8. Vodafone Essar
Gujarat Ltd. vs. ACIT [2020] 424 ITR 498
(Guj.) Date of order: 3rd
March, 2020 A.Ys.: 2005-06 and
2006-07
Special deduction u/s 80-IA of ITA, 1961 –
Telecommunications services – Computation of profits u/s 80-IA(1) – Change in
shareholding of company – Effect of section 79 – Losses which have lapsed
cannot be taken into account for purposes of section 80-IA
The assessee company, established in
1997-98, was in the business of providing cellular telecommunications services
in the State of Gujarat. During the previous year relevant to the A.Y. 2001-02,
there was a change in the shareholding of the assessee, as a result of which the provisions of section 79 of the IT Act, 1961 were made applicable and the accumulated losses from the A.Ys. 1997-98 to 2001-02 lapsed. The assessee made a claim for
deduction u/s 80IA for the first time for the A.Y. 2005-06. In the return of income, the assessee had shown total income of Rs. 191,59,84,008 and claimed the entire
amount as deduction u/s 80IA(4)(ii) of the Act. According to the A.O., the
quantum of deduction available to the assessee u/s 80IA(4)(ii) was to be
computed in accordance with the provisions of section 80IA(5), without the
application of the provisions of section 79.
This was upheld by the Commissioner
(Appeals) and the Tribunal.
On an appeal by the assessee, the Gujarat
High Court reversed the decision of the Tribunal and held as under:
‘i) The application of section 80IA(5) to deny the
effect of provisions of section 79 cannot be sustained. When the loss of
earlier years has already lapsed, it cannot be notionally carried forward and
set off against the profits and gains of the assessee’s business for the year
under consideration in computing the quantum of deduction u/s 80IA(1). The
provisions of section 80IA(5) cannot be invoked to ignore the provisions of
section 79.
ii)
The appeals are allowed. The impugned orders passed by the Tribunal in the
respective tax appeals are quashed and set aside. The substantial question is
answered in favour of the assessee and against the Revenue.’
