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

190                       [2021]
               SUPREME COURT     4 S.C.R. 190
                              REPORTS                     [2021] 4 S.C.R.


A                   COMMISSIONER OF INCOME TAX-I
                                       v.
                    M/s. RELIANCE ENERGY LTD.
               (FORMERLY BSES LTD.) THROUGH ITS M.D.
B                       (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
C
      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
D
             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
E     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
F     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
G     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


H
                                      190
   COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                      191
                  ENERGY LTD.

for 10 consecutive assessment years; and d) in computing the          A
‘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         B
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        C
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      D
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                  E
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-     F
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              G
      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 :

                                                                      H
192            SUPREME COURT REPORTS                         [2021] 4 S.C.R.


A           [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]
B
            3 SCR 166; Commissioner of Income-tax v. Tridoss
            Laboratories Ltd. [2010] 328 ITR 448 (Bombay)
            – referred to.
                              Case Law Reference
C     [1979] 3 SCR 984                 referred to              Para 6
      [1978] 3 SCR 660                 referred to              Para 7
      [2008] 4 SCR 919                 referred to              Para 7
      (2003) 5 SCC 590                 referred to              Para 7
D     [1986] 3 SCR 166                 referred to              Para 8
            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1327
      of 2021.
            From the Judgment and Order dated 24.06.2013 of the High Court
      of Judicature at High Court of Judicature at Bombay, ITA No. 1688 of
E     2009.
            With
            Civil Appeal Nos. 1328, 1329 Of 2021, 2537 Of 2016, 1408, 1508,
      1509 of 2021.
F           Arijit Prasad, Sr. Adv., H R Rao, Rupesh Kumar, Mrs. Anil Katiyar,
      B. V. Balaram Das, Advs. for the appellant.
            Ajay Vohra, Sr Adv, Mahesh Agarwal, M. S. Ananth, Ms. Sayaree
      Basu Mallik, E. C. Agrawala, Kamal Mohan Gupta, Advs. for the
      respondent.
G
            The Judgment of the Court was delivered by
            L. NAGESWARA RAO, J.
           For the sake of convenience, we are referring to the facts of Civil
      Appeal No.1328 of 2021.
H
    COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                             193
         ENERGY LTD. [L. NAGESWARA RAO, J.]

      Civil Appeal No. 1328 of 2021                                           A
        1. By an order of assessment dated 31.01.2005, the Assessing
Officer restricted the eligible deduction under Section 80-IA of the Income
Tax Act, 1961 (hereinafter “the Act”) to the extent of ‘business income’
only. On 23.03.2006, the Commissioner of Income-Tax (Appeal)-I
(hereinafter “the Appellate Authority”) partly allowed the Appeal filed       B
by the Assessee and reversed the order of the Assessing Officer on the
issue of the extent of deduction under Section 80-IA of the Act. The
Income Tax Appellate Tribunal (hereinafter “the Tribunal”), upheld the
decision of the Appellate Authority on the issue of deduction under Section
80-IA. The High Court refused to interfere with the Tribunal’s order as
far as the issue on deduction under Section 80-IA is concerned. Therefore,    C
this Appeal by the Revenue.
       2. This Appeal pertains to 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 return was subsequently revised on
06.12.2002 and thereafter, on 30.03.2004. At the time of the assessment       D
proceedings, the Assessee submitted a revised computation of income
by revising its claim of deduction under Section 80-IA of the Act.
       3. The Assessee is in the business of generation of power and
also deals with purchase and distribution of power. The Assessee-
Company generated power from its power unit located at Dahanu. In             E
respect of deduction under Section 80-IA of the Act, the Assessee was
asked to explain as to why the deduction should not be restricted to
business income, as had been the stand of the Revenue for the assessment
year 2000-01. The Assessee had revised its claim under Section 80-IA
of the Act to Rs. 546,26,01,224/-, having admitted that there was an          F
error in calculation of income-tax depreciation. The Assessing Officer
considered the revised claim of the Assessee under Section 80-IA and
determined the amount eligible for deduction under Section 80-IA at Rs.
492,78,60,973/- against the Assessee’s claim of Rs. 546,26,01,224/-.
However, the Assessing Officer stated in the assessment order that the
actual deduction allowable shall be to the extent of ‘income from business’   G
as per provisions of Section 80AB of the Act. The ‘business income’ of
the Assessee was computed at Rs. 355,74,73,451/- and the ‘gross total
income’ at Rs. 397,37,70,178/-. Inclusion of ‘income from other sources’
of Rs. 41,62,96,727/- in the ‘gross total income’ and deduction claimed
under Chapter VI-A of the Act against such ‘gross total income’ was           H
194            SUPREME COURT REPORTS                          [2021] 4 S.C.R.


