June 2019

Section 80-IA Deduction u/s. 80-IA Industrial undertaking Generation of power Assessee owning three units and claiming deduction in respect of one (eligible) unit Losses of earlier years of other two units cannot be notionally brought forward and set off against profits of eligible unit Unit entitled to deduction u/s. 80-IA to be treated as an independent unitSection 80-IA Deduction u/s. 80-IA Industrial undertaking Generation of power Assessee owning three units and claiming deduction in respect of one (eligible) unit Losses of earlier years of other two units cannot be notionally brought forward and set off against profits of eligible unit Unit entitled to deduction u/s. 80-IA to be treated as an independent unit

K. B. BHUJLE
Advocate

20

CIT vs. Bannari Amman Sugars Ltd.; 412 ITR 69 (Mad)

Date of order: 28th January, 2019

A.Y.: 2004-05

 

Section 80-IA Deduction u/s. 80-IA Industrial undertaking Generation of power Assessee owning three units and claiming deduction in respect of one (eligible) unit Losses of earlier years of other two units cannot be notionally brought forward and set off against profits of eligible unit Unit entitled to deduction u/s. 80-IA to be treated as an independent unit

 

The assessee manufactured and sold sugar. It operated three power generation units, two in Karnataka and one in Tamil Nadu with a capacity of 16, 20 and 20 megawatts, respectively. For the A.Y. 2004-05, the assessee claimed deduction u/s. 80-IA of the Income-tax Act, 1961 for the first time in respect of its 16 megawatts unit in Karnataka. The A.O. set off the losses suffered by the units in Karnataka and Tamil Nadu against the profits earned by the eligible unit and held that the assessee had no positive profits after such set-off and hence no deduction was liable to be granted u/s. 80-IA.

 

The Tribunal found that independent power purchase agreements were entered into by the assessee which contained different and distinct terms and conditions. It held that the provisions of section 80-IA were attracted only in the case of the specific unit which claimed deduction and that consolidating the profit and loss of the three units of the assessee by the lower authorities was untenable.

 

On appeal by the Revenue, the Madras High Court upheld the decision of the Tribunal and held as under:

 

i)   Section 80-IA(5) provides that in determining the quantum of deduction u/s. 80-IA, the eligible business shall be treated as the only source of income of the assessee during the previous year

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