2015 (4) TMI 340 - HC - Income Tax

Court affirms Tribunal decision on Section 80-IA deduction, rejects Revenue appeal.

The Court affirmed the Tribunal's decision, holding that the assessee is entitled to the deduction under Section 80-IA of the Income Tax Act. The Court ... Entitlement to deduction under Section 80-IA - 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 Issues Involved:1. Entitlement to deduction under Section 80-IA of the Income Tax Act.2. 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 Deduction under Section 80-IA of the Income Tax Act:The core issue in this appeal is whether the Tribunal was correct in law in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. The Court noted that this issue had already been decided in the case of Velayudhaswamy Spinning Mills vs. Asst. CIT, where it was held that Chapter VI-A provides for incentives in the form of tax deductions, which are 'profit-linked incentives.' The Court reiterated that the provisions of Sections 80-I, 80-IA, and 80-IB are essentially identical and that the deductions are to be computed as if the eligible business is the only source of income.2. Treatment of Losses and Deductions Set Off in Previous Years:The Court examined whether losses and other deductions that have been set off against the income of previous years should be reopened for the purpose of computing current year income under Sections 80-I or 80-IA. The Court referenced the decision in Liberty India vs. CIT, which clarified that the profits derived from eligible business are to be computed as if such business is the only source of income. The Court also cited the case of CIT vs. Mewar Oil and General Mills Ltd., which held that once losses and other deductions have been set off against the income of previous years, they should not be reopened for the computation of current year income.The Court extracted relevant portions of the Velayudhaswamy Spinning Mills decision, emphasizing that the 'initial assessment year' is different from 'beginning from the year' and that the fiction created by sub-section (5) of Section 80-IA does not allow the Revenue to look backward to bring forward losses notionally. The Court concluded that losses incurred in years prior to the initial assessment year, which have already been absorbed, cannot be brought forward and set off against the profits of the eligible business.The Court noted that the facts of the present case are identical to those in Velayudhaswamy Spinning Mills, where the assessee had exercised the option under Section 80-IA(2) and had no unabsorbed depreciation or loss of the eligible undertakings during the relevant assessment year. The Court affirmed that the Tribunal's decision was correct and that the assessee is entitled to the deduction under Section 80-IA.Conclusion:The Court dismissed the Revenue's appeal, confirming the Tribunal's order and holding that the assessee is entitled to the deduction under Section 80-IA. The Court answered all questions of law in favor of the assessee and against the Revenue, noting that the Revenue's appeals before the Supreme Court on the same issue were still pending and had not been admitted. The Court reiterated that losses and deductions set off in previous years should not be reopened for the computation of current year income under Section 80-IA.