A     not accepted by the Assessing Officer. The Assessing Officer rejected
      the claim of the Assessee for allowing deduction under Section 80-IA of
      the Act, along with other deductions available to the Assessee, to the
      extent of ‘gross total income’ and restricted the deduction allowed under
      Section 80-IA at Rs.354,00,75,084/-, by limiting the aggregate of
      deductions under Sections 80-IA and 80-IB of the Act to ‘business
B
      income’ of the Assessee.
             4. The Assessing Officer rejected the contention of the Assessee
      that Section 80AB of the Act is not applicable. It was held that Section
      80AB of the Act makes it clear that for the purposes of deduction in
      respect of certain incomes, deduction had to be given on the income of
C     the nature specified in the relevant section and allowed against income
      of that nature alone. The Assessing Officer elaborated on this point by
      stating that ‘income from business’ alone had to be considered for
      allowing any deduction computed on ‘income from business’ and using
      the same analogy, deduction computed on ‘income from other sources’
D     should be allowable against ‘income from other sources’ only. As the
      deduction under Section 80-IA of the Act pertains to profits and gains
      from a business undertaking, the deduction is allowable only against
      ‘income from business’. It was held by the Assessing Officer that
      deduction computed under Section 80-IA of the Act could not be allowed
      against any source other than business. The Assessing Officer also relied
E     upon the words ‘that nature’ and ‘shall alone’ in Section 80AB of the
      Act to hold that deduction under a relevant section has to be given to the
      extent of the income from that particular source only on which deduction
      is available. In the matter before us, this would mean that deduction
      under Section 80-IA of the Act has to be allowed only to the extent of
F     ‘income from business’.
             5. It was argued by the Assessee before the Appellate Authority
      that the conclusion of the Assessing Officer on deduction under Section
      80-IA of the Act being restricted to ‘business income’ needs to be set
      aside. The Assessee contended that the observation of the Assessing
G     Officer that deduction under a particular section is permissible only
      against income under that particular head was erroneous. Deductions
      related to various incomes under various sections of Chapter VI-A have
      to be quantified in accordance with the respective sections. The Assessee
      urged before the Appellate Authority that the deductions so quantified
      under various sections under Chapter VI-A have to be aggregated and
H
       COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                          195
            ENERGY LTD. [L. NAGESWARA RAO, J.]

allowed against the ‘gross total income’. Finally, the submission of the      A
Assessee before the Appellate Authority was that restricting the deduction
under Section 80-IA of the Act to the extent of ‘business income’ was
unjustified. With reference to Section 80AB, the Assessee contended
that the operation of the said section related only to quantification of
deduction on the basis of net income.
                                                                              B
       6. The Appellate Authority partly allowed the Appeal filed by the
Assessee by an order dated 23.03.2006 and reversed the finding of the
Assessing Officer on the issue of deduction under Section 80-IA of the
Act for the reasons stated hereinafter. In respect of Section 80AB of
the Act, the Appellate Authority referred to the background of insertion
of the said section with effect from 01.04.1981. The Appellate Authority      C
referred to Circular No. 281 dated 22.09.1980 of the Central Board of
Direct Taxes (CBDT) wherein the reason for introduction of Section
80AB was explained. The Supreme Court in the case of Cloth Traders
(P) Ltd. v. Additional CIT, Gujarat-I1 held that deduction under Section
80M of the Act, which deals with deduction in respect of certain inter-       D
corporate dividends, was allowable on the gross amount of the dividends
received. It was decided to undo the decision of this Court as it was
contrary to the legislative intent, which was that deduction under Section
80M was to be allowed on the dividend income as computed under the
Act, i.e., on the net income after deduction of admissible expenses. The
Appellate Authority proceeded to hold that Section 80AB places a ceiling      E
on the quantum of deductions in respect of incomes contained in Part-C
of Chapter VI-A. Such deductions are to be computed on the net eligible
income, which will be deemed to be included in the gross total income.
The Appellate Authority observed that Section 80AB is limited to
determining the quantum of deductible income included in the gross total      F
income. Following a decision of the Income Tax Appellate Tribunal,
Mumbai dated 25.04.2003 in Royal Cushion Vinyl Products Ltd. v.
Dy. Commissioner of Income Tax, Mumbai (ITA No. 770/MUM/98),
the Appellate Authority set aside the order of the Assessing Officer on
this count. The Appellate Authority directed the Assessing Officer not
to restrict the deduction admissible under Section 80-IA of the Act to        G
income under the head ‘business’. The Assessing Officer was further
directed to aggregate the deduction under Section 80-IA of the Act with
the other deductions available to the Assessee and then to allow deductions

1
    (1979) 3 SCC 538                                                          H
196             SUPREME COURT REPORTS                            [2021] 4 S.C.R.


