Learned Counsel Appearing For The Assessee Submitted That Theissue Involved In This Appeal Has Already Been Decided By This Courtin The Decision Reported In (20 v. Asst. Cit) And Hence The Same May Be Followedin This Case Also

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE R.SUDHAKARANDTHE HONOURABLE MRS.JUSTICE S.VIMALA Commissioner of Income TaxNo.63, Race Course RoadCoimbatore. .. Appellant M/s. Best Corporation Ltd.No.89/2, Best Industrial EstateAvinashi RoadTirupur – 641 603... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act,1961 as against the order dated 10.09.2014 made in I.T.A.No.722/Mds/2014 on the file of the Income Tax Appellate Tribunal,Madras 'B' Bench for the assessment year 2009-2010. As against the Order of the Commissioner of Income Tax (Appeals)-II Coimbatore, made in Appeal No.167/11-12 dated 24.12.2013, asagainst the order of the Joint Commissioner of Income Tax TirupurRange, Tirupur, for the Assessment Year 2009-10, dated 26.12.2011. For Appellant : Mr. T.R.Senthil Kumar Mr. R.Kumar, learned counsel takes notice for therespondent/assessee. By consent of both parties, the Tax Case(Appeal) itself is taken for disposal, since the issue involved inthis Tax Case (Appeal) is covered by a decision of this Court. 2. This Tax Case (Appeal) is filed by the Revenue as against theorder of the Income Tax Appellate Tribunal. The core issue raised inthis Tax Case (Appeal) is whether, on the facts and in thecircumstances of the case, the Tribunal is right in law in holdingthat the respondent/assessee is entitled to claim deduction underhttps://hcservices.ecourts.gov.in/hcservices/ section 80-IA of the Income Tax Act. 3. Learned counsel appearing for the assessee submitted that theissue involved in this appeal has already been decided by this Courtin the decision reported in (2012) 340 ITR 477 (VelayudhaswamySpinning Mills - Vs - Asst. CIT) and hence the same may be followedin this case also. 4. It is stated by the learned Standing Counsel appearing for theRevenue that as against the decision rendered by this Court in thecase of Velayudhaswamy Spinning Mills - Vs - Asst. CIT reported in(2012) 340 ITR 477, the Revenue preferred appeals before the SupremeCourt and the same are pending. 5. Heard learned counsel appearing for the assessee and thelearned Standing Counsel appearing for the Revenue and perused thematerials placed before this Court. 6. In the decision reported in (2012) 340 ITR 477 (VelayudhaswamySpinning Mills - Vs - Asst. CIT), this Court, while dealing with thebenefit under Chapter VIA of the Income Tax Act, placed reliance onthe decision reported in (2009) 317 ITR 218 (SC) (Liberty India - Vs- CIT), wherein the Supreme Court considered the scope of Section80I, 80IA and 80IB of the Income Tax Act and held that Chapter VI-Aprovides for incentives in the form of tax deductions essentiallybelong to the category of "profit-linked incentives". This Courtalso placed reliance on the decision reported in (2004) 271 ITR 311(Raj) (CIT - Vs - Mewar Oil and General Mills Ltd.), and came to theconclusion that once the losses and other deduction have set offagainst the income of the previous year, it should not be reopenedagain for the purpose of computation of current year income underSection 80I or 80IA of the Income Tax Act and the assessee should notbe denied the admissible deduction under Section 80IA of the IncomeTax Act. 7. For better understanding of the decision, we extract therelevant portion of the decision of this Court as such: 7. For better understanding of the decision, we extract therelevant portion of the decision of this Court as such: "From a reading of the above, it is clear that thebenefit is given to the profits and gains derived fromthe business of the hotel or the business of repairs toocean-going vessels or other powered craft. Thededuction is allowed to the extent of 20 per cent. fromthe profits and gains of the assessee. Sub-section (5)gives deduction for the period of seven assessmentyears immediately succeeding the initial assessmentyear. Sub-section (6) deals with computing thededuction under sub-section (1) and it starts with nonobstante clause and also it is a deeming provision. Thefiction created by the undertaking was the only sourceof income during the previous year initially andsubsequent assessment years. Sub-section (6) was thesubject-matter before this court in the above-mentionedhttps://hcservices.ecourts.gov.in/hcservices/ unreported judgment, wherein this court had held thatwhile