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2016 (4) TMI 528 - MADRAS HIGH COURT

2016 (4) TMI 528 - MADRAS HIGH COURT - TMI - Eligibility of deduction under Section 80IA - Held that:- The appellant is engaged in the business of yarn and textile brokerage and in the generation of power through windmills 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, .....

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venue as against the order of the Income Tax Appellate Tribunal. The core issue raised in this Tax Case (Appeal) is whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. 2. Though it is brought to the notice of this Court that the issue involved in this appeal has already been decided by this Court in the decision reported in Velayudhaswamy Spinning .....

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under Chapter VIA of the Income Tax Act, placed reliance on the decision reported in Liberty India Vs CIT [2009) 317 ITR 218 (SC)], wherein the Supreme Court considered the scope of Sections 80I, 80IA and 80IB of the Income Tax Act and held that Chapter VI-A provides for incentives in the form of tax deductions essentially belong to the category of "profit-linked incentives". This Court also placed reliance on the decision reported in CIT - Vs - Mewar Oil and General Mills Ltd. [2004) .....

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"From a reading of the above, it is clear that the benefit is given to the profits and gains derived from the business of the hotel or the business of repairs to ocean-going vessels or other powered craft. The deduction is allowed to the extent of 20 per cent. from the profits and gains of the assessee. Sub-section (5) gives deduction for the period of seven assessment years immediately succeeding the initial assessment year. Sub-section (6) deals with computing the deduction under sub-sec .....

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on of the new industry need not be taken into consideration once they have been set off from other sources of income earlier. In the present case, we are concerned with the provision of section 80-IA. The said provision was introduced by the Finance Act, 1999, with effect from April 1, 2000. The provisions of sections 80-I and 80-IA are also more or less identically worded. Sections 80-I and 80-IA come in Chapter VI-A of the Income-tax Act. Chapter VI-A deals with deductions to be made in comput .....

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cluded in the gross total income", which reads as follows : "Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C-Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of .....

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ction under that section, the amount of income of that nature as computed in accordance with the provision of this Act shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in the gross total income. Section 80AB defines "gross total income" which means the total income has to be computed in accordance with the Act before making deduction under this Chapter. Heading "B" deals with "deductions in .....

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India v. CIT [2009] 317 ITR 218 (SC); [2009] 225 CTR (SC) 233 ; [2009] 28 DTR (SC) 73, the apex court considered the scope of sections 80-I, 80-IA and also section 80-IB of the Act, wherein, it has been held that Chapter VI-A provides for incentives in the form of tax deductions essentially belong to the category of "profit-linked incentives". Therefore, when Section 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts th .....

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the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business) there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to hundred per cent. of the profits and gains derived from such business for ten consecutive assessm .....

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sion or distribution or power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines. (4) This section applies to- (i) any enterprise carrying on the business of (i) developing, or (ii) operating and maintaining, or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely: (a) it is owned by a company registered in India or by a consortium of such companies (or by an authority or .....

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hstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assess .....

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allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent. of the profits and gains derived from such business for ten consecutive assessment years. Deduction is given to eligible business and the same is defined in sub-section (4). Sub-section (2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised, if it is not exercised, the assessee will not be getting the benefit. Fifteen years is .....

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ar" referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under : "(1) It starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored ; (2) It is for the purpose of determining the quantum of deduction ; (3) For the assessment year immediately succeeding the initial assessment year ; (4) It is a deeming provision ; (5) Fiction created that the eligible business is the .....

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f earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other in .....

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r, the assessee exercised the option under section 80-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the year. The unreported judgment of this court cited supra considered the scope of sub-section .....

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w on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 1984-85, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income-tax (Appeals), which has not been di .....

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s or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-I for the purpose of computing admissible deductions thereunder. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under section 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no ca .....

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all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-I for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view. The standing counsel appearing for the Revenue is unable to bring to our notice any relevant material or any compelling reason or any contra judgment of other courts to .....

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he losses, depreciation and investment allowance of earlier years in respect of the new industrial undertaking, ship or approved hotel will be taken into account in determining the quantum of deduction admissible under the new section 80-I even though they may have been set off against the profits of the taxpayer from other sources." We are not agreeing with the counsel for the Revenue. We are, therefore, of the view that loss in the year earlier to the initial assessment year already absor .....

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