COMMISSIONER OF INCOME TAX-I versus M/S. RELIANCE ENERGY LTD. (FORMERLY BSES LTD.) THROUGH ITS M.D.

Citation: [2021] 4 S.C.R. 190 · Decided: 28-04-2021 · Supreme Court of India · Bench: L. NAGESWARA RAO · Disposal: Disposed off
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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 4 S.C.R.
   [2021] 4 S.C.R. 190
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COMMISSIONER OF INCOME TAX-I
v.
M/s. RELIANCE ENERGY LTD.
(FORMERLY BSES LTD.) THROUGH ITS M.D.
(Civil Appeal No. 1327 of 2021)
APRIL 28, 2021
[L. NAGESWARA RAO AND VINEET SARAN, JJ.]
Income Tax Act, 1961: s.80-IA – Deduction under – Held:
The import of s.80-IA is that the ‘total income’ of an assessee is
computed by taking into account the allowable deduction of the
profits and gains derived from the ‘eligible business’ – There is no
limitation on deduction admissible under s.80-IA of the Act to income
under the head ‘business’ only.
Disposing of the appeals, the Court
Held: 1. A plain reading of Section 80AB of the Act shows
that the provision pertains to determination of the quantum of
deductible income in the ‘gross total income’. Section 80AB
cannot be read to be curtailing the width of Section 80-IA. Section
80A(1) stipulates that in computation of the ‘total income’ of an
assessee, deductions specified in Section 80C to Section 80U of
the Act shall be allowed from his ‘gross total income’. Sub-section
(2) of Section 80A of the Act provides that the aggregate amount
of the deductions under Chapter VI-A shall not exceed the ‘gross
total income’ of the Assessee. Section 80AB of the Act which
deals with determination of deductions under Part C of Chapter
VI-A is with respect only to computation of deduction on the basis
of ‘net income’. [Para 9][198-A-D]
2. The essential ingredients of Section 80-IA (1) of the Act
are: a) the ‘gross total income’ of an assessee should include
profits and gains; b) those profits and gains are derived by an
undertaking or an enterprise from a business referred to in sub-
section (4); c) the assessee is entitled for deduction of an amount
equal to 100% of the profits and gains derived from such business
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for 10 consecutive assessment years; and d) in computing the
‘total income’ of the Assessee, such deduction shall be allowed.
[Para 11][199-B-D]
3. The import of Section 80-IA is that the ‘total income’ of
an assessee is computed by taking into account the allowable
deduction of the profits and gains derived from the ‘eligible
business’. With respect to the facts of this Appeal, there is no
dispute that the deduction quantified under Section 80-IA is
Rs.492,78,60,973/-. The said amount represents the net profit
made by the Assessee from the ‘eligible business’ covered under
sub-section (4), i.e., from the Assessee’s business unit involved
in generation of power. The Assessee contends that income from
all other heads including ‘income from other sources’, in addition
to ‘business income’, have to be taken into account for the
purpose of allowing the deductions available to the Assessee,
subject to the ceiling of ‘gross total income’. The Appellate
Authority was correct in its view that there is no limitation on
deduction admissible under Section 80-IA of the Act to income
under the head ‘business’ only. [Para 12][199-D-H]
4. The question that arises further with reference to
allowing the deduction so computed to arrive at the ‘total income’
of the Assessee cannot be determined by resorting to
interpretation of sub-section (5). In the case in hand, there is no
discussion about Section 80-IA(5) by the Appellate Authority, nor
the Tribunal and the High Court. The scope of sub-section (5) of
Section 80-IA of the Act is limited to determination of quantum
of deduction under sub-section (1) of Section 80-IA of the Act by
treating ‘eligible business’ as the ‘only source of income’. Sub-
section (5) cannot be pressed into service for reading a limitation
of the deduction under sub-section (1) only to ‘business income’.
[Paras 13, 15][200-E-F; 202-A-B]
Cloth Traders (P) Ltd. v. Additional CIT, Gujarat-I
(1979) 3 SCC 538 : [1979] 3 SCR 984; Royal Cushion
Vinyl Products Ltd. v. Dy. Commissioner of Income Tax,
Mumbai (ITA No. 770/MUM/98) (6); Cambay Electric
Supply Industrial Co. Ltd. v. CIT (1978) 2 SCC 644 :
COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE
ENERGY LTD.
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[2021] 4 S.C.R.
[1978] 3 SCR 660; Synco Industries Ltd. v. Assessing
Officer, Income Tax, Mumbai & Anr. (2008) 4 SCC
22 : [2008] 4 SCR 919; Pandian Chemicals Ltd. v.
Commissioner of Income Tax, Madurai (2003) 5 SCC
590; CIT (Central), Madras v. Canara Workshops (P)
Ltd., Kodialball, Mangalore (1986) 3 SCC 538 : [1986]
3 SCR 166; Commissioner of Income-tax v. Tridoss
Laboratories Ltd. [2010]
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