THE COMMISSIONER OF INCOME TAX V. M/S KARNATAKA POWER CORPORATION LTD.,

ITA/778/2009

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The case involves the Commissioner of Income-tax and the Additional Commissioner of Income-tax as appellants, against Karnataka Power Corporation Ltd. as the respondent. The core issue was the method of calculating deductions under Section 80IA of the Income-tax Act, 1961, for the Assessment Year 2005-2006. The assessee, Karnataka Power Corporation Ltd., had multiple units with varying profit and loss statuses. The Revenue contended that the overall profit and loss of all units should be considered collectively for the purpose of calculating deductions, whereas the Tribunal and the assessee argued for an undertaking-wise calculation. The High Court of Karnataka upheld the Tribunal's decision, referencing the judgment of the Apex Court and previous cases, confirming that each unit's profit or loss should be considered separately in the calculation of deductions under Section 80IA.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 701151 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-01-2015
• Assessment Year: misc
• Other Referred Cases: Synco Industries Co. vs. 299 ITR 444, Komarla Feeds and Foods Pvt. Ltd. vs. Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR
• Assessee Lawyers: K V ARVIND
• Keywords: Assessment Year; Deduction; Income Tax; Power generation; Profit and Loss; Undertaking-wise
• Section: 80IA; 260A

Judgement Text

"IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19th DAY OF JANUARY 2015 PRESENT THE HON’BLE MR. JUSTICE N.KUMAR AND THE HON’BLE MR. JUSTICE B.VEERAPPA I.T.A. NO.778/2009 BETWEEN : 1. The Commissioner Of Income-tax, C.R.Building, Queens Road, Bangalore. 2. The Addl. Commissioner Of Income-tax, Range-11, C.R.Building, Queens Road, Bangalore. ...APPELLANTS (By Sri.K.V.Arvind, Adv.) AND : M/s.Karnataka Power Corporation Ltd., No.82, Shakti Bhavan, - 2 - Race Course Road, Bangalore – 560 001. …RESPONDENT (By Sri.A.Shankar, Adv.) . . . . This I.T.A. is filed under Section 260A of the Income Tax Act, 1961, arising out of order dated 10.07.2009 passed in ITA No.294/BNG/2009, for the Assessment Year 2005-2006, praying to : (i) formulate the substantial questions of law stated therein, (ii) Allow the appeal and set-aside the order passed by the Income Tax Appellate Tribunal, Bangalore in I.T.A. No.294/BNG/2009, dated 10.07.2009, confirm the order of the Appellate Commissioner confirming the order passed by the Additional Commissioner of Income Tax, Range-11, Bangalore in the interest of justice. This I.T.A. coming on for hearing, this day, N.Kumar J., delivered the following: JUDGMENT The Revenue has preferred this appeal against the order of the Tribunal holding that the deduction under - 3 - Section 80IA of the Income-tax Act, 1961 (for short, hereinafter referred to as `the Act’) is to be computed undertakingwise, i.e., in the manner in which the assessee has claimed deduction. 2. The assessee – company is engaged in power generation. The assessee was having seven units in which power was being generated. Out of the seven units, the assessee has shown loss in two units. In one of the units, there is profit for the current year, but after adjusting brought forward loss, the resultant figure is the loss. Therefore, in respect of these three units, the assessee has not claimed deduction under Section 80IA of the Act. The assessee claimed deduction under Section 80IA on the four units and computed the deduction on the basis of the profits of the four units without setting off the loss of the three units. The - 4 - following chart shows the manner in which the assessee has claimed deduction under Section 80IA as under: Profit for the year 2515228379 Less: 80IA profit/loss relating to new projects B/F loss C.Y. profit C/f loss Profit adjusted KADRA -597730705 -114289444 -712020149 KODSALLI -347949850 -72736189 -420686039 BRBCPH -52301312 19356888 -32944424 RTPS V & VI 0 988423211 988423211 RTPS VII 0 276801817 276801817 GERUSOPA 0 653257975 653257975 ADPH 0 128667789 128667789 2047150792 468077587 Taxable profit for the year 468077587 3. The assessing authority held that as the assessee is only in the business of power generation, the profit and loss as obtained from all its seven units have to be considered and only the net/total has to be considered as eligible deduction. The assessee’s computation of eligible deduction of Rs.204,71,50,792/- by considering only four units is therefore, held to be erroneous. Aggrieved by the said order the assessee preferred an appeal to the Commissioner of Income-Tax - 5 - (Appeals). The said order of the assessing authority was upheld. Hence, the assessee preferred an appeal to the Tribunal. The Tribunal after referring to the judgment of the Apex Court, in the Synco Industries Co. case reported in 299 ITR 444 and also the judgments of the Special Bench of Ahmedabad, held that the deduction under Section 80IA of the Act is to be computed undertaking-wise. In case, there is a loss in an undertaking, then it will not be set off against the profit of another undertaking though loss for this undertaking will be adjusted against the profit in subsequent year in case the deduction is claimed under Section 80IA in respect of that unit. Therefore, it was held that the deduction is to be computed in the manner as claimed by the assessee. However the matter was remitted back to the assessing authority to ascertain the profit of each undertaking and to allow deduction under Section 80IA of the Act after considering those units, in which there - 6 - is profit after adjustment of brought forward loss of that unit. Aggrieved by the said order, Revenue is in appeal. 4. The appeal was admitted to consider the following substantial question of law: Whether the Tribunal was justified in holding that in granting deduction under Section 80IA of the Act, it is only the income of the loss making units should be taken into consideration and not all the units of the assessee, some of which were making profits? 5. This Court had an occasion to consider the said substantial question of law in I.T.A. No. 308/2009 in the case of Komarla Feeds and Foods Pvt. Ltd., Vs. Commissioner of Income-tax decided on 16th January, 2015, where this Court has answered the said substantial question of law in favour of the assessee and against the revenue. Following the said judgment - 7 - and also the judgment of the Apex Court which reference is made out above, the substantial question of law in this case is answered in favour of the assessee and against the revenue. Accordingly, appeal is dismissed. Sd/- JUDGE Sd/- JUDGE SPS "