2016 (7) TMI 309 - AT - Income Tax

Disallowance of claim on deduction u/s.80IA - 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

Summary

Issues:
- Appeal against the order of the Learned Commissioner of Income Tax(A)-8, Chennai for the assessment year 2010-11.
- Disallowance of claim on deduction u/s.801A of ?39,62,582.
- Eligibility of losses prior to assessment year 2008-09 in the computation of eligible profits for deduction u/s.801A.

Analysis:
1. The appeal by the Revenue challenges the order of the Learned Commissioner of Income Tax(A)-8, Chennai for the assessment year 2010-11. The Revenue raised multiple grounds, including the deletion of the disallowance of claim on deduction u/s.801A amounting to ?39,62,582. The Revenue contended that the initial assessment year for the purpose of sec.801A(5) should be the year in which the assessee set up the wind mills. Additionally, the Revenue argued that losses prior to assessment year 2008-09 should not enter into the computation of eligible profits for claiming the deduction u/s.801A.

2. The Tribunal referred to the judgment of the jurisdictional High court in the case of Velayudhaswamy Spinning Mills (P) Ltd vs. ACIT, wherein it was clarified that the deduction u/s.80IA is provided for eligible businesses, as defined in sub-section (4). The Tribunal highlighted that the initial assessment year mentioned in sub-section (5) is distinct from the beginning year specified in sub-section (2). It emphasized that losses of years preceding the initial assessment year, which were already set off against the assessee's income, should not be notionally brought forward for deduction u/s.801A. The Tribunal noted that the fiction created in sub-section (5) is limited in scope and does not permit reworking set off amounts that were already adjusted against other income.

3. Based on the interpretation of the relevant provisions and precedents, the Tribunal concluded that the Commissioner of Income Tax (Appeals) was justified in favoring the assessee. Consequently, the appeal of the Revenue was dismissed, affirming the decision of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11.