interpreting the above provision, for the purposeof allowing deduction under section 80-I broughtforward losses and unabsorbed depreciation of the newindustry need not be taken into consideration once theyhave been set off from other sources of income earlier.In the present case, we are concerned with theprovision of section 80-IA. The said provision wasintroduced by the Finance Act, 1999, with effect fromApril 1, 2000. The provisions of sections 80-I and 80-IA are also more or less identically worded. Sections80-I and 80-IA come in Chapter VI-A of the Income-taxAct. Chapter VI-A deals with deductions to be made incomputing total income. There are two tax incentivescontemplated in Chapter VI-A. One is investmentincentive and the other one is profit-linkedinvestment. Chapter VI-A was introduced by the FinanceAct, 1965, with effect from April 1, 1965, and itconsists of four headings. They are A, B, C and D.Heading "A" is general and it also contains definition.It consists of sections 80A, 80AA, 80AB, 80AC and 80B.Section 80AB deals with "Deductions to be made withreference to the income included in the gross totalincome", which reads as follows : "Where any deduction is required to be made orallowed under any section included in thisChapter under the heading 'C-Deductions inrespect of certain incomes' in respect of anyincome of the nature specified in that sectionwhich is included in the gross total income ofthe assessee, then, notwithstanding anythingcontained in that section, for the purpose ofcomputing the deduction under that section, theamount of income of that nature as computed inaccordance with the provisions of this Act(before making any deduction under this Chapter)shall alone be deemed to be the amount of incomeof that nature which is derived or received bythe assessee and which is included in his grosstotal income." A mere reading of the above provision makes it clearthat any income of the nature specified in thatsection, which is included in the gross total income ofthe assessee for the purpose of computing the deductionunder that section, the amount of income of that natureas computed in accordance with the provision of thisAct shall alone be deemed to be the amount of income ofthat nature which is derived or received by theassessee and which is included in the gross totalincome. Section 80AB defines "gross total income" whichmeans the total income has to be computed in accordancewith the Act before making deduction under this https://hcservices.ecourts.gov.in/hcservices/ A mere reading of the above provision makes it clearthat any income of the nature specified in thatsection, which is included in the gross total income ofthe assessee for the purpose of computing the deductionunder that section, the amount of income of that natureas computed in accordance with the provision of thisAct shall alone be deemed to be the amount of income ofthat nature which is derived or received by theassessee and which is included in the gross totalincome. Section 80AB defines "gross total income" whichmeans the total income has to be computed in accordancewith the Act before making deduction under this https://hcservices.ecourts.gov.in/hcservices/ Chapter. Heading "B" deals with "deductions in respectof certain payments" which consists of sections 80C to80GGC. Heading "C" deals with "deductions in respect ofcertain incomes", which consists of sections 80H to80TT. The last heading "D" deals with "otherdeductions" which consists of sections 80U to 80V.Heading "C" is relevant for considering the issue inthese appeals. The relevant provisions that are to beconsidered are sections 80-I, 80-IA and 80-IB. In thecase of Liberty India v. CIT [2009] 317 ITR 218 (SC) ;[2009] 225 CTR (SC) 233 ; [2009] 28 DTR (SC) 73, theapex court considered the scope of sections 80-I, 80-IAand also section 80-IB of the Act, wherein, it has beenheld that Chapter VI-A provides for incentives in theform of tax deductions essentially belong to thecategory of "profit-linked incentives". Therefore, whensection 80-IA/80-IB refers to profits derived fromeligible business, it is not the ownership of thatbusiness which attracts the incentives. Further, it hasbeen held that sections 80-IB/80-IA are the code bythemselves as they contain both substantive as well asprocedural provisions. The Supreme Court furtherobserved in the said judgment that sub-section (5) ofsection 80-IA provides for manner of computation ofprofits of an eligible business. Accordingly suchprofits are to be computed