2016 (6) TMI 383 - HC - Income Tax

High Court affirms Tribunal's decision on Section 80-IA deductions for windmill business income

The High Court upheld the Income Tax Appellate Tribunal's decision, dismissing the revenue's appeal against the Commissioner of Income-Tax's order ... Eligibility of deduction under Section 80IA - Held that:- 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 [2010 (3) TMI 860 - Madras High Court ].- Decided in favour of the assessee. Issues:Challenge to order of Income Tax Appellate Tribunal dismissing appeal by revenue against Commissioner of Income-Tax's order. Interpretation of Section 80-IA deductions for income from windmill business. Application of precedent in Velayudhaswamy Spinning Mills case. Validity of Tribunal's decision on deduction under Section 80-IA for windmill division.Analysis:The case involves a challenge to an order made by the Income Tax Appellate Tribunal regarding the deduction claimed under Section 80-IA for income from a windmill business. The assessee, engaged in exporting home textiles products and generating power using wind energy, filed a return for the assessment year 2011-12. The Assessment Officer made deductions including an addition for low profit and under Section 80IA. The assessee contended before the Commissioner of Income-Tax that the deduction claimed was based on the interpretation of Section 80-IA(5) as per the decision in Velayudhaswamy Spinning Mills case.Before the appellate authority, the assessee argued for the deduction under Section 80-IA based on total turnover and income from the windmill business, citing the Velayudhaswamy Spinning Mills case. The Commissioner directed the Assessing Officer to allow the deduction claimed by the assessee, emphasizing the applicability of the Velayudhaswamy Spinning Mills case to the current situation. The Assistant Commissioner of Income-Tax then appealed to the Income-Tax Appellate Tribunal, which dismissed the appeal following the precedent set in the Velayudhaswamy Spinning Mills case.The revenue, represented by Mr. J. Narayanasamy, challenged the Tribunal's decision, arguing that the assessee's entitlement to the deduction under Section 80-IA for the windmill division was incorrect. The revenue contended that the profit and gains of the business should be computed separately, considering past losses and unabsorbed allowances. This raised a substantial question of law regarding the correctness of the Tribunal's decision based on the Velayudhaswamy Spinning Mills case.The judgment delves into the provisions of Chapter VIA of the Income-Tax Act, particularly Section 80-IA, which allows deductions for profits and gains from industrial undertakings. The Velayudhaswamy Spinning Mills case is extensively discussed, highlighting the interpretation of deductions under Section 80-IA and the treatment of losses and profits for such claims. The judgment references other cases following the Velayudhaswamy Spinning Mills precedent to support the decision.Ultimately, the High Court upheld the Tribunal's decision, stating that there were no valid grounds to reverse the orders. The question of law was answered against the revenue and in favor of the assessee. The Tax Case Appeal was dismissed, with no costs awarded. The judgment reaffirmed the application of the Velayudhaswamy Spinning Mills case in determining the eligibility for deductions under Section 80-IA for the windmill division.