2016 (2) TMI 468 - HC - Income Tax

High Court affirms deduction for windmill income under Section 80IA

Commissioner of Income Tax Versus Shri. S. Martin

The High Court upheld the Tribunal's decision allowing the assessee's deduction claim under Section 80IA of the Income Tax Act, 1961, related to income ... Entitlement to claim deduction under section 80-IA - 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 this appeal falls within the parameters of Section 80IA of the Income Tax Act. See CIT Vs. Eastman Exports Global Clothing (P) Ltd [2015 (1) TMI 830 - MADRAS HIGH COURT] and Velayudhasamy Spinning Mills (2010 (3) TMI 860 - Madras High Court ) - Decided in favour of the assessee. Issues involved:1. Interpretation of Section 80IA of the Income Tax Act, 1961 regarding deduction eligibility.2. Determining the initial assessment year for claiming deduction under Section 80IA.3. Applicability of previous court decisions on similar cases to the current case.Issue 1: Interpretation of Section 80IA of the Income Tax Act, 1961 regarding deduction eligibility:The case involved the assessee claiming a deduction under Section 80IA of the Income Tax Act, 1961, on income from the windmill division. The assessing officer disallowed the deduction, stating that no profits were available for deduction in the relevant financial year. The assessee had claimed the deduction based on a court decision in Velayudhaswamy Spinning Mills case. The Commissioner of Income Tax (Appeals) allowed the claim, following the same court decision. The Income Tax Appellate Tribunal also dismissed the appeal based on the Velayudhaswamy Spinning Mills case. The Department challenged this decision, questioning the entitlement to deduction without setting off losses from windmill operations. The Tribunal's decision was upheld by the High Court, citing previous similar cases where the court had ruled in favor of the assessee.Issue 2: Determining the initial assessment year for claiming deduction under Section 80IA:The Department raised concerns about the initial assessment year under Section 80IA, arguing that it should be the year of commencement of eligible business, not just the year of claim for deduction. They contended that losses and unabsorbed depreciation from earlier years should be carried forward and set off against profits in subsequent years. The Department also pointed out that the Tribunal should have considered the year of commencement as the initial assessment year for deduction purposes. However, the High Court dismissed these arguments and upheld the Tribunal's decision based on the interpretation of the law and previous court rulings.Issue 3: Applicability of previous court decisions on similar cases to the current case:The High Court noted that the facts and circumstances of the present case were similar to previous cases decided by the court. Referring to a batch of cases, the court followed the decision in Velayudhaswamy Spinning Mills case and ruled in favor of the assessee. The court highlighted that previous judgments had favored the assessee over the Revenue in similar situations. Consequently, the court dismissed the appeal filed by the Revenue, affirming the Tribunal's decision and answering the questions of law against the Revenue and in favor of the assessee. The Tax Case Appeal was dismissed with no costs awarded.This comprehensive analysis of the judgment outlines the key issues involved, the arguments presented by the parties, and the court's decision based on the interpretation of relevant legal provisions and precedents.