as if such eligible businessis the only source of income of the assessee. Section 80-IA reads as follows : "80-IA. (1) Where the gross total income of anassessee includes any profits and gains derived byan undertaking or an enterprise from any businessreferred to in sub-section (4) (such businessbeing hereinafter referred to as the eligiblebusiness) there shall, in accordance with andsubject to the provisions of this section, beallowed in computing the total income of theassessee, a deduction of an amount equal tohundred per cent. of the profits and gains derivedfrom such business for ten consecutive assessmentyears. (2) The deduction specified in sub-section (1)may, at the option of the assessee, be claimed byhim for any ten consecutive assessment years outof fifteen years beginning from the year in whichthe undertaking or the enterprise develops andbegins to operate any infrastructure facility orstarts providing telecommunication service ordevelops an industrial park or develops a specialeconomic zone referred to in clause (iii) of sub-section (4) or generates power or commencestransmission or distribution or power orundertakessubstantialrenovationand https://hcservices.ecourts.gov.in/hcservices/ (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 anyinfrastructure facility which fulfils all thefollowing conditions, namely : (a) it is owned by a company registered in Indiaor by a consortium of such companies (or by anauthority or a board or a corporation or any otherbody established or constituted under any Centralor State Act) ; https://hcservices.ecourts.gov.in/hcservices/ (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 anyinfrastructure facility which fulfils all thefollowing conditions, namely : (a) it is owned by a company registered in Indiaor by a consortium of such companies (or by anauthority or a board or a corporation or any otherbody established or constituted under any Centralor State Act) ; (b) it has entered into an agreement with theCentral Government or a State Government or alocal authority or any other statutory body for(i) developing, or (ii) operating and maintaining,or (iii)developing, operating and maintaining anew infrastructure facility ; (c) it has started or starts operating andmaintaining the infrastructure facility on orafter the 1st April, 1995. (5) Notwithstanding anything contained in anyother provision of this Act, the profits and gainsof an eligible business to which the provisions ofsub-section (1) apply shall, for the purposes ofdetermining the quantum of deduction under thatsub-section for the assessment year immediatelysucceeding the initial assessment year or anysubsequent assessment year, be computed as if sucheligible business were the only source of incomeof the assessee during the previous year relevantto the initial assessment year and to everysubsequent assessment year up to and including theassessment year for which the determination is tobe made." From a reading of sub-section (1), it is clear thatit provides that where the gross total income of anassessee includes any profits and gains derived by anundertaking or an enterprise from any business referredto in subsection (4), i.e., referred to as the eligiblebusiness, there shall, in accordance with and subjectto the provisions of the section, be allowed, incomputing the total income of the assessee, a deductionof an amount equal to 100 per cent. of the profits andgains derived from such business for ten consecutiveassessment years. Deduction is given to eligiblebusiness and the same is defined in sub-section (4).Sub-section (2) provides option to the assessee to https://hcservices.ecourts.gov.in/hcservices/ choose 10 consecutive assessment years out of 15 years.Option has to be exercised, if it is not exercised, theassessee will not be getting the benefit. Fifteen yearsis outer limit and the same is beginning from the yearin which the undertaking or the enterprise develops andbegins to operate any infrastructure activity, etc.Sub-section (5) deals with quantum of deduction for aneligible business. The words "initial assessment year"are used in sub-section (5) and the same is not definedunder the provisions. It is to be noted that "initialassessment year" employed in sub-section (5) isdifferent from the words "beginning from the year"referred to in sub-section (2). The important factorsare to be noted in sub-section (5) and they are asunder : "(1) It starts with a non obstante clause whichmeans it overrides all the provisions of