Case Law Details
Backdrop:- Section 80-IA of the Income-tax Act, 1961 (ITA) deals with tax holidays for eligible businesses. Sub-section (5) of section 80-IA of ITA provides that for the purpose of determining the quantum of the deduction, the profits of the eligible business shall be computed as if such eligible business were the only source of income of the taxpayer. This deeming fiction is applicable from the initial assessment year i.e. the first year of claim of the deduction.
Taxpayers carrying on specified eligible businesses have the option to claim the deduction in, any 10 consecutive assessment years out of a total eligible period of 15 years; in other words, the taxpayer can decide the first year of claim of the deduction i.e. the initial assessment year.
The consequence of treating the eligible business as the only source of income of the taxpayer in terms of section 80-IA(5) of ITA is that the brought forward losses and unabsorbed depreciation of the eligible business are to be set off against the profits of the eligible business for the purpose of determining the quantum of the deduction, whether or not the losses and depreciation have already been set off against profits of earlier years.
Issue before High Court
Whether the brought forward losses and unabsorbed depreciation of earlier years prior to the initial assessment year, which have already been set off against profits of earlier years, can be notionally carried forward and taken into consideration for computation of deduction under section 80-IA of ITA?
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