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Deduction Under Section 80-IA Income Tax Act Not Limited To ‘Business Income’ Only: Supreme Court

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The Supreme Court on Wednesday has held that the scope of sub-section (5) of Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating ‘eligible business’ as the ‘only source of income.

In the instant case, the Assessing Officer restricted the eligible deduction under Section 80-IA of the Income Tax Act, 1961 to the extent of ‘business income’ only. The Commissioner of Income-Tax (Appeal)-I partly allowed the Appeal filed by the Assessee and reversed the order of the Assessing Officer on the issue of the extent of deduction under Section 80-IA of the Act. The Income Tax Appellate Tribunal, upheld the decision of the Appellate Authority on the issue of deduction under Section 80-IA. The High Court refused to interfere with the Tribunal’s order as far as the issue on deduction under Section 80-IA is concerned.

The SC bench comprising Justice L. Nageswara Rao and Justice Vineet Saran held that,” the scope of sub-section (5) of Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating ‘eligible business’ as the ‘only source of income’. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to ‘business income’. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase ‘derived … from’ in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act.”

The bench also observed that the import of Section 80-IA is that the ‘total income’ of an assessee is computed by taking into account the allowable deduction of the profits and gains derived from the ‘eligible business’. With respect to the facts of this Appeal, there is no dispute that the deduction quantified under Section 80-IA is Rs.492,78,60,973/-. To make it clear, the said amount represents the net profit made by the Assessee from the ‘eligible business’ covered under sub-section (4), i.e., from the Assessee’s business unit involved in generation of power.

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