of the Income Tax Act.
2. Treatment of losses and deductions set off in previous years.
3. Applicability of previous court decisions and their implications on the current case.

Detailed Analysis:

1. Entitlement to Deduction under Section 80-IA of the Income Tax Act:
The primary issue in this appeal was whether the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The court referred to the precedent set in the case of "Velayudhaswamy Spinning Mills V. Asst. CIT" (2012) 340 ITR 477, where it was established that Chapter VI-A of the Income Tax Act provides for profit-linked incentives in the form of tax deductions. The court reiterated that the provisions of Section 80-IA are designed to offer deductions based on the profits derived from eligible businesses, irrespective of the ownership of the business.

2. Treatment of Losses and Deductions Set Off in Previous Years:
The court examined the treatment of losses and other deductions that had been set off in previous years. 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 the current year's income under Section 80-IA. This principle was supported by the decision in "CIT V. Mewar Oil and General Mills Ltd." (2004) 271 ITR 311 (Raj), which stated that losses or deductions already set off should not be reconsidered for current income computation under Section 80-IA.

3. Applicability of Previous Court Decisions and Their Implications:
The court relied heavily on the decision in "Velayudhaswamy Spinning Mills V. Asst. CIT" and other relevant cases, such as "Liberty India V. CIT" (2009) 317 ITR 218 (SC), which clarified that the incentives under Chapter VI-A are profit-linked and not ownership-linked. The court also noted that the Revenue had filed appeals against the Velayudhaswamy decision, which were pending before the Supreme Court but had not been admitted yet. Despite this, the court found no compelling reason or contrary judgment to deviate from the established precedent.

Conclusion:
The court concluded that the respondent/assessee is entitled to the deduction under Section 80-IA, as the losses of previous years, already set off, should not be notionally brought forward. The court dismissed the appeal filed by the Revenue, confirming the order passed by the Income Tax Appellate Tribunal and answering the questions of law in favor of the assessee and against the Revenue. The appeal was dismissed with no costs.