The Tax Publishers2020 TaxPub(DT) 1415 (Guj-HC) : (2020) 424 ITR 0498 : (2020) 315 CTR 0778 : (2020) 275 TAXMAN 0432

INCOME TAX ACT, 1961

Section 80-IA read with Section 79

When the loss of earlier years had already lapsed, then the same could not 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 under section 80-IA(1).

Deduction under section 80-IA - Profits and gains derived from telecommunication services - Non-consideration to losses lapsed due to change in shareholding -

Assessee-company was a telecommunication service provider claimed 100% deduction under section 80-IA in respect of the profits derived from the telecommunication services. Assessee filed its return of income for the assessment year 2005-2006 declaring total income at Rs. Nil. It computed the gross total income after reducing its carry forward losses and unabsorbed depreciation after the assessment year 2001-2002. The company did not claim the losses prior to 2001-2002 during which the change in the shareholding took place by applying the provision of section 79. According to AO, the quantum of deduction available to assessee under section 80-IA(4)(ii) was to be computed as per the provisions of section 80-IA(5) without the application of the provisions of section 79 of the Act, 1961. Held: When there was no issue of any strict or otherwise literal construction of the provisions of the Act, the application of section 80-IA(5) to deny the effect of provisions of section 79 could not be sustained as per the Scheme of the Act,1961. When the loss of earlier years had already lapsed, then the same could not 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 under section 80-IA(1). The provision of section 80-IA(5) could not be invoked to ignore the provisions of section 79 by virtue of which the business loss of the assessee prior to year 2001-2002 had already lapsed. AO was, therefore, not justified in applying section 80-IA(5) so as to ignore the losses which had already lapsed by operation of section 79.

REFERRED : Synco Industries Ltd. v. AO, IT, Mumbai in 2008 (299) ITR 444; IPCA Laboratories Limited v. Dy. CIT, Mumbai in 2004 (266) ITR 521; CIT v. Ganga Corporation Asbestos (P) Ltd. in 2014 (366) ITR 582; CIT, Bangalore v. J.H. Gotla in 1985 (1560 ITR 323.

FAVOUR : In assessee's favour

A.Y. : 2005-06

IN THE GUJARAT HIGH COURT

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