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2015 (8) TMI 667 - HC - Income TaxDisallowance of deduction claimed under section 80IA - ITAT allowed claim - 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 of the respondent/assessee to claim deduction under Section 80-IA of the Income Tax Act. Issue-wise Detailed Analysis: Entitlement to Deduction under Section 80-IA: The core issue in this Tax Case (Appeal) was whether the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The learned counsel for the assessee argued that this issue had already been decided by the Madras High Court in the case of Velayudhaswamy Spinning Mills vs. Asst. CIT (2012) 340 ITR 477, and requested that the same decision be applied here. The Revenue's counsel acknowledged that the decision in Velayudhaswamy Spinning Mills was pending appeal before the Supreme Court, but had not been admitted yet. The High Court examined the materials and arguments presented by both parties. The Court referenced the Velayudhaswamy Spinning Mills case, which relied on the Supreme Court's decision in Liberty India vs. CIT (2009) 317 ITR 218 (SC). The Supreme Court had clarified that Chapter VI-A of the Income Tax Act provides for "profit-linked incentives" and that deductions under Sections 80-I, 80-IA, and 80-IB should be computed as if the eligible business were the only source of income. The Court noted that in the Velayudhaswamy Spinning Mills case, it was concluded 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 80-IA. The Rajasthan High Court in CIT vs. Mewar Oil and General Mills Ltd. (2004) 271 ITR 311 had also held similarly, stating that losses or deductions already set off against previous years' income should not be reopened for current year computation under Section 80-I. The Court extracted relevant portions from the Velayudhaswamy Spinning Mills decision, emphasizing that the eligible business should be considered the only source of income during the initial assessment year and subsequent years, and that any losses set off in earlier years should not be brought forward notionally. In the present case, the assessee had exercised the option under Section 80-IA(2) during the relevant assessment year, and there were no unabsorbed depreciation or losses of the eligible undertakings, as they had already been absorbed in earlier years. The Court agreed with the findings in the Velayudhaswamy Spinning Mills case and saw no reason to take a different view. The Court dismissed the Revenue's reliance on the Memorandum explaining the provisions in the Finance (No. 2) Bill, 1980, stating that it did not mandate bringing forward set-off amounts notionally under Section 80-IA(5). Conclusion: The Court concluded that the respondent/assessee was entitled to claim the deduction under Section 80-IA of the Income Tax Act. The Court dismissed the Tax Case (Appeal) filed by the Revenue, confirming the order passed by the Tribunal. The questions of law were answered in favor of the assessee and against the Revenue. Consequently, the connected miscellaneous petition was also closed.
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