TaxTMI 
TaxTMI 
2010 (1) TMI 836
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....he unabsorbed depreciation of the earlier year which had already been absorbed cannot be notionally carried forward and taken into consideration for computation u/s 80IA? 2. Whether the Commissioner of Income Tax (Appeals) is justified in holding that the windmills installed by the assessee for captive consumption constitute separate business undertaking and, therefore, the assessee is eligible for deduction u/s 80IA? 3. Whether the Commissioner of Income Tax (Appeals) is justified in allowing the expenditure claimed by the assessee on replacement of machinery as revenue expenditure u/s 37 of the Income Tax Act, capitalised by the assessee earlier? 3. Issue No. 1 - Regarding notional carry forward of unabsorbed depreciation:- 3.1 This issue is common in all these appeals. The assessees in all three cases claimed deduction u/s 80IA on the income from windmill installed by the assessee and the electricity consumed for in-house requirements. The Assessing Officer, apart from not considering the windmill installed as a separate undertaking for generation of power, questioned the claim of the assessee on the ground that the assessee has no profit or gain from the windmill as....
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....ble business is treated as the only source of income and, therefore, the other sources of income of the assessee undertaking are assumed as not existing. In view of this legal fiction, the depreciation or losses cannot be set off against any other source of income of the assessee and, therefore, the same will be set off against the income from eligible business u/s 80IA. He has further contended that the option of 10 years out of 15 years from the year in which the undertaking or enterprise develops and begins to operate is provided under sub-section (2) of section 80IA only for giving the flexibility of availing the deduction as best suited to the assessee. He has further submitted that this option of choosing 10 years out of 15 years is based on the premise that in the initial years, the undertaking may not earn profit and the assessee can avail the deduction for consecutive 10 years when it starts earning profit, but that does not mean that the earlier losses of unabsorbed depreciation will not be carried forward and set off against the profits earned by the assessee in the future years from the eligible profits as per provisions of sub-section (5) of section 80IA. The learned D....
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....(SB). The learned counsel for the assessees, on the other hand, submitted that the Special Bench has not overturned the decision of Chennai Tribunal relied upon by the learned CIT(A), above. He submitted that the facts of the case before the Special Bench were different and in these particular cases, the facts are similar to Chennai Bench decision above and therefore, the same is directly applicable in favour of the assessees. 6. We have carefully considered the rival submissions and perused the records. We find that the contentions of the learned D.R. have considerable cogency. The Special Bench duly elaborated upon concerned section 80-IA and sub-clause (i) thereon and had ultimately decided the issue in favour of the Revenue. The question that was put before the Special Bench for consideration was as under:- "Whether in view of the provisions of section 80-IA(5) of the Income-tax Act, 1961, the profit from the eligible business for the purpose of deduction under section 80-IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier ye....
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....missible be computed; (d) where there are no losses of the eligible unit carried forward (in view of having been set off against profits of that very source), the losses of earlier years, though already absorbed against other-sources, are once again to be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction; (e) the deduction is limited to gross total income." 8. In view of the above, it is amply clear that the Special Bench held that profits from the eligible business for the purpose of determination of the quantum of deduction under section 80-IA have to be computed only after deduction of notional brought forward losses and depreciation of the eligible business even though they have been set off against other income in earlier years. It is settled law that the decision of Special Bench takes precedence over the Division Bench of the Tribunal. Accordingly, respectfully following the Special Bench decision cited above, we set aside the orders of the CIT(Appeals) and restore that of the Assessing Officer." 3.6 Again, in case of M/s VXL Systems vs. ACIT supra, this Tribunal has decided this issue in para Nos. 4 and 5 a....
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....arned Commissioner of Income Tax was, therefore, justified in setting aside the assessment. 3.8 On the other hand, in the case of ACIT vs. M/s Sri Velayuthasamy Spinning Mills Private Limited and Ors., this Tribunal has decided this issue, by following the decision in case of Mohan Breweries and Distilleries Limited vs. ACIT (2008) 114 TTJ (Chennai) 532, in para 9 as under:- "From the relevant provisions of section 80IA of the Income Tax Act, 1961, it is clear that the assessee can choose ten consecutive years out of fifteen years beginning from the year in which the assessee undertaking or enterprise develops and begins to operate. The selection of ten consecutive years block period is within the span of fifteen years from the years in which the assessee begins the operation of enterprise develops. Therefore, sub-section (2) provides a liberty to the assessee to choose the block of ten consecutive years as tax holiday out of the span of fifteen years. The sub-section (5) of section 80IA of the Income Tax Act, 1961 starts with non-obstante clause having an over-riding effect over the other provisions of the Income Tax Act, 1961. Therefore, the sub-section (5) prescribes the d....
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....Benches of this Tribunal in the case of M/s VXL Systems vs. ACIT supra as well as in the case of ACIT vs. M/s Sudan Spinning Mills Ltd. and Ors. has decided the issue in favour of the Revenue and against the assessee by following the decision of Ahmedabad Special Bench of this Tribunal in the case of ACIT vs. Goldmine Shares and Finance P. Ltd. Accordingly, by following the principle of consistency, and in view of the decisions of the Co-ordinate Benches of this Tribunal as well as Ahmedabad Special Bench decision, we decide this issue in favour of the Revenue and against the assessee. 4. Issue No. 2 - Regarding windmill as a separate business undertaking:- 4.1 This issue is common in all the appeals. We have heard the learned Departmental Representative as well as the Learned A.R. and considered the relevant records. The learned Departmental Representative has heavily relied upon the decision of this Tribunal in the case of M/s Chettinad Cement Corporation Ltd. vs. ACIT in I.T.A. No.1029/Mds/2005 for assessment year 2001-02 vide order dated 5.1.2007. 4.2 On the other hand, the learned A.R. has relied upon the decision of this Tribunal in the case of M/s Sri Velayuthasamy ....
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....he said Circular as it was not referred or pointed out. The meaning of undertaking is not provided in the Income Tax Act as there is no definition in the statute. Therefore, the meaning of the undertaking has to be understood in the context and objectivity of provision of section 80IA. Chapter IA of the Income Tax Act provides deductions in respect of certain income and section 80IA provides deductions in respect of profit gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Therefore, to understand the meaning of undertaking in the context of the provisions of section 80IA, the business carrying on by the undertaking is relevant. As per the clause (iv) of sub-section (4) of section 80IA, if an undertaking is set up in any part of India for generation and distribution of power it is entitled for the deduction provided under sub-section (1) of section 80IA. The word undertaking in its ordinary meaning denotes in work, enterprise, project or business undertaking. Therefore, it does not cover the entire industry or business of the owner but refers the undertaking set up for the purpose as provided in the provisions of Section 80-IA. 11. In t....