the Actand other provisions are to be ignored ; (2) It is for the purpose of determining thequantum of deduction ; (3) For the assessment year immediatelysucceeding the initial assessment year ; (4) It is a deeming provision ; (5) Fiction created that the eligible businessis the only source of income ; and (6) During the previous year relevant to theinitial assessment year and every subsequentassessment year." "(1) It starts with a non obstante clause whichmeans it overrides all the provisions of the Actand other provisions are to be ignored ; (2) It is for the purpose of determining thequantum of deduction ; (3) For the assessment year immediatelysucceeding the initial assessment year ; (4) It is a deeming provision ; (5) Fiction created that the eligible businessis the only source of income ; and (6) During the previous year relevant to theinitial assessment year and every subsequentassessment year." From a reading of the above, it is clear that theeligible business were the only source of income,during the previous year relevant to the initialassessment year and every subsequent assessment years.When the assessee exercises the option, the only lossesof the years beginning from initial assessment yearalone are to be brought forward and no losses ofearlier years which were already set off against theincome of the assessee. Looking forward to a period often years from the initial assessment is contemplated.It does not allow the Revenue to look backward and findout if there is any loss of earlier years and bringforward notionally even though the same were set offagainst other income of the assessee and the set offagainst the current income of the eligible business.Once the set off is taken place in earlier year againstthe other income of the assessee, the Revenue cannotrework the set off amount and bring it notionally. Afiction created in sub-section does not contemplates tobring set off amount notionally. The fiction is createdonly for the limited purpose and the same cannot beextended beyond the purpose for which it is created. https://hcservices.ecourts.gov.in/hcservices/ In the present cases, there is no dispute that lossesincurred by the assessee were already set off andadjusted against the profits of the earlier years.During the relevant assessment year, the assesseeexercised the option under section 80-IA(2). In TaxCase Nos. 909 of 2009 as well as 940 of 2009, theassessment year was 2005-06 and in Tax Case No. 918 of2008 the assessment year was 2004-05. During therelevant period, there were no unabsorbed depreciationor loss of the eligible undertakings and the same werealready absorbed in the earlier years. There is apositive profit during the year. The unreportedjudgment of this court cited supra considered the scopeof sub-section (6) of section 80-I, which is thecorresponding provision of sub-section (5) of section80-IA. Both are similarly worded and, therefore, weagree entirely with the Division Bench judgment of thiscourt cited supra. In the case of CIT v. Mewar Oil andGeneral Mills Ltd. (No. 1) [2004] 271 ITR 311 (Raj) ;[2004] 186 CTR (Raj) 141, the Rajasthan High Court alsoconsidered the scope of section 80-I and held asfollows (page 314 of 271 ITR) : "Having considered the rival contentions whichfollow on the line noticed above, we are of theopinion that on finding the fact that there wasno carry forward losses of 1983-84, which couldbe set off against the income of the currentassessment year 1984-85, the recomputation ofincome from the new industrial undertaking bysetting off the carry forward of unabsorbeddepreciation or depreciation allowance fromprevious year did not simply arise and on thefinding of fact noticed by the Commissioner ofIncome-tax (Appeals), which has not beendisturbed by the Tribunal and challenged beforeus, there was no error much less any errorapparent on the face of the record which could berectified. That question would have been germaneonly if there would have been carry forward ofunabsorbeddepreciationandunabsorbeddevelopment rebate or any other unabsorbed lossesof the previous year arising out of the priorityindustry and whether it was required to be setoff against the income of the current year. It isnot at all required that losses or otherdeductions which have already been set offagainst the income of the previous year should bereopened again for computation of current incomeunder section 80-I for the purpose of computingadmissible deductions thereunder. In view thereof, we are of the opinion that