2018 (5) TMI 516 - HC - Income Tax

Depreciation on Wind Mills already adjusted against the profits of Printing Business artificially carried forward for the impugned assessment year for the purpose of denial of relief u/s 80IA - Held that - In the assessee s own case, for the earlier assessment year, an identical issue was considered 2016 (7) TMI 1232 - MADRAS HIGH COURT as relying on decision in Velayudhaswamy Spinning Mills (P) 2010 (3) TMI 860 - Madras High Court Tribunal has not erred in holding that there was no rectification possible under Section 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-I for the new industrial undertaking was not required in the present case. - Decided in favour of assessee

Summary

Issues:
Interpretation of depreciation on wind mills for denial of relief under Section 80 IA read with Sections 80 AB and 80 IA (7), 72 of the Income Tax Act.

Analysis:
The High Court of Madras heard an appeal against the order passed by the Income Tax Appellate Tribunal, Chennai Bench 'A', regarding the assessment year 2002-03. The substantial question of law in the appeal was whether depreciation on wind mills, previously adjusted against the profits of printing business for assessment years 1995-1996 and 1996-97, could be carried forward for denial of relief under specific sections of the Income Tax Act. The Court referred to a previous case involving an identical issue where the Division Bench had ruled in favor of the assessee. The Court emphasized that losses or deductions already set off against income of the previous year should not be reopened for computing current income under Section 80-I for admissible deductions. The Court cited judgments from Velayudhaswamy Spinning Mills (P.) Ltd. v. Assistant Commissioner of Income-tax and CIT v. Mewar Oil and General Mills Ltd. to support its decision. The Court concluded that losses absorbed against profits of other businesses cannot be notionally brought forward and set off against profits of eligible businesses as mandated by section 80-IA(5).

In light of the above analysis and precedent, the Court answered the question of law in favor of the assessee and against the Revenue. The Tax Case Appeal was allowed with no costs incurred by either party.