Section 80-IA(5)

Section 80-IA(5) — the law in short

What the courts have decided on section 80-IA(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Reliance Energy Ltd Supreme CourtHelps taxpayer
  My section 80-IA deduction is larger than my business income. Can I set it against my other income too, or only against business income?
  Against gross total income, subject to the Chapter VI-A ceiling. The Supreme Court held that section 80AB deals only with computing the deduction on net income and cannot be read as curtailing the width of section 80-IA. Section 80-IA(5) is confined to determining the quantum of the deduction by treating the eligible business as the only source of income; it cannot be pressed into service to read a limitation confining the deduction under sub-section (1) to business income. Section 80A(1) allows the Chapter VI-A deductions from gross total income and section 80A(2) caps the aggregate at gross total income. The Revenue's appeals were dismissed on this issue.
• Pr. CIT-2 v The Tata Power Company Ltd High CourtHelps taxpayerValidity unconfirmed
  Our eligible undertaking made losses in its early years which were absorbed against our other income. Can the officer bring them back notionally under s.80-IA(5), and can we pick which year is the initial assessment year?
  The Bombay High Court held that the assessee may choose its initial assessment year within the eligible window under s.80-IA(2), and that once that choice is made, depreciation and losses of the eligible undertaking already absorbed against other income in earlier years are not notionally revived under s.80-IA(5) to wipe out the deduction. It relied on CBDT Circular No. 1 of 2016, its own earlier decisions in Hercules Hoists and B.G. Chitale, and the Madras High Court in G.R.T. Jewellers.
• ACIT v Goldmine Shares and Finance Pvt Ltd ITATHelps departmentValidity unconfirmed
  My windmill unit's early losses were already set off against my share trading profits. Must I now notionally bring those losses back and reduce the unit's profit before claiming section 80-IA?
  Yes, on this Special Bench view. The Ahmedabad Special Bench answered the reference in favour of the Revenue: because of section 80-IA(5), the profit of the eligible business for computing the deduction must be arrived at after deducting the notional brought forward losses and depreciation of that business, even though they were actually allowed as a set off against other income in earlier years. The sub-section creates a fiction that the eligible business is the assessee's only source of income, and a fiction must be carried to its logical conclusion. The fiction cuts both ways - other units' losses cannot reduce the eligible profit either - and the deduction remains limited to gross total income.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.