TaxTMI 
TaxTMI 
2018 (2) TMI 1082
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....quities, mutual funds and others at Rs..7.23 crores at the beginning of the year and Rs..17.84 crores at the end of the year and has shown substantial increase in the investment portfolio. Assessing Officer invoked the provisions of Rule 8D and computed the disallowance at Rs..22,40,269/- which comprises of interest under Rule 8D2(ii) at Rs..20,16,757/- and administrative expenses being half percent of average value of investments under Rule 8D2(iii) at Rs..2,23,512/-. 3. On appeal the Ld.CIT(A) deleted the disallowance made under Rule 8D2(ii) in respect of investments and sustained the disallowance made under Rule 8D2(iii). The reason for deleting the interest was stated that assessee demonstrated that interest paid was totally for sugar trading business or for loans on Plant & Machinery and no interest was paid for investment in assets from which exempt income was earned. He also observed that assessee has own funds many times more than the investments made in assets and therefore in view of the decision of Hon'ble Jurisdictional High Court in the case of HDFC Bank v. DCIT [67 taxmann.com 42] and CIT v. Reliance Utilities & Power Ltd [313 ITR 340] the disallowance made und....
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....he purpose of determining the quantum of deduction under section 80IA of the Act has to be computed before deduction of the notionally brought forward losses and depreciation of eligible business as they have to be allowed to be setoff other income in earlier years. 8. Ld. Counsel for the assessee also invited our attention to the decision of the Mumbai bench in the case of M/s. Indian Gratings Pvt. Ltd. v. DCIT, RGT-8(2) in ITA.No. 4311/Mum/2013 dated 11.02.2015 and submitted that the issue in appeal has been thoroughly considered by this Bench and held that assessee is entitled for deduction u/s. 80IA on the profits derived from the Windmill Unit, starting from A.Y. 2009-10 which is the initial Assessment Year chosen by the assessee and the earlier year losses cannot be set off against the profits for eligible units in this year. Ld. Counsel for the assessee submits that while coming to such conclusion the Coordinate Bench followed the decision of the Vellayudhaswamy Spinning Mills P. Ltd and Sudan Spinning Mills (P) Ltd. v. ACIT (supra). Learned Counsel for the assessee submits that the Ld.CIT(A) also followed the decision of the Mumbai Bench in the case of M/s. Indian Gratin....
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....rmining 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." 6.2.4 It was further claimed that in the case of the appellant, the losses incurred by the appellant prior to initial assessment year were already set off and adjusted against the profits of non-eligible business in earlier years. According to the appellant, the appellant had exercised the option u/s. 80IA(2) from A.Y. 2010-11. During the relevant period starting from initial assessment year there was no unabsorbed depreciation or loss to be carried forward and absorbed. The appellant had also tried to distinguish the facts of the case in the ease of Pidilite Industries relied upon by the A.O. with the observation that in that case the Hon'ble Tribunal was dealing with regard to two eligible units of Gujarat Unit which was set up in t....
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....nto consideration the loss and depreciation which is already set off against the income of the assessee from other source and compute the profit under section 80IA. Therefore, the approach of the Tribunal is in accordance with law. The assessing authority and the Commissioner committed a serious error in setting off the profit earned by the assessee under Section 80IA against the losses and depreciation of the eligible business which is already setoff from other source before such a claim is put forth. Thus, there is no error committed by the Tribunal in setting aside the order passed by the Assessing Authority as well as the lower Appellate Authority. The substantial question of law is answered in favour of the assessee and against the Revenue'. 6.2.6 Further reliance was also placed on the decision of Indian Gratings P. Ltd. vs. DOT ITA No.4311/Mum/2013. The Hon'ble Jurisdictional Tribunal in the case of Indian Gratings Pvt. Ltd. ITA No.4311/Mum/2013 has held as under: 6. After careful considering the rival submissions, facts of the case and the issues involved, we find that only issue involved is that whether the earlier year losses of the eligible unit....
