For computing income u/s 80I or 80 IA only losses and deductions of eligible business has to be considered from initial A.Y.

 Brief of the case:

Madras High Court in CIT Vs K Rajinikanth (Madras High Court) held that for computing the income for calculating the deduction u/s 80IA, only the profits & Losses of the eligible business had to be taken into consideration as if it was the only business of the assessee. Further once the Losses were adjusted against the other income of the business enterprise, the same would not be reopened again for calculating the income for deduction u/s 80IA.

Facts of the case:

Assessee claimed deduction u/s 80IA of the current year without adjusting the previous year losses and other deductions because the same were already adjusted in the previous year with the other income of that business and were not related with the eligible business which AO disallowed on the basis that the previous year losses and other deductions had to adjusted before calculating the amount eligible for deduction u/s 80IA.

Contention of the assessee:

Assessee was of the view that as the past years losses and other deductions were already adjusted against the profits of past years and were not related with eligible business so the same should not be adjusted for computing the income of eligible business deduction u/s 80IA for current year because the income had to be calculated as if that was the only eligible business of the assessee.

Contention of the revenue:

Revenue was of the view that past year losses and other deductions had to be adjusted for computing the current year income for sec 80IA as the same also belongs to the assessee.

Held by High Court:

High Court held that the income of only eligible business for which the assessee was taking deduction u/s 80IA had to be considered from the initial assessment years which means that the business income for calculating the deduction u/s 80IA had to be calculated as it was the only business of the assessee and the assessee was not having any other income and the profits had to be considered from the initial assessment years i.e from the year in which the enterprise had started its operations.

More over once the losses were adjusted against the other income of previous years the same would not be reopened to calculate the deduction u/s 80IA of the current year.So the past year losses and other deductions which revenue was adjusting for calculating the eligible amount of deduction was already adjusted by the assessee in the past years or with the other income of previous year .

So the appeal of revenue was dismissed.