Reliance Energy Limited is in the business of the generation of power and is also involved in the purchase and distribution of power. The power unit for power generation was located in Dahanu. The company was an assesee for the assessment year 2002-03 for which the income-tax return was filed by the Assessee on 31.10.2002 declaring the total income as ‘NIL’. The assessee claimed deduction under Section 80-IA of the Act. The assesee was questioned by the Assessing officer for the same. An amount of Rs.5,46,26,01,224 was the revised claim given by assessee under section 80-IA of the Act. An amount 492,78,60,973/- of was determined by the assessing officer and stated that under Section 80B extends to 'income from business' for actual deductions. The 'Gross total income' of petitioner was amouting to Rs.397,37,70,178, in which business income amounts to 355,74,73,451/-. In the ‘gross total income’, Rs 41,62,96,727/- was included in Income from other sources. For which the assessing officer did not accepted the deductions claimed by assessee aganist such ‘gross total income’ under Chapter VI- A of the Act. The assessee argued before the Appelate authority that the conclusion of restricting the deductions to business income by Assessing officer under section 80-IA need to be kept aside and contended that the deduction observed by the Assessing Officer under a particular section is permissible only against income under that particular head was incorrect. The Assessee urged before the Appellate Authority that the deductions so quantified under various sections under Chapter VI-A have to be aggregated and allowed against the ‘gross total income’. The Appeal filed by the Assessee by an order dated 23.03.2006 was allowed by the Appelate Authority and the finding on the issue of deduction under Section 80-IA of the Act by the Assessing Officer were reversed.
The Revenue appealed against this order in the High Court and contended that the deductions should be restricted to 'busniess income' only. The Counsel submitted that the determination of quantum of deduction under sub-section (1) of Section 80-IA should be on the basis that the source of income from the eligible business was the only source of income of an assessee and thereo should be allowed as income. The respondent submitted that the deduction under sub-section (1) is restricted to ‘business income’ only has no indication in sub-section (5) of Section 80-IA
The Court held that that 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’. The plea was dismissed by the Court.