DIGVIJAI POLYTEX PRIVATE LIMITED,RAJAPALAYAM vs. ACIT CORP CIRCLE, MADURAI

Facts in brief are that the appellant is engaged in the business of generating power from operation of wind mills and also deals in trading of PP bags. The assessee filed return dated 24.10.2019 declared income at Rs.9,40,640/- which was arrived by including income from business at Rs.4,64,927/- and income from other sources at Rs.22,09,887/- and by claiming deduction under section 80A(4) in respect of wind mill unit amounting to Rs.17,34,173/-. The CPC, Bangalore after processing return sent intimation under section 143(1) dated 01.05.2020 wherein the deduction under section 80IA(4) has been restricted to the extent of Rs.4,64,927/- as against Rs.17,34,173/- claimed by the appellant. Meaning thereby, deduction was disallowed of Rs.12,69,246/-. The assessing officer, CPC (‘AO’ in short) while restricting the claim under section 80IA as given the following reasons: ‘’In Schedule VIA under Part C deduction in respect of certain incomes in SINo2e deduction under section 801Α claimed is more than the amount shown in Schedule BP SINo39 Net Profit or loss from business or profession other than speculative business and specified business after applying rule 7A 7B or 8 if applicable If rule 7A 7B or 8 is not applicable enter same figure as in 38 if loss take the figure to 2i of item E’’.

On appeal, Ld.CIT(A) while dismissing the appeal held as under: ‘’6.1 From the above provisions, it is clear that the deduction under section 80-IA is available @100% of the profits and gains derived from eligible business. As per Scheme of the Act, the net profit or income from any business is to be computed as per the provisions contained in section 28 to 44 of the Act. The interest on deposits does not come under any of those provisions. Therefore, it cannot be said that the interest received on deposits with banks is a part of the profit of eligible business or an income from business. The appellant has itself shown the interest on deposits under the heads 'Income from other sources' in the return of income. Therefore, the interest on deposits with banks is undoubtedly is income from other sources and accordingly the same is not eligible for deduction under section 801A of the Act. Therefore, the CPC has rightly disallowed the deduction claimed by the appellant on this income to the extent of Rs. 12,69,246/-.’’

On further appeal before us, Ld.AR, Shri J Prabhakar CA, relied on the judgment of Hon’ble Supreme Court in the case of M/ Reliance Energy Ltd. [2021] 127 taxmann.com 69 (SC) and filed written submissions which are as under: ‘’1) The detailed Statement of Facts may be found in the Statement of Facts filed before the CIT(A), NFAC dated 07-02-2024. 2) The assessee filed the return of income for AY 2019-20 on 24-10-2019 declaring the taxable income of Rs.9,40,640/-. The Computation is as under.

The Hon’ble Supreme Court in the case of M/ Reliance Energy Ltd (supra) in para 12 held as under: ‘’12. 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. The claim of the Assessee is that in computing its 'total income', deductions available to it have to be set-of against the 'gross total income', while the Revenue contends that it is only the 'business income' which has to be taken into account for the purpose of setting-off the deductions under sections 80-IA and 80-IB of the Act. To illustrate, the 'gross total income' of the Assessee for the assessment year 2002-03 is less than the quantum of deduction determined under section 80-IA of the Act. The Assessee contends that income from all other heads including 'income from other sources', in addition to 'business income', have to be taken into account for the purpose of allowing the deductions available to the Assessee, subject to the ceiling of 'gross total income'. The Appellate Authority was of the view that there is no limitation on deduction admissible under section 80-IA of the Act to income under the head 'business' only, with which we agree’’.

We have gone through the record of the case and the judgment of Hon’ble Supreme Court referred supra. We are of the considered view that the judgment of the Hon’ble Supreme Court in the case of M/s Reliance Energy Ltd is applicable here in this case. In this case, gross total income of the assessee is Rs.26,74,814/- and assessee has claimed the entire profit of the windmill division of Rs.17,34,173/- which is within the permissible ceiling of ‘gross total income’ as per section 80IA. Therefore, respectfully following the judgment of Hon’ble Supreme Court in the case of M/ Reliance Energy Ltd, we allow the balance deduction of Rs.12,69,246/- under section 80IA of the Act. 7. In the result, the appeal filed by the assessee is allowed. Pronounced in open court on 20th day of June, 2024 at Chennai.