2020 (10) TMI 884 - HC - Income Tax

Court upholds decisions on income tax deductions, disallowance, and profit aggregation under Sections 80IA and 14A.

The Commissioner of Income-Tax Bangalore, The Assistant Commissioner Of Income-Tax Circle-11 (5), Versus M/s. Jindal Aluminium Limited

The court ruled against the revenue, upholding decisions made by the Commissioner of Income Tax (Appeals) and the Tribunal. The judgment focused on the ... Deduction u/s 80IA - only the profit making power generating unit of the assessee should be taken into account and not the loss making units in computing the total income of the assessee for its eligible business to allow deduction - HELD THAT:- As decided in E ASST. COMMISSIONER OF INCOME-TAX CIRCLE-11 (5) , BANGALORE [2020 (5) TMI 333 - KARNATAKA ] similar issue involved in this appeal is squarely covered by an order in the case of SWARNAGIRI WIRE INSULATIONS P. LTD. [2013 (2) TMI 202 - KARNATAKA HIGH COURT] - Decided against revenue. Disallowance u/s 14A - Substantial question of law - HELD THAT:- CIT (Appeals) as well as the Tribunal has recorded a finding that the assessee has invested a sum of ₹ 26,61,011/- from its own capital and the claim of the assessee for an amount of ₹ 14,40,471/- under Section 14A of the Act has been remitted to the Assessing Officer to decide the claim in accordance with law. The aforesaid concurrent findings of fact recorded by the Tribunal by no stretch of imagination can be said to be either perverse or based on no evidence. No element of perversity has been brought to our notice, therefore, it is not necessary for us to answer the aforesaid substantial question of law. Issues:1. Interpretation of Section 80IA of the Income Tax Act for deduction computation.2. Application of Section 14A of the Income Tax Act for disallowance of expenditure.3. Aggregation of profit-making and loss-making units for deduction computation.Issue 1: Interpretation of Section 80IA for deduction computationThe appeal involved questions regarding the interpretation of Section 80IA of the Income Tax Act, specifically concerning the computation of deductions for profit-making and loss-making units. The appellant argued that all profit-making and loss-making units should be aggregated to compute the deduction under Section 80IA(1) for eligible businesses. It was contended that Section 80IA(5) pertains to eligible business as a whole, not individual units. The appellant cited a previous court decision permitting aggregation and set off under Section 70 of the Act. Additionally, the appellant highlighted the applicability of the amendment to Section 14A(2) with Rule 8D from the Assessment Year 2008-09. The appellant also argued that the Assessing Officer had valid reasons for disallowing expenditure under Section 14A of the Act, citing relevant case law and the object of introducing Section 14A. The appellant further contended that the Tribunal erred in its assessment of the surplus and investment timeline.Issue 2: Application of Section 14A for disallowance of expenditureThe dispute also involved the application of Section 14A of the Income Tax Act for the disallowance of expenditure. The appellant argued that the Assessing Officer had valid reasons for invoking Section 14A due to the incorrectness of the expenditure claim by the assessee. The appellant emphasized that the Tribunal should have remitted the matter to the Assessing Officer if it found the satisfaction under Section 14A was not met. The appellant also challenged the Tribunal's consideration of the surplus and investment timeline in making its decision.Issue 3: Aggregation of profit-making and loss-making unitsThe issue of aggregating profit-making and loss-making units for deduction computation under Section 80IA was a key point of contention. The appellant argued for the aggregation of all units to compute deductions under Section 80IA(1) for eligible businesses. The appellant referenced previous court decisions and the applicability of Section 80IA(5) to eligible businesses as a whole, not individual units. The appellant also highlighted the Tribunal's error in not considering the entirety of the energy generation business as one undertaking or enterprise, leading to a misinterpretation of the deduction provisions.In summary, the judgment involved a detailed analysis of the interpretation of Section 80IA and Section 14A of the Income Tax Act, focusing on deduction computation, expenditure disallowance, and the aggregation of profit-making and loss-making units. The court addressed the arguments presented by both parties, considered relevant case law, and ultimately ruled against the revenue, upholding the decisions made by the Commissioner of Income Tax (Appeals) and the Tribunal. The judgment emphasized the importance of factual findings by the Tribunal and the necessity for questions of law to be rooted in pleadings and sustainable facts for High Court intervention.