theTribunal has not erred in holding that there was https://hcservices.ecourts.gov.in/hcservices/ no rectification possible under section 80-I inthe present case, albeit, for reasons somewhatdifferent from those which prevailed with theTribunal. There being no carry forward ofallowable deductions under the head depreciationor development rebate which needed to be absorbedagainst the income of the current year and,therefore, recomputation of income for thepurpose of computing permissible deduction undersection 80-I for the new industrial undertakingwas not required in the present case. Accordingly, this appeal fails and is herebydismissed with no order as to costs." From a reading of the above, the Rajasthan High Courtheld that it is not at all required that losses orother deductions which have already been set offagainst the income of the previous year should bereopened again for computation of current income undersection 80-I for the purpose of computing admissibledeductions thereunder. We also agree with the same. Wesee no reason to take a different view. The standing counsel appearing for the Revenue isunable to bring to our notice any relevant material orany compelling reason or any contra judgment of othercourts to take a different view. He only relied heavilyon the Memorandum explaining the provisions in theFinance (No. 2) Bill, 1980, [1980] 123 ITR (St.) 154 tosupport this case and the same reads as follows : "Clause 30(iii). In computing the quantum of 'taxholiday' profits in all cases, taxable income derivedfrom the new industrial units, etc., will be determinedas if such units were an independent unit owned by ataxpayer who does not have any other source of income.In the result, the losses, depreciation and investmentallowance of earlier years in respect of the newindustrial undertaking, ship or approved hotel will betaken into account in determining the quantum ofdeduction admissible under the new section 80-I eventhough they may have been set off against the profitsof 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 yearearlier to the initial assessment year already absorbedagainst the profit of other business cannot benotionally brought forward and set off against theprofits of the eligible business as no such mandate isprovided in section 80-IA(5). Under these circumstances, we set aside the order ofthe Tribunal and answer all the questions in favour ofthe appellant/assessee and against the Revenue in TaxCase Nos. 909 and 940 of 2009 respectively.https://hcservices.ecourts.gov.in/hcservices/ Accordingly, tax cases are allowed." 8. It is relevant to note that as against the above-saiddecision rendered by this Court, the Revenue has filed appeals beforethe Supreme Court, which are stated to be pending, in which, onlynotice was ordered and were not yet admitted by the Supreme Court. 9. The facts in the present case are also identical to theabove-said decision of this Court that all the business undertakingsare wind mills and they have claimed the benefit of deduction underSection 80IA of the Income Tax Act for the assessment years inquestion and for the subsequent years as well. Having exercisedtheir option and their losses have been set off already against otherincome of the business enterprise, the assessee in this appeal fallswithin the parameters of Section 80IA of the Income Tax Act. In thedecision reported in (2012) 340 ITR 477 (Velayudhaswamy SpinningMills - Vs - Asst. CIT), there appears to be no distinction on facts. 10. Again in a batch of cases in T.C.(A)Nos.408 of 2012, byorder dated 12.1.2015, this Court, following the decision reported in(2012) 340 ITR 477 (Velayudhaswamy Spinning Mills - Vs - Asst. CIT)held in favour of the assessee and against the Revenue. 11. We, therefore, taking note of the decision rendered by thisCourt in the case of Velayudhasamy Spinning Mills (supra) and in abatch of cases in T.C.(A)Nos.408 of 2012, are inclined to dismissthis Tax Case (Appeal) and, thereby, confirm the order passed by theTribunal. 12. In view of the above, the questions of law raised in thisappeal are answered against the Revenue and in favour of theassessee. This Tax Case (Appeal) stands dismissed. No costs.Consequently, connected miscellaneous petition is closed. Sd/-Assistant Registrar GLNTo 1.The Income Tax Appellate TribunalMadras 'B' Bench Chennai. 2.The Commissioner of Income Tax,Appeals II, Coimbatore. 3.The Joint Commissioner of Income Tax Tripur Range, Tirupur. https://hcservices.ecourts.gov.in/hcservices/