A     of such aggregate amount to the extent of ‘gross total income’. The
      order of the Appellate Authority was affirmed by the Tribunal and the
      High Court on this issue. Aggrieved thereby, the Revenue has come in
      Appeal.
              7. The contention on behalf of the Revenue before us is that the
B     Assessing Officer was right in holding that the deduction under Section
      80-IA of the Act should be restricted to ‘business income’ only. Mr.
      Arijit Prasad, learned Senior Counsel appearing on behalf of the Revenue,
      submitted that Section 80AB of the Act contemplates deductions in
      respect of incomes against income of the nature specified in the relevant
      section. He further submitted that Section 80-IA(5) makes it clear that
C     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 therefore,
      the deduction so determined should be allowed only against ‘business
      income’. According to him, the phrase ‘derived … from’ in sub-section
D     (1) of Section 80-IA of the Act indicates that the computation of deduction
      is restricted only to the profits and gains from the eligible business. He
      relied upon the judgment of this Court in Cambay Electric Supply
      Industrial Co. Ltd. v. CIT2, followed in Synco Industries Ltd. v.
      Assessing Officer, Income Tax, Mumbai & Anr. 3 and Pandian
      Chemicals Ltd. v. Commissioner of Income Tax, Madurai4.
E
             8. In response, the Assessee supported the order passed by the
      Appellate Authority which was upheld by the Tribunal and the High
      Court. It is the argument of Mr. Ajay Vohra, learned Senior Counsel
      appearing on behalf of the Assessee, that Section 80AB of the Act is
      with reference to computation of deduction on the basis of net income.
F     He submitted that there is no indication in sub-section (5) of Section 80-
      IA that the deduction under sub-section (1) is restricted to ‘business
      income’ only. On the other hand, according to him, sub-section (5) deals
      with determination of the quantum of deduction by treating eligible business
      as the only source of income of the Assessee. Sub-section (5), therefore,
G     is concerned with computation of the deduction, which is at a stage prior
      to allowing the deduction so computed. He submitted that there is no
      dispute that the computation of deduction is only from the eligible business.
      2
        (1978) 2 SCC 644
      3
        (2008) 4 SCC 22
      4
H       (2003) 5 SCC 590
       COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                        197
            ENERGY LTD. [L. NAGESWARA RAO, J.]

The claim of the Assessee, as accepted by the Appellate Authority, is       A
that there is no restriction on taking into account income from any other
source while allowing the deduction computed under Section 80-IA,
subject to the aggregate of all deductions under Chapter VI-A not
exceeding the ‘gross total income’. He relied upon judgments of this
Court in CIT (Central), Madrasv.Canara Workshops (P) Ltd.,
                                                                            B
Kodialball, Mangalore5 and Synco Industries (supra) to argue that
sub-section (5) of Section 80-IA of the Act does not restrict permissible
deduction under sub-section (1) to be allowed against ‘business income’
only. The learned Senior Counsel for the Assessee relied upon the
judgment of the Bombay High Court in Commissioner of Income-tax
v. Tridoss Laboratories Ltd.6 to argue that the Appeal should not be        C
allowed.
      9. The controversy in this case pertains to the deduction under
Section 80-IA of the Act being allowed to the extent of ‘business income’
only. The claim of the Assessee that deduction under Section 80-IA
should be allowed to the extent of ‘gross total income’ was rejected by     D
the Assessing Officer. It is relevant to reproduce Section 80AB of the
Act which is as follows:
         “80AB. Deductions to be made with reference to the income
         included in the gross total income. — Where any deduction is
         required to be made or allowed under any section included          E
         in this Chapter under the heading “C. — Deductions in respect
         of certain incomes” in respect of any income of the nature
         specified in that section which is included in the gross total
         income of the assessee, then, notwithstanding anything
         contained in that section, for the purpose of computing the
         deduction under that section, the amount of income of that         F
         nature as computed in accordance with the provisions of this
         Act (before making any deduction under this Chapter) shall
         alone be deemed to be the amount of income of that nature
         which is derived or received by the assessee and which is
         included in his gross total income.”                               G
      As stated above, Section 80AB was inserted in the year 1981 to
get over a judgment of this Court in Cloth Traders (P) Ltd. (supra).
The Circular dated 22.09.1980 issued by the CBDT makes it clear that
5
    (1986) 3 SCC 538
6
    [2010] 328 ITR 448 (Bombay)                                             H
198             SUPREME COURT REPORTS                            [2021] 4 S.C.R.


