Supreme Court Defers Verdict on Vodafone’s ₹191 Crore Income Tax Deduction Claim u/s 80IA [Read Order]

The Supreme Court recently deferred the final disposal of a dispute between theIncome Tax Department and Vodafone Essar Gujarat Limited (now known as Vodafone Idea Ltd.) over a deduction of ₹191,59,84,008 which was claimed under Section 80IA of the Income Tax Act, 1961.

The matter was listed before a bench of Justice Dipankar Datta and Justice Augustine George Masih which granted the Revenue two weeks to file a rejoinder and directed that the special leave petition be re-listed after three weeks.

The present Special Leave to Appeal (Civil) arose from a judgment delivered by the Gujarat High Court dated 3 March 2020 in Tax Appeal Nos. 65 of 2009 and 1191 of 2010.

The facts follow Vodafone - a prominent telecom services provider in India who had a change in shareholding in the year relevant to AY 2001–02 which attracted the provisions of Section 79 of the Income Tax Act and led to lapsing of earlier accumulated losses; the company earned profits in AY 2005–06 and claimed the Chapter VI-A deduction for the first time.

Senior counsel S.N. Soparkar with Bandish Soparkar appearing for Vodafone argued that the assessee had exercised the option for the initial assessment year and was therefore entitled to claim the deduction taking into account unabsorbed losses and depreciation available at the beginning of the block, relying on CBDT Circular No.1/2016.

Meanwhile, Manish Bhatt and Mauna M. Bhatt for the Revenue countered that Section 80IA(5), by its non-obstante clause, required computation of eligible business profits on a standalone basis and thus the effect of Section 79 could not be given. Those submissions are recorded in the High Court judgment.

The Division bench of Justice J.B. Pardiwala and Justice Bhargav D. Karia were tasked with examining whether the Assessing Officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal (ITAT) were correct in disallowing Vodafone’s claim of ₹191,59,84,008 under Section 80IA on the ground that Section 80IA(5) should be applied without giving effect to the provisions of Section 79.

The facts recorded in the High Court judgment show that Vodafone, a telecom services provider, had a change in shareholding in the year relevant to AY 2001–02 which engaged Section 79 and led to lapsing of earlier accumulated losses; the company earned profits in AY 2005–06 and claimed the Chapter VI-A deduction for the first time.

Senior counsel S.N. Soparkar and Bandish Soparkar appearing for Vodafone argued that the assessee had exercised the option for the initial assessment year and was therefore entitled to claim the deduction taking into account unabsorbed losses and depreciation available at the beginning of the block, relying also on CBDT Circular No.1/2016.

Meanwhile, Manish Bhatt and Mauna M. Bhatt appearing for the Revenue, countered that the non-obstante clause of section 80IA(5) would override the non-obstante clause of section 79

It was further submitted that the non-obstante clause of Section 80IA(5) required computation of eligible business profits on a standalone basis and thus there would be no effect of Section 79.

After detailed analysis of Sections 66, 72, 79, 80A and 80IA, the Gujarat High Court concluded that a plain reading of Section 80IA(5) does not permit to ignore losses that have lapsed by operation of Section 79 when computing gross total income prior to Chapter VI-A deductions.

The court held that the scheme of the Act requires application of carry-forward and set-off provisions and found against the approach that would mechanically ignore Section 79; the judgment thus provided the legal foundation on which the present special leave petition is contested.

The petition was contested before the Supreme Court and in its latest verdict dated 20.08.2025, the Court granted the petitioner two weeks’ time to file their rejoinder and ordered to re-list the petitioner after three weeks.

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