Tribunal allows deduction under section 80IA for AY 2006-07 and 2007-08, remits issue back for verification

The Tribunal dismissed the Revenue's appeal and allowed the deduction under section 80IA for AY 2006-07 and AY 2007-08, following Circular No. 1/2016 and the High Court's judgment. Regarding the disallowance of an amount from book profits under section 115JB for AY 2007-08, the Tribunal remitted the issue back to the AO for verification and allowed necessary deductions, partly allowing both appeals filed by the assessee.

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Issues:
1. Disallowance of deduction under section 80IA for AY 2006-07 and AY 2007-08.
2. Disallowance of deduction of amount from the book profits under section 115JB for AY 2007-08.

Issue 1 - Disallowance of Deduction under Section 80IA:
The appeal was filed against the Commissioner of Income Tax (Appeals) confirming the Assessing Officer's disallowance of deduction under section 80IA for AY 2006-07 and AY 2007-08. The Circular No. 1/2016 clarified that the "initial assessment year" means the first year opted by the assessee for claiming deduction under section 80IA. It further stated that an assessee has the option to choose the initial year for claiming deduction for ten consecutive years. The Circular resolved the issue regarding the set off of losses and unabsorbed depreciation. The Tribunal, following the Circular and the judgment of the High Court of Madras, dismissed the Revenue's appeal and allowed the deduction under section 80IA in favor of the assessee.

Issue 2 - Disallowance of Deduction from Book Profits under Section 115JB:
The issue concerned the disallowance of an amount from the book profits under section 115JB for AY 2007-08. The CIT(A) directed the AO to tax specific interest income under normal provisions and section 115JB. The AO was instructed to follow the directions of the CIT(A) without exceeding them. It was noted that the issue of deduction under section 80IA was not raised during the appellate proceedings for AY 2004-05. The Tribunal, referring to a previous order, remitted the issue back to the AO for verification and allowed the necessary deductions in accordance with the law. The Tribunal partly allowed both appeals filed by the assessee.

In conclusion, the Tribunal's judgment clarified the interpretation of the "initial assessment year" for claiming deduction under section 80IA, following Circular No. 1/2016. It also addressed the disallowance of an amount from book profits under section 115JB for AY 2007-08, remitting the issue back to the AO for verification. The appeals filed by the assessee were partly allowed based on the findings and directions provided in the judgment.

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