A     the reason for introduction of Section 80AB of the Act was for the
      deductions under Part C of Chapter VI-A of the Act to be made on the
      net income of the eligible business and not on the total profits from the
      eligible business. 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
B
      curtailing the width of Section 80-IA. It is relevant to take note of Section
      80A(1) which 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
C     under Chapter VI-A shall not exceed the ‘gross total income’ of the
      Assessee. We are in agreement with the Appellate Authority that 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’.
D            10. Sub-section (1) and sub-section (5) of Section 80-IA which
      are relevant for these Appeals are as under:
            “80-IA. Deductions in respect of profits and gains from
            industrial undertakings or enterprises engaged in
            infrastructure development, etc.—
E           (1) Where the gross total income of an assessee includes any
            profits and gains derived by an undertaking or an enterprise
            from any business referred to in sub-section (4) (such business
            being hereinafter referred to as the eligible business), there
            shall, in accordance with and subject to the provisions of this
F           section, be allowed, in computing the total income of the
            assessee, a deduction of an amount equal to hundred per
            cent. of the profits and gains derived from such business for
            ten consecutive assessment years.
             ****
G           (5) Notwithstanding anything contained in any other provision
            of this Act, the profits and gains of an eligible business to
            which the provisions of sub-section (1) apply shall, for the
            purposes of determining the quantum of deduction under that
            sub-section for the assessment year immediately succeeding
            the initial assessment year or any subsequent assessment year,
H
    COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                             199
         ENERGY LTD. [L. NAGESWARA RAO, J.]

      be computed as if such eligible business were the only source           A
      of income of the assessee during the previous year relevant
      to the initial assessment year and to every subsequent
      assessment year up to and including the assessment year for
      which the determination is to be made.”
      11. The essential ingredients of Section 80-IA (1) of the Act are:      B
      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
      c)     the assessee is entitled for deduction of an amount equal to
             100% of the profits and gains derived from such business
             for 10 consecutive assessment years; and
      d)     in computing the ‘total income’ of the Assessee, such
             deduction shall be allowed.                                      D
       12. 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/-. To make it clear, the said
                                                                              E
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 claim of the Assessee is that in
computing its ‘total income’, deductions available to it have to be set-off
against the ‘gross total income’, while the Revenue contends that it is
only the ‘business income’ which has to be taken into account for the         F
purpose of setting-off the deductions under Sections 80-IA and 80-IB of
the Act. To illustrate, the ‘gross total income’ of the Assessee for the
assessment year 2002-03 is less than the quantum of deduction determined
under Section 80-IA of the Act. The Assessee contends that income
from all other heads including ‘income from other sources’, in addition
                                                                              G
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 of the view that
there is no limitation on deduction admissible under Section 80-IA of the
Act to income under the head ‘business’ only, with which we agree.
                                                                              H
200             SUPREME COURT REPORTS                            [2021] 4 S.C.R.


