2015 (7) TMI 575 - HC - Income Tax

Tax Appeal Dismissed, Assessee Upheld on Deduction Entitlement

Commissioner of Income Tax Versus M/s. Ramraj Handlooms

The Tax Case (Appeal) was dismissed, confirming the Tribunal's order. The Court upheld the assessee's entitlement to claim deduction under Section 80-IA ... Entitlement to claim 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 claim deduction under Section 80-IA of the Income Tax Act.2. Applicability of previous judgments and pending appeals before the Supreme Court.Detailed Analysis:Entitlement to Claim Deduction Under Section 80-IA:The core issue in this appeal is whether the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. This issue has been previously decided by the Madras High Court in the case of Velayudhaswamy Spinning Mills V. Asst. CIT, reported in (2012) 340 ITR 477. The Court in that case relied on the Supreme Court's decision in Liberty India V. CIT, reported in (2009) 317 ITR 218 (SC), which considered the scope of Sections 80I, 80IA, and 80IB of the Income Tax Act. It was held that Chapter VI-A provides for profit-linked incentives in the form of tax deductions. The Court concluded that once losses and other deductions have been set off against the income of the previous year, they should not be reopened for the purpose of computing the current year's income under Section 80I or 80IA, and the assessee should not be denied the admissible deduction under Section 80IA.Applicability of Previous Judgments and Pending Appeals:The Revenue's standing counsel stated that appeals against the decision in Velayudhaswamy Spinning Mills V. Asst. CIT are pending before the Supreme Court. However, the Madras High Court, after hearing the standing counsel and perusing the materials, found no compelling reason to deviate from its earlier decision.The Court reiterated the relevant portion of its previous decision, emphasizing that the benefit under Section 80-IA is given to the profits and gains derived from eligible business activities. It clarified that the 'initial assessment year' and the computation of profits should be treated as if the eligible business were the only source of income. The Court also noted that once losses have been set off in earlier years, they cannot be notionally brought forward and set off against the profits of the eligible business in subsequent years.The Court further cited the Rajasthan High Court's decision in CIT v. Mewar Oil and General Mills Ltd., which held that losses or deductions already set off against the income of previous years should not be reopened for computing current income under Section 80-I.In conclusion, the Court found no reason to take a different view from its previous decisions and dismissed the Revenue's appeal, confirming the Tribunal's order. The questions of law were answered in favor of the assessee and against the Revenue.Final Judgment:The Tax Case (Appeal) was dismissed, and the order passed by the Tribunal was confirmed. The questions of law raised were answered against the Revenue and in favor of the assessee. No costs were imposed.