COMMISSIONER OF INCOME TAX-I vs. M/s RELIANCE ENERGY LTD. (FORMERLY BSES LTD.) THROUGH ITS M.D. [APRIL 28, 2021].

CITATION	AIR 2021 SUPREME COURT 2151
DATE OF JUDGMENT	28 April, 2021
COURT	Supreme Court
APPELLANT	Commissioner of Income Tax-I
RESPONDENT	M/s. Reliance Energy Ltd.(Formerly BSES Ltd.) through its M.D.
BENCH	Vineet Saran J , L. Nageswara Rao J

INTRODUCTION

This case primarily pertains to the Income Tax Act, 1961 which is an important law dealing with taxation matters. It involves a dispute related to deductions between the appellant & the respondent. Commissioner of Income Tax is the appellant in the current case who has filed an appeal against the respondent Reliance Energy Limited represented by their Managing Director. Firstly an appeal was filed in the Income Tax Appellate Tribunal where it was partly allowed and then it was filed in the High Court which again upholds the decision of the Appellate Tribunal.

FACTS OF THE CASE

As per the facts of this case it’s a pure case of taxation law. It basically revolves around the sections 80AB, 80-IA given under Part VI-A of the Income Tax Act, 1961. In this case the respondent having business of power generation, purchase & distribution is the assessee or the taxpayer. According to the assessment proceedings of AY 2002-03, the assessee asserted that deduction under section 80-IA should be allowed to the extent of “gross total income”. But the learned Assessing Officer (Id. AO) rejected the claim of the assessee and held that the actual deduction allowable should be restricted to the extent of “income from business” as per provisions of Section 80AB of the Act. The assessee disturbed with this interpretation filed an appeal before the Commissioner of Income Tax. The Commissioner of Income Tax partly allowed the appeal and reversed the order of the Assessing Officer ordering him to not restrict the deduction admissible under section 80-IA of the Act to income only under the business head. The direction given by the Commissioner of Income Tax was upheld by the Income Tax Appellate Tribunal & also the High Court. Because of this reason the Revenue filed an appeal before the Honorable Supreme Court.

ISSUES RAISED

The main issues in this case are as follows:-

1. Whether the deduction under section 80-IA be calculated only through the business income of the assessee?
2. Whether other profits & gains of the assessee earned through other sources also be taken into consideration?
3. What will be the right interpretation of section 80AB?

CONTENTIONS OF APPELLANT

1. Learned senior counsel Mr.Ajay Vohra was representing the assessee in the current case.
2. The assessee argued that the decision of the Assessing Officer that the deduction under section 80-IA be restricted only to the income from business activity should be set aside.
3. It also contended that the interpretation of the Assessing Officer which stated that a deduction under a particular section should be limited to the income generated from that particular section is also wrong.
4. It also asserted that application of section 80AB is only limited to calculation of deduction on the basis of net income.

CONTENTIONS OF RESPONDENT

1. Learned senior counsel Mr.Arijit Prasad was representing Revenue the respondents in the current case.
2. They contended that the deduction under section 80-IA of the income Tax Act 1961 should be restricted to income from business only.
3. It argued that calculation of deduction should be strictly limited to profits & gains from the eligible business.

JUDGMENT

After carefully considering the contentions put forth by both the parties the Supreme Court took the decision of dismissing the appeal filed by the Revenue. In its rulings the Supreme Court declared that the deductions under section 80-IA of the Income Tax Act, 1961 cannot be limited solely to income generated from business activities only as the only source of income. While deciding this judgment the Supreme Court relied on its decision given in the case of Synco Industries Ltd v Assessing Officer, Income Tax, Mumbai.

ANALYSIS

This case is a good example highlighting the interpretation of major sections related to deductions of the Income Tax Act 1961. It focuses on the amount on which the deductions can be given. It mostly elaborates sections 80AB which talks about the deductions to be made with reference to the income and section 80-IA which talks about deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Both the sections are included in under Part IV-A of the Act. While giving this decision the Supreme Court has taken reference of many other relevant and related cases decided by it and this case has itself become an important precedent for interpreting the crucial sections of the Act.

CONCLUSION

In conclusion, it can be stated that the imperative aspects relating to significant provisions of the Income Tax Act 1961 have been properly examined and discussed in this case. The Supreme Court has upheld the findings established by the respondent, which were also upheld by both the Income Tax Appellate Tribunal and the High Court. This further provides a strong legal precedent for future cases involving similar circumstances related to interpretation of section 80AB & 80-IA under the Income Tax Act 1961.

REFERENCES

1. Indiankanoon

https://indiankanoon.org/doc/47673931

2. SCV & Co. LLP

https://www.scvindia.com

This Article is written by Pushkarni Nandkumar Bhagwat student of DES’s.Shri.Navalmal Firodia Law College, Pune, Intern at Legal Vidhiya.

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