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....ops and begin to operate. The 15 years is the outer limit within which the assessee can choose the period of claiming the deduction. Sub-section (5) is a non-obstante clause which deals with the quantum of deduction for an eligible business. The relevant provisions of sub-section(5) of section 80IA reads as under:- "('5) Notwithstanding anything contained in any other provision of this Act the profits and gains of an eligible business to which the provisions of sub-section (I) 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." 10. From a plain reading of the above. It can be gathered that It is a non-obstante clause which overrides the other provisions of the Act and it is for the purpose of determining the quantum of deduction under s....
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....ndment have come to the same conclusion: - From reading of the above, is clear that the eligible business was the only source of income, during the previous year relevant of the Act initial Assessment Year and every subsequent Assessment Years. When the assessee exercises the option, the only losses of the years beginning from initial Assessment Year alone are to be brought forward and losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee the Revenue cannot rework the set off amount and bring it notionally. Fiction created in sub- section does not contemplates to bring set off amount notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is....
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.... that the Tribunal has not erred in holding that there was no rectification possible under s.80-I in the present case albeit for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, re-computation of income for the purpose of computing permissible deduction under S.80I for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs. From reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again far computation of current income under s. 80-I for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view." 12. This judgment has been further followed by the same High Court in CIT v/s Emerald Jewel Industry (P) Ltd. [2011] 53 DTR 262 (Mad.). From the above....
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....99 and the first year of operation was Assessment Year 1999-2000. Thus, in the Assessment Year 1999-2000 the definition of initial Assessment Year was already there in the Act and there was no provision through which the assessee could have chosen its initial Assessment Year. This provision was brought in stature w.e.f. 1st April, 2000, by virtue of section 80IA. Thus this decision also will not help in the case of the Department. In assessee's case, as specifically stated in the foregoing paragraphs, the assessee's claim for initial assessment year i.e. assessment year 2008-09 and its claim for deduction under section 80IA made for the first time from assessment year 2008-09, has not been disputed. Thus, the aforesaid judgement relied upon by the learned Departmental Representative will not be applicable to the facts of the present case." Thus, following the aforesaid decisions, we hold that the assessee's Claim for deduction u/s 80IA is allowable from the profits derived from the Windmill unit, starting from A.Y. 2009-10, which is the "initial assessment year" chosen by the assessee. The earlier year losses cannot be set off against the profits for eligible units....
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....on 80IA(5) of the Act will be computed with reference to the eligible units and not from the other non-eligible units. So also, in case of loss suffered by the eligible units, such loss should not be set off against the profits of the other units, other business, other income earned in the initial years of assessment in the subsequent years. It is the mandate of law that the losses of earlier years though already absorbed against the other sources, they are once again notionally brought forward and set off against the profits of the other units to compute eligible deduction. 4. In view of the same, the profit from the eligible business for the purpose of determination of the quantum of deduction under Section 80IA of the Act, has to be computed after deduction of the notionally brought forward losses and depreciation of eligible business, even though they have been allowed to be set off against other income in the earlier years. The learned Counsel submits that in the wake of such position, the Tribunal erred in passing the impugned order and allowing the deduction of the entire profits under Section 80IA(5) of the Act. 5. The learned Senior Counsel for the respon....
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....it started functioning from the year 2005-06. The losses of the years 2005-06 to 2008-09 were absorbed during the relevant years and no losses were carried forward. The only question of debate before the Tribunal was whether the profit earned during the Assessment Year 2009-10 would be entitled for deduction under Section 80IA(5) of the Act without deducting the losses, which were absorbed in the earlier years. 8. The said issue is now no longer res-integra in view of the judgment of the Madras High Court in a case of Velayudhaswamy Spinning Mills P Ltd. & Sudan Spinning Mills (P). Ltd. (supra), the Court observed as under :- "From a readying of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the ....