TaxTMI 
TaxTMI 
2011 (6) TMI 214
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....T [2006] 6 SOT 287 the assessee was entitled to deduction. Audit report in Form No. 10CCB in support of claim of deduction under section 80-IA was also filed. During the course of assessment proceedings the Assessing Officer observed that the claim of the assessee for deduction under section 80-IA was not maintainable in view of the provisions of section 80-IA(5). In reaching this conclusion, the Assessing Officer relied on Special Bench order in the case of Asstt. CIT v. Goldmine Shares & Finance (P.) Ltd. [2008] 113 ITD 209 (Ahd.). It was noticed that in the aforenoted order of the Special Bench the Tribunal has concluded that in view of the provisions of section 80-IA(5) the profits from eligible business for the purpose of determination of quantum of deduction under section 80-IA were to be computed after deduction of notional brought forward losses and depreciation of eligible business even though this had been set off against other income in the earlier years. In view of this position the Assessing Officer did not allow deduction under section 80-IA(5). The learned CIT(A) echoed the assessment order on this issue. 3. We have heard the rival submissions and perused the rele....
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....ined in 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, be computed as if such eligible business were the only source 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. It is noticed that by virtue of sub-section (5), section 80-IA has become a stand alone provision. The effect of sub-section (5) is that for the purpose of granting deduction in the initial year or a subsequent year it shall be considered as if the assessee is having eligible business as the only source of its income. In other words if there is a loss in the initial year and in the subsequent year there is a profit, deduction shall be allowed by considering the brought forward loss in the year of profit. Firstly such brought forward loss shall be set off against the profit of the eligible unit ....
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..... Before the amendment, the 'initial assessment year' was defined in the Act, but after the amendment no definition for the initial assessment year has been given and thus there is option to the assessee in selecting the year of claiming relief under section80-IA. Adverting to the facts of the instant case it is found that the unit at Gujarat was set up in the financial year 1996-97 as is apparent from the detail provided to us by the learned Counsel for the assessee which shows that there was a loss in assessment year 1997-98 to the tune of Rs. 3.56 crores. It, therefore, indicates that the ratio of the judgment of the Hon'ble Madras High Court shall not apply to the present factual scenario for the reason that the Gujarat unit was set up after the amendment to section by the Finance Act, 1999. In the pre-amendment period "initial assessment year" was defined under section 80-IA(12). Since the amendment took place by the Finance Act, 1999 taking away the definition of initial assessment year' given in the pre-amendment period, it is the ante amendment provision which would apply to the assessee because the assessee started commercial production in the financial yea....
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....ears so as to enable the assessee to claim the benefit of deduction under section 80-IA in subsequent years when there is profit. The facts of Sangli & Satara units are entirely different. In this case there was loss of Rs. 16.73 crores from the eligible unit which was set off against the business income of other non-eligible unit. This fact has been mentioned in the detail sheet supplied by the learned A.R. at the time of hearing. It, therefore, becomes evident that the loss from the eligible unit was set off against the business income of other non-eligible unit and not the income of the eligible unit. The judgmnt of the Hon'ble Madras High Court would be applicable when there is profit from the eligible unit and the only source of income is that from the eligible business. As the present assessee had earned income from non-eligible business in the year of loss in the year of commencement of commercial production in the eligible unit, which was set off, the ratio decidendi of the judgment of the Hon'ble Madras High Court would not apply. But for the judgment in Velayudhaswamy Spinning Mills (P.) Ltd. case (supra), the ld. AR has nothing to distinguish the Special Bench or....