2025 (7) TMI 1383 - HC - Income Tax

Entitlement to claim deduction u/s 80IA without fully setting-off of unabsorbed depreciation of the past years - HELD THAT -Revenue fairly submitted that the said question of law is covered by Velayudha Swamy Spinning Mills P Ltd 2010 (3) TMI 860 - MADRAS HIGH COURT and held against the Revenue. As fairly stated that the special leave petition was also dismissed as reported in ACIT (Madras) vs. Velayudha Swamy Spinning Mills P Ltd 2016 (11) TMI 373 - SC ORDER . Exclusion of deduction u/s 80IA from the business profits for the purpose of computation of deduction u/s 80HHC - HELD THAT - The same issue was considered in Shital Fibres Ltd. 2025 (5) TMI 1599 - SUPREME COURT (LB) Associated Capsules (P) Ltd 2011 (1) TMI 787 - BOMBAY HIGH COURT and Micro Labs Ltd. 2015 (12) TMI 708 - SUPREME COURT and answered in favour of the assessee. Deduction in respect of the captive power generation plant - turbine to generate electricity was installed only to utilise the huge volume of low pressure steam needed for the process of manufacturing sugar - independent undertaking so as to be eligible to claim deduction under Section 80-IA(4)(iv) - HELD THAT - The same is covered by Jindal Steel and Power Ltd 2023 (12) TMI 417 - SUPREME COURT Tamil Nadu Petro Products 2010 (11) TMI 645 - MADRAS HIGH COURT Jay Chemical Industries Ltd. 2020 (3) TMI 231 - GUJARAT HIGH COURT .

Summary

ISSUES:

Whether deduction under Section 80-IA can be excluded from business profits for computing deduction under Section 80HHC, considering the prohibition of double allowance under Section 80-IA(9)?Whether an assessee is entitled to claim deduction under Section 80-IA without fully setting off unabsorbed depreciation of past years, despite such depreciation having been set off against other income, in light of Section 80-IA(5) which treats the eligible unit as the only source of income'Whether the Income Tax Appellate Tribunal was correct in allowing reduction of unabsorbed depreciation in a revised statement without filing a revised return, as per the Supreme Court ruling in GOETZE INDIA PVT. LTD'Whether deduction under Section 80-IA(4)(iv) is allowable for a captive power generation plant installed primarily to utilize low pressure steam in manufacturing, and thus not an independent undertaking?

RULINGS / HOLDINGS:

On the issue of exclusion of Section 80-IA deduction from business profits for Section 80HHC computation, the Court ultimately answered the question in favour of the assessee, relying on precedents including Shital Fibres Ltd and others, thereby rejecting the Revenue's position that double allowance was prohibited.Regarding the entitlement to claim deduction under Section 80-IA without fully setting off unabsorbed depreciation, the Court held against the Revenue, confirming that the eligible unit must be treated as the only source of income and unabsorbed depreciation must be notionally carried forward, consistent with Velayudha Swamy Spinning Mills P Ltd.The question of allowing reduction of unabsorbed depreciation without filing a revised return was deemed not to arise, given the settled position on unabsorbed depreciation from the ruling on Question No.2.Deduction under Section 80-IA(4)(iv) was held not to be allowable for the captive power generation plant, as it was not an independent undertaking but installed solely to utilize low pressure steam in the manufacturing process, consistent with precedents including Commissioner of Income Tax vs. Jindal Steel and Power Ltd.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, specifically Sections 80-IA, 80-IA(5), 80-IA(9), and 80HHC, interpreting the scope and interaction of deductions to prevent impermissible double claims while recognizing the treatment of eligible units as separate income sources.Precedential authority from the Supreme Court and High Courts was extensively relied upon, including rulings that clarified the non-allowance of double deductions and the treatment of unabsorbed depreciation for deduction claims.The Court corrected an earlier procedural misunderstanding regarding withdrawal of a question of law, emphasizing adherence to proper party representation and the binding nature of authoritative precedents.The interpretation of Section 80-IA(4)(iv) was doctrinally aligned with established principles that a captive power plant not independently engaged in business activities cannot claim deduction as an independent undertaking.