2018 (7) TMI 489 - HC - Income Tax

Entitled to deduction u/s 80IA without setting off the losses/unabsorbed depreciation pertaining to the windmill, which were set off in the earlier year against other business income of the assessee - Held that - A Hon ble Division Bench of this Court in Velayudhaswamy Spinning Mills Pvt. Ltd s case (2010 (3) TMI 860 - MADRAS HIGH COURT), held that once the losses and other deductions are set off against the income of the assessee in the previous year, it should not be re-opened again, for the purpose of computation of current year income, under Section 80-I and 80-IA of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to an order passed by the Income Tax Appellate Tribunal regarding deduction under Section 80IA without setting off losses/unabsorbed depreciation pertaining to windmill.

Analysis:
The Tax Appeal challenged an order by the Income Tax Appellate Tribunal dismissing the appeal by the Revenue against the order of the Commissioner of Income-Tax (Appeals) for the Assessment Year 2006-07. The substantial question of law raised was whether the Tribunal was right in holding that the assessee is entitled to deduction under Section 80IA without setting off losses/unabsorbed depreciation pertaining to the windmill. The jurisdictional High Court's decision in M/s. Velayudhasamy Spinning Mills case was cited, pending appeal before the Supreme Court. The Court consistently followed the decision in Velayudhaswamy Spinning Mills case, stating that once losses and deductions are set off against the income in the previous year, it should not be reopened for the current year's income computation under Section 80-I and 80-IA of the Act.

The Court referred to the judgments in Liberty India vs. CIT and CIT vs. Mewar Oil & General Mills Ltd., maintaining that the assessee's entitlement to deductions should not be re-opened if set off against income in previous years. The Tribunal confirmed the order of the Commissioner of Income-Tax (Appeal) based on the assessee's arguments and the jurisdictional High Court's decision. The Court upheld the decision, emphasizing that each windmill division is a separate entity, and the option of claiming deductions under Section 80IA rests with the assessee. The pendency of the Revenue's Special Leave Petition before the Supreme Court did not justify a different approach in the assessment year, as consistency was maintained with previous decisions in the assessee's favor.

After reviewing the material on record, the Court found no valid grounds to reverse the order. The question of law was answered against the Revenue and in favor of the assessee. Consequently, the Tax Case Appeal was dismissed at the admission stage with no costs incurred.