2016 (4) TMI 527 - HC - Income Tax

Eligibility of deduction under Section 80IA - Held that - The appellant is engaged in the manufacture of cane sugar and industrial alcohol and generation of power through windmills 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. 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 on the current case.
3. Treatment of losses and deductions set off in previous years for the computation of current year income under Section 80-IA.

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 Tribunal was correct in law to allow the respondent/assessee to claim deductions under Section 80-IA of the Income Tax Act. The court examined the provisions of Section 80-IA and concluded that the assessee is entitled to the deduction. The relevant portion of the judgment states, "the benefit is given to the profits and gains derived from the business of the hotel or the business of repairs to ocean-going vessels or other powered craft. The deduction is allowed to the extent of 20 per cent. from the profits and gains of the assessee."

2. Applicability of Previous Court Decisions on 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 court also referenced the Supreme Court's decision in Liberty India Vs CIT [2009) 317 ITR 218 (SC)], which clarified that Chapter VI-A provides for "profit-linked incentives." The court stated, "We see no reason to take a different view," thus affirming the applicability of previous decisions.

3. Treatment of Losses and Deductions Set Off in Previous Years:
The court emphasized that losses and deductions set off in previous years should not be reopened for the computation of current year income under Section 80-IA. The judgment quotes, "it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-I for the purpose of computing admissible deductions thereunder." The court further noted, "the Revenue cannot rework the set off amount and bring it notionally," thus rejecting the Revenue's argument that previous losses should be brought forward.

Conclusion:
The court dismissed the Revenue's appeal, confirming the Tribunal's order allowing the assessee to claim deductions under Section 80-IA. The court concluded, "we set aside the order of the Tribunal and answer all the questions in favour of the appellant/assessee and against the Revenue." The judgment also noted that appeals filed by the Revenue against similar decisions are pending before the Supreme Court but have not yet been admitted. Therefore, the court found no compelling reason to deviate from the established legal position and dismissed the appeal, stating, "this Tax Case (Appeal) stands dismissed."

Separate Judgments:
No separate judgments were delivered by the judges in this case. The decision was unanimous.

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