2015 (1) TMI 830 - HC - Income Tax

High Court upholds Tribunal decision on deductions for power generation. Loss set-off not reopened for current year profits.

The High Court affirmed the Tribunal's decision, allowing the deductions under Section 80-IA for the assessees engaged in power generation through wind ... Entitlement to claim deduction under section 80-IA - AO disallowed the assessees' claim under Section 80IA of the Income Tax Act primarily on the ground that carried forward loss of earlier years should be set off before computing the profit for the current year. - Held that:- All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in each of the appeal falls within the parameters of Section 80IA of the Income Tax Act. We, taking note of the decision rendered by this Court in the case of Velayudhasamy Spinning Mills (2010 (3) TMI 860 - Madras High Court ) and respectfully agreeing with the reasoning rendered by this Court, we are inclined to dismiss all the above Tax Case (Appeals), thereby confirm the order passed by the Tribunal. - Decided in favour of the assessee. Issues Involved:1. Whether the Tribunal is right in law in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act.Detailed Analysis:1. Core Issue:The primary issue in these appeals is whether the Tribunal correctly held that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The assessees, engaged in the business of power generation through wind mills, claimed deductions under Section 80-IA, which the Assessing Officer disallowed on the grounds that carried forward losses from earlier years should be set off before computing the current year's profit. The Commissioner of Income Tax (Appeals) reversed this decision, allowing the deduction, and the Tribunal upheld this reversal, leading to the Revenue's appeal to the High Court.2. Legal Precedents and Arguments:The assessees relied on the decision of the High Court in Velayudhaswamy Spinning Mills V. Asst. CIT (2012) 340 ITR 477, which had already addressed similar issues. The Revenue, represented by the Standing Counsel, acknowledged that appeals against the Velayudhaswamy decision were pending before the Supreme Court.3. Judicial Reasoning:The High Court examined the relevant legal provisions and previous judgments, particularly focusing on the interpretation of Section 80-IA and its sub-sections. The Court noted that Section 80-IA provides deductions for profits derived from eligible businesses and 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.4. Interpretation of Section 80-IA:The Court reiterated that Section 80-IA starts with a non obstante clause, indicating it overrides other provisions. It emphasized that for determining the quantum of deduction, the eligible business is treated as the only source of income. The Court clarified that losses from years prior to the initial assessment year, which were already set off, cannot be notionally brought forward and set off against the current year's profits of the eligible business.5. Application to Present Cases:In the present cases, the assessees had already set off their losses against other income in previous years and had positive profits during the relevant assessment years. The Court found no distinction in facts from the Velayudhaswamy case and agreed with its reasoning, confirming that the assessees were entitled to the deductions under Section 80-IA.6. Conclusion and Orders:The Court dismissed the Revenue's appeals, confirming the Tribunal's orders and holding that the assessees are entitled to the deductions claimed under Section 80-IA. The questions of law were answered in favor of the assessees and against the Revenue. Consequently, the connected Miscellaneous Petitions were also dismissed.7. Pending Appeals:The Court noted that appeals against the Velayudhaswamy decision were pending before the Supreme Court, but as they were not yet admitted, the High Court's decision stood.Final Judgment:The appeals were dismissed, affirming the Tribunal's decision and allowing the deductions under Section 80-IA for the assessees. No costs were awarded, and connected Miscellaneous Petitions were also dismissed.