2015 (3) TMI 458 - 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 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 assessee.

Issues Involved:
1. Entitlement to deduction under Section 80-IA of the Income Tax Act.
2. Applicability of prior decisions, specifically Velayudhaswamy Spinning Mills v. Asst. CIT.
3. Treatment of losses and unabsorbed depreciation in computing deductions under Section 80-IA.
4. Pending appeals before the Supreme Court and their impact on the current case.

Issue-wise Detailed Analysis:

1. Entitlement to Deduction under Section 80-IA of the Income Tax Act:
The core issue in this appeal is whether the Tribunal was correct in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The court noted that this issue had already been decided in favor of the assessee in the case of Velayudhaswamy Spinning Mills v. Asst. CIT, which was reported in (2012) 340 ITR 477.

2. Applicability of Prior Decisions:
The learned counsel for the assessee argued that the issue was covered by the decision in Velayudhaswamy Spinning Mills v. Asst. CIT, and requested the court to follow the same precedent. The court agreed, noting that the decision in Velayudhaswamy Spinning Mills had dealt extensively with the benefit under Chapter VIA of the Income Tax Act, placing reliance on the Supreme Court's decision in Liberty India v. CIT, which considered the scope of Sections 80I, 80IA, and 80IB.

3. Treatment of Losses and Unabsorbed Depreciation:
The court examined the relevant portion of the decision in Velayudhaswamy Spinning Mills, which clarified 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 court emphasized that the fiction created by sub-section (5) of Section 80-IA does not allow for the notional bringing forward of set-off amounts. It was concluded that losses incurred in earlier years, which were already set off against other income, could not be notionally brought forward and set off against the profits of the eligible business for the purpose of Section 80-IA deductions.

4. Pending Appeals Before the Supreme Court:
The court noted that appeals against the decision in Velayudhaswamy Spinning Mills were pending before the Supreme Court, but they had not yet been admitted, and only notices had been ordered. Despite this, the court found no compelling reason to deviate from the established precedent.

Conclusion:
The court dismissed the Tax Case (Appeal), confirming the Tribunal's order and holding in favor of the assessee. It reiterated that the losses of earlier years, which were already set off, should not be reopened for computing current year income under Section 80-IA. The questions of law raised in the appeal were answered against the Revenue and in favor of the assessee. Consequently, the accompanying miscellaneous petition was also dismissed.

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