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2010 (10) TMI 1132
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....nd in law when two views were available on the basis of settled law were available and the A.O. has followed one of them then the assessment order cannot be treated as erroneous and prejudicial to the interests of the revenue so as to invoke the provisions of S. 263 of the Act. In view of the Hon'ble Supreme Court judgement the order of the CIT-III, Pune is vitiated in law and it be cancelled. 3) On the facts and in the circumstances of the case and in law the initial assessment year was the year under appeal when for the first time deduction u/s. 80-IA was claimed and therefore, the provisions of S. 80-IA(5) r.w.s. 80-IA(1) were not applicable for the earlier assessment years and there was no question of notionally carrying forward any loss or unabsorbed depreciation from these years. In view of this the A.O. has passing his assessment order granting deduction of Rs. 37,41,304/- u/s. 8-IA which is not erroneous and prejudicial to the interests of the revenue. 4) On the facts and in the circumstances of the case and in law the Ld. CIT-III, Pune ought to have passed a speaking order by demonstrating how the assessee was not entitled to deduction u/s. 80-IA(4)(iv)(a....
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....ectricity. Accordingly, assessee is not covered by sec. 115JB as well. The CIT did not agree with the contentions and invoking the subsection (2) of 80IA reduced the unabsorbed depreciation and accordingly the claim made by the assessee at Rs. 37,41,304/- has been directed to be withdrawn vide para 5.5 of the order. With reference to the arguments and applicability of sec. 115JB the CIT relied on the Statutory Audit report for A.Y 2002-03 and came to the conclusion that the provisions of sec. 115JB are applicable and accordingly he directed the A.O to consider the provisions of sec. 115JB, if warranted as per the regular provisions of the Act falls short of the tax payable as per sec. 115JB. He directed the A.O accordingly to give effect to the order. 3. Contesting the action of the CIT the Ld. Counsel made detailed written submissions and made arguments and filed a paper book. Arguments and synopsis of judgements which were relied upon during the course of arguments can be summarised in that the assessee has an option to claim deduction u/s. 80IA and A.Y 2003-04 was the first year in which the assessee chooses to claim deduction and accordingly it has option to work out the ded....
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....the case of CIT v. Gabriel India Ltd. (1993) 203 ITR 108 and has pronounced the following broader principles to judge the action of CIT taken under section 263: - "The fundamental principle which emerge from the above case may be summarised below." i. The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue. Both the conditions must be fulfilled. ii. Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. iii. An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. iv. If the order is passed without application of mind, such order will fall under the category of erroneous order. v. Every loss of revenue cannot be treated as prejudicial to the interests of the revenue and if the Assessing Officer has adopted one of the course permissible under law or where two views are possible and the Assessing Officer has taken one view with which the CIT does not ag....
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....p; Depreciation Loss A.Y 2001-02 (To the Extent Adjusted) 3,241,153.00 3,241,153.00 TAXABLE INCOME - TAXABLE INCOME (Rounded off) TAX ON TOTAL INCOME - 161,071.00 LESS:-TAX DEDUCTED AT SOURCE REFUND DUE 161,071.00 5.2 In arriving at the profit of Rs. 3,741,304.15/-, the assessee has worked out the profit as under:- Particulars Rs. Rs. Rs. Gross Power Generation Receipts Sale of Electricity 1,870,177.00 Sale of Sales Tax Benefit 2,254,500.00 4,124,677.00 Less:- Expenses Directly related the Machines MSEB Charge 64,676.00 Insurance -Package scheme (Windmill) Non-Agri Tax Paid For machines Land 14,101.00 45,577.00| 4,998.00 Less:- Ratio of Admn. Exps. Incurred for machines 318,696.85 AUDIT FEES 14,500.00 BANK COMMISSION ....
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....; 53,79,672/- -------------------- Expenses 53,59,206/- Land Develop. 16,33,176/- -------------------- 37,26,030/- --------------------- Depreciation 69677.85 Claim of 80-IA-First Year 3741304/-" 5.4 As can be seen from the above, the assessee has certain electricity sales in A.Y 2002-03 and other income from the land development and according to the contentions there has been no 80IA claim in A.Y 2002-03. In the impugned assessment year, the assessee has the receipt of Rs. 4,124,677/- out of Power Generation and other income of Rs. 5,379,672/- and after claiming expenses the net profit shown in P & L account....
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....nly if the gross total income so determined is positive the question of allowing the deductions under Chapter VI-A would arise, not otherwise." 5.6 Keeping the above principles in mind, the carried forward depreciation being more than the profit of the year (the profit being Rs. 6982457/- and the unabsorbed depreciation being Rs. 9492448/-) question of deduction under chapter VIA does not arise as gross total income will be nil after set off of the carried forward depreciation. Therefore, even if the assessee arrived at the profit of Rs. 3741304/- towards the profit generated in the Power Generation Unit, the deduction u/s. 80IA cannot be allowed in view of the gross total income being NIL. Consequently working made by the assessee in the computation of the income is not correct. The A.O has not considered this and allowed the claim wrongly and also the consequent computation of unabsorbed depreciation to be carried forward. 6. Another aspect which has not been considered by the AO was whether the assessee made the claim of 80IA for the first time in this assessment year or in the earlier assessment year. Even though the assessee's contentions on initial assessment year is co....
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.... any of the 10 consecutive assessment years out of the 15 years beginning from the year in which undertaking generates power or undertakes transmission of power. Accordingly the assessee has right to opt for the first of the 10 consecutive assessment years called 'initial assessment year' as per sub sec. (5). Once the assessee chooses the initial assessment year the provisions relating to quarantining of the unit will start from that year only. Consequently the losses or depreciation of the year prior to the initial assessment year cannot be considered as per the provisions u/s. 80IA(5). The principle was considered in the coordinate Bench decision in the case of Mohan Breweries and Distilleries Ltd. (supra) wherein it was held: "Section 80-IA as amended by the Finance Act, 1999 gives an option to the assessee with effect from 1-4-2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility, etc. It is left to the assessee at its will to claim this relief from the first assessment year, or from the second or from....
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....s operations and in the instant case, the initial assessment year was the assessment year in which the assessee had chosen to claim deduction under section 80-IA. Hence, the provisions of section 80-IA(5), treating undertaking as a separate sole source of income, could not be applied to a year prior to the year in which the assessee opted to claim relief under section 80-IA for the first time. Further, depreciation and carry forward loss relief to the unit which claims deduction under section 80-IA cannot be notionally carried forward and set-off against the income from the year in which the assessee started claiming deduction under section 80-IA. Therefore, there was no question of setting-off notionally carried forward unabsorbed depreciation or loss of earlier years against the profits of the units and the assessee was entitled to claim deduction under section 80-IA on the current assessment year's profit. Assessee having claimed deduction under s. 80-IA for the first time in asst. yr. 2004-05, this will be the year in which the undertaking has to be treated as a separate sole source of income within the meaning of s. 80IA(5) and, therefore, depreciation and loss of....