TaxTMI 
TaxTMI 
2016 (5) TMI 320
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....the assessee appeared from time to time and furnished the books of accounts and other relevant information called for. During the course of assessment proceedings, the A.O. noticed that the assessee has claimed deduction u/s 80IA of the Act, towards profits from the activity of generation of power. The A.O. further noticed that that the assessee has commenced the generation of power from the financial year 2004-05, but the deduction u/s 80IA of the Act has been claimed first time for the assessment year 2009-10. Therefore, issued a show cause notice and asked to explain why the deduction claimed u/s 80IA of the Act shall not be disallowed. In response to show cause notice, the assessee has submitted that it has commenced its eligible business of generation of power from the financial year 2004-05. However, it has incurred losses for the initial assessment year and such loss has been set off against other income for the relevant financial year. Therefore, it had an occasion to earn profit from the assessment year 2009-10, which was claimed u/s 80IA of the Act. The assessee further submitted that as per sub section (2) of section 80IA of the Act, the assessee at his option can claim ....
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....ld be restricted to 10 consecutive assessment years within the block of 15 years allowed under the sub section (2) of the Act. The assessee further submitted that the A.O. has interpreted the initial assessment year referred in sub section (2) of section 80IA of the Act, by holding that the initial assessment year would mean the year in which the eligible business was commenced. The assessee further stated that the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT (2012) 340 ITR 477, has clarified the initial assessment year and held that if before claiming deduction u/s 80IA of the Act, the loss and depreciation incurred by the assessee in respect of eligible business has been set off against income of the assessee from other source, the said loss or depreciation cannot again be notionally brought forward and set off against the profits against eligible business for computing deduction. Therefore, the A.O. was erred in denying the benefit of deduction u/s 80IA of the Act. 5. The CIT(A) after considering the explanations furnished by the assessee confirmed the additions made by the A.O. The CIT(A) further held that a cogent reading of sub ....
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....lers India Pvt. Ltd., in TCA No.176 of 2016 has considered the circular issued by the CBDT and after considering the circular, held that the initial assessment year would mean the year in which the assessee has first claimed deduction u/s 80IA of the Act. The Ld. D.R. on the other hand, strongly supported the order of CIT(A). 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. denied the deduction u/s 80IA of the Act, for the reason that the assessee ought to have set off the notionally brought forward losses of earlier assessment years before claiming deduction u/s 80IA of the Act. According to the assessing officer, the initial assessment year would mean the year in which the assessee has commenced eligible business. The A.O. further held that sub section (5) of section 80IA of the Act, provides for determination of income available for deduction u/s 80IA of the Act. Sub section (5) begins with a non-obstante clause "Not withstanding anything contained in any other provisions of this Act" makes it clear that it is independent of any other provisions of the Act. As per sub section (5), the a....
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.... of the assessee could lead to an interpretation of the initial assessment year to meaning the year in which the eligible business was commenced, otherwise, the fiction created in sub section (5) section 80IA of the Act become redundant. Accordingly, the A.O. after relied upon the special bench decision of ITAT Ahmedabad, in the case of Gold Mine Shares & Finance Pvt. Ltd. (2008) 113 ITD 209 (supra) held that the initial assessment year would mean the year of commencement of eligible business and hence, the notional losses including depreciation should be set off against eligible profits, even though they have been allowed set off against other income in earlier years. 9. The assessee contention is that the initial assessment year would mean the initial year of claim of deduction under sub section (1) of section 80IA of the Act. Therefore, the A.O. was not correct in interpretation of initial assessment year means the year of commencement of eligible business. Before we go into the facts of the case, let us understand the relevant provisions of section 80IA of the Act. "Section 80IA Sub section (1) Where the gross total income of an assessee includes any profit....
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.... should be within 15 years from the date of commencement of its eligible business. Sub section (5) provides for determination of quantum of deduction for the assessment year immediately succeeding the initial assessment year or in subsequent assessment year. As per sub section (5), the profits of eligible business shall be computed as if such eligible business were the only source of income of the assessee during the relevant assessment year and to every subsequent assessment year. The purpose and object of insertion of sub section (5) is the manner of determination of quantum of deduction available for deduction for the assessment year immediately succeeding the initial assessment year, but it does not deal with initial assessment year. The sub section (2) provides a clear mandate to the assessee, a choice for deciding the year from which it desires to claim deduction out of the allowable 15 years. From the reading of sub section (2) of section 80IA of the Act, it is very clear that the deduction is at the option of the assessee and the assessee can claim deduction, beginning from any assessment year within the block of 15 assessment years. However, the deduction can be claimed fo....
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....s is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity etc. sub-s. (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-s. (5) and the same is not defined under the provisions. It is to be noted that initial assessment year' employed in sub-s. (5) is different from the words "beginning from the year" referred to in sub-s. (2). Important factors are to be noted in sub-s. (5) and they are as under: It starts with non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; (2) it is for the purpose of determining the quantum of deduction; (3) for the assessment year immediately succeeding the initial assessment year; (4) It Is a deeming provision; (5) fiction created that the eligible business is the only source of income; and (6) during the previous year relevant to the initial assessment year and every subsequent assessment year. . From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relev....
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....e raised in the assessee's appeal before the Tribunal. It is a question of fact. It is not a perverse order. There is no error or illegality in the order of the Tribunal warranting interference. The order of the Tribunal is in conformity with law." 12. The A.R. relied upon Hon'ble Madras High Court decision, in the case of CIT Vs. GRT Jewellers India Pvt. Ltd. in TCA No.176 of 2016 and submitted that the Hon'ble Madras High Court, after taking note of circular issued by CBDT, circular no.1 of 16 dated 15.2.2016 held that for the purpose of section 80IA(5) of the Act, the initial assessment year would mean the first year opted by the assessee for claiming deduction u/s 80IA(5) of the Act. The relevant portion is extracted below: "Circular No. 112016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 15th February, 2016 Subject: Clarification 1 of the term 'initial assessment year' in Section 801A(5) of the Income Tax Act, 1961 Section 801A of the Income-tax Act, 1961 ('Act'), as substituted by Finance Act, 1999 with effect from 1.4.2000, provides for deduction of ....