A            13. The other contention of the Revenue is that sub-section (5) of
      Section 80-IA refers to computation of quantum of deduction being limited
      from ‘eligible business’ by taking it as the only source of income. It is
      contended that the language of sub-section (5) makes it clear that
      deduction contemplated in sub-section (1) is only with respect to the
      income from ‘eligible business’ which indicates that there is a cap in
B
      sub-section (1) that the deduction cannot exceed the ‘business income’.
      On the other hand, it is the case of the Assessee that sub-section (5)
      pertains only to determination of the quantum of deduction under sub-
      section (1) by treating the ‘eligible business’ as the only source of income.
      It was submitted by Mr. Vohra, learned Senior Counsel, that the final
C     computation of deduction under Section 80-IA for the assessment year
      2002-03 as accepted by the Assessing Officer, was arrived at by taking
      into account the profits from the ‘eligible business’ as the ‘only source
      of income’. He submitted that, however, sub-section (5) is a step
      antecedent to the treatment to be given to the deduction under sub-
      section (1) and is not concerned with the extent to which the computed
D
      deduction be allowed. To explain the interplay between sub-section (5)
      and sub-section (1) of Section 80-IA, it will be useful to refer to the
      facts of this Appeal. The amount of deduction from the ‘eligible business’
      computed under Section 80-IA for the assessment year 2002-03 is
      Rs. 492,78,60,973 /-. There is no dispute that the said amount represents
E     income from the ‘eligible business’ under Section 80-IA and is the only
      source of income for the purposes of computing deduction under Section
      80-IA. 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).
F           14. It will be useful to refer to the judgment of this Court relied
      upon by the Revenue as well as the Assessee. In Synco Industries
      (supra), this Court was concerned with Section 80-I of the Act. Section
      80-I(6), which is in pari materia to Section 80-IA(5), is as follows:
            “ 80-I(6) Notwithstanding anything contained in any other
G           provision of this Act, the profits and gains of an industrial
            undertaking or a ship or the business of a hotel or the business
            of repairs to ocean-going vessels or other powered craft to
            which the provisions of sub-section (1) apply shall, for the
            purposes of determining the quantum of deduction under sub-
            section (1) for the assessment year immediately succeeding
H
    COMMISSIONER OF INCOME TAX-I v. M/S. RELIANCE                              201
         ENERGY LTD. [L. NAGESWARA RAO, J.]

      the initial assessment year or any subsequent assessment year,           A
      be computed as if such industrial undertaking or ship or the
      business of the hotel or the business of repairs to ocean-going
      vessels or other powered craft were the only source of income
      of the assessee during the previous years relevant to the initial
      assessment year and to every subsequent assessment year up
                                                                               B
      to and including the assessment year for which the
      determination is to be made.”
       It was held in Synco Industries (supra) that for the purpose of
calculating the deduction under Section 80-I, loss sustained in other
divisions or units cannot be taken into account as sub-section (6)
contemplates that only profits from the industrial undertaking shall be        C
taken into account as it was the only source of income. Further, the
Court concluded that Section 80-I(6) of the Act dealt with actual
computation of deduction whereas Section 80-I(1) of the Act dealt with
the treatment to be given to such deductions in order to arrive at the total
income of the assessee. The Assessee also relied on the judgment of            D
this Court in Canara Workshops (P) Ltd., Kodialball, Mangalore
(supra) to emphasize the purpose of sub-section (5) of Section 80-IA. In
this case, the question that arose for consideration before this Court
related to computation of the profits for the purpose of deduction under
Section 80-E, as it then existed, after setting off the loss incurred by the
assessee in the manufacture of alloy steels. Section 80-E of the Act, as       E
it then existed, permitted deductions in respect of profits and gains
attributable to the business of generation or distribution of electricity or
any other form of power or of construction, manufacture or production
of any one or more of the articles or things specified in the list in the
Fifth Schedule. It was argued on behalf of the Revenue that the profits        F
from the automobile ancillaries industry of the assessee must be reduced
by the loss suffered by the assessee in the manufacture of alloy steels.
This Court was not in agreement with the submissions made by the
Revenue. It was held that the profits and gains by an industry entitled to
benefit under Section 80-E cannot be reduced by the loss suffered by
any other industry or industries owned by the assessee.                        G

        15. In the case before us, there is no discussion about Section 80-
IA(5) by the Appellate Authority, nor the Tribunal and the High Court.
However, we have considered the submissions on behalf of the Revenue
as it has a bearing on the interpretation of sub-section (1) of Section 80-
                                                                               H
202              SUPREME COURT REPORTS                          [2021] 4 S.C.R.


A     IA of the Act. We hold 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’. An attempt was made by the learned Senior
B
      Counsel for the Revenue to rely on the phrase ‘derived … from’ in
      Section 80-IA (1) of the Act in respect of his submission that the intention
      of the legislature was to give the narrowest possible construction to
      deduction admissible under this sub-section. It is not necessary for us to
      deal with this submission in view of the findings recorded above. For the
C     aforementioned reasons, the Appeal is dismissed qua the issue of the
      extent of deduction under Section 80-IA of the Act.
             Civil Appeal No. 1327 of 2021, Civil Appeal No. 1329 of 2021,
      Civil Appeal No. 2537 of 2016, Civil Appeal No. 1408 of 2021 and Civil
      Appeal No. 1508 of 2021 are disposed of in terms of the above judgment.
D            Civil Appeal No. 1509 of 2021 is de-tagged as the questions arising
      therein are not related to the aforementioned issue.


      Devika Gujral                                             Appeals disposed of.

E




F




G




H