2015 (4) TMI 982 - HC - Income Tax

Entitlement to claim deduction under Section 80-IA - Held that - The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its 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. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - 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 court decisions to the current case.
3. Interpretation of Section 80-IA, particularly sub-section (5).

Issue-wise Detailed Analysis:

1. Entitlement to Claim Deduction Under Section 80-IA of the Income Tax Act:
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 Court Decisions to the Current Case:
The court noted that the issue had already been decided in the case of Velayudhaswamy Spinning Mills Vs Asst. CIT [2012) 340 ITR 477], where it was held that once losses and other deductions have been set off against the income of the previous year, they should not be reopened for the purpose of computing current year income under Section 80-IA. The Revenue's counsel mentioned that appeals against this decision were pending before the Supreme Court, but the court found no compelling reason to deviate from its previous ruling.

3. Interpretation of Section 80-IA, Particularly Sub-section (5):
The court provided an in-depth analysis of Section 80-IA, especially sub-section (5), which deals with the quantum of deduction for an eligible business. The court emphasized that sub-section (5) starts with a non obstante clause, indicating it overrides other provisions of the Act. It creates a fiction that the eligible business is the only source of income during the relevant assessment years. The court reiterated that losses already set off against other income in previous years cannot be notionally brought forward and set off against the profits of the eligible business for the purpose of deduction under Section 80-IA.

The court cited the Supreme Court decision in Liberty India Vs CIT [2009) 317 ITR 218 (SC)], which clarified that Chapter VI-A of the Income Tax Act provides profit-linked incentives, and the computation of profits for eligible businesses should be done as if such business is the only source of income. The court also referred to the decision in CIT - Vs - Mewar Oil and General Mills Ltd. [2004) 271 ITR 311 (Raj)], which supported the view that previously set-off losses should not be reopened for current year computation under Section 80-IA.

Conclusion:
The court concluded that the assessee's case fell within the parameters of Section 80-IA, as the losses had already been set off against other income in previous years. The court dismissed the Revenue's appeal, confirming the Tribunal's order and ruling in favor of the assessee. The court also noted that similar decisions had been made in other cases, reinforcing the consistency of its interpretation of Section 80-IA.

Final Judgment:
The Tax Case (Appeal) was dismissed, and the questions of law were answered against the Revenue and in favor of the assessee. The court upheld the Tribunal's decision, allowing the assessee to claim the deduction under Section 80-IA of the Income Tax Act.

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