Set back to Bajaj Auto: ITAT allows Deduction u/s 80 IA of Income Tax Act after deducting Depreciation from Profits of eligible undertakings [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) delivered a setback to Bajaj Auto by allowing the deduction under Section 80 IA of the Income Tax Act 1961 only after deducting depreciation from the profits of eligible undertakings.

During the assessment process, the Assessing Officer ( AO ) computed the deduction allowable under Section 80 IA of the Income Tax Act 1961 by subtracting depreciation from the profits of the eligible undertakings.

The AO contended that depreciation, being of an expense nature, needed to be considered to arrive at the accurate income. Citing the precedent set by the Supreme Court in Mother India Refrigeration Industries Pvt. Ltd. vs CIT the eligible profit was recalculated, taking into account the depreciation allowable as per the Income Tax Act.

Section 80IA of the Income Tax Act, 1961 provided tax benefits to businesses that operate in infrastructure, power, telecommunication, and other specified sectors. This provision offers tax deductions and exempted to encourage businesses to invest in the mentioned sectors. Investments in these sectors help our country's economic growth, thus, the Income Tax department encourages it by providing tax exemptions.

Under Section 80IA of the Income Tax Act, 1961 eligible businesses can claim a tax exemption on their profits. The exemption amount is 100% of profits for the first five years from the year of commencement of operations. After the initial five-year period, the exemption amount reduces to 50% of the profits for the next five years.

However, this exemption was available only if profits are derived from eligible business activities. Any income generated from non-eligible activities will not qualify for the exemption.

The two member bench of the tribunal comprising Aby T varkey ( Judicial member ) and Amarjith Singh (Account member) noted that a similar issue with identical facts in the cases of the assessee has already been decided against the assessee for the Assessment Years 1993-94 to 1998-99, In line with the decision of the co-ordinate bench mentioned above, the appeal ground of the assessee was dismissed.   

Accordingly, appeal of the assessee stand dismissed.

To Read the full text of the Order CLICK HERE

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