TaxTMI 
TaxTMI 
2018 (8) TMI 1126
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....und that incorrect set off of losses were claimed by the assessee pertaining to the earlier assessment years as under : 2004-05 Rs.33,01,365/- 2003-04 Rs.74,01,133/- The AO also observed that the assessee was having positive income in the assessment year 2005-06 onwards as per the details given below : 2005-06 Rs.1,35,72,656/- 2006-07 Rs.1,59,07,527/- 2007-08 Rs.2,58,92,798/- The AO was of the view that having positive income from the assessment year 2005-06 to the assessment year 2011-12 the assessee ought to have claimed the set off losses in the immediately subsequent assessment year and it is incorrect to claim the set off of losses after completion of tax holiday period. 3. The assessee is engaged in the business of power generation and eligible for deduction u/s 80IA for 10 consecutive assessment years (tax holiday period) out of 15 years beginning from the year in which the undertaking generates the power. The assessee started claiming the deduction from the assessment year 2000-01 and claimed the same for 10 consecutive assessment years and completed the tax holiday period in 2010-11. During the intervening period 2003-04 and 2004-05 t....
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....0521 (2004). None appeared representing the assessee. 6. We have heard the departmental representative and gone through the orders of the authorities below. In this case, the assessee had incurred the losses during the assessment year 2003-04 and 2004-05 and did not claim the set off of losses in the subsequent assessment years though there were profits from the business for the assessment years 2005-06 onwards and carried forwarded the losses till the completion of tax holiday period of 10 years and claimed the losses in the impugned assessment year i.e. after completion of 10 years. The assessee is eligible for deduction u/s 80IA of the Act for the 10 consecutive assessment years out of the 15 assessment years commencing from the initial assessment year. The initial assessment year selected was 2000-01 in the instant case. As per section 80IA sub section 5 of the Act, the deduction is allowable to the assessee on the profits and gains derived from the eligible business as computed as if the unit is an separate and independent entity which means that the profits and gains as computed u/s 29 to 43D in the case of 80IA unit independently and allow the brought forward losses as pr....
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....al income'; 2. second, the computation of deduction is made under a non obstante section 80- IA(7)/80-IA(5); 3. third, the profits and gains are computed on a fiction created to the effect that the eligible business is the only source of income; 4. fourth, the fiction is created for the purposes of determining the quantum of deduction; and 5. fifth, the fiction is for all the years eligible for the deduction. [Para 24] As regards first sub-head it may be noticed that section 80-IA deduction is admissible in respect of profits and gains derived by eligible business which is included in the gross total income which is defined in sub-section (5) of section 80B to mean the total income computed in accordance with the provisions of the Act before making any deductions under Chapter VIA. It follows, therefore, that deductions under Chapter VI-A can be given only if the gross total income is positive and not negative. If the 'gross total income' of the assessee is determined as 'Nil' then there is no question of any deduction being allowed under Chapter VI-A in computing the total income. The Assessing Officer has to take in....
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....ficer no doubt has to treat the profit derived from an industrial undertaking as the only source of income in order to arrive at the deductions under Chapter VI-A. However, non obstante clause appearing in section 80-I(6) is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80-I(1) is required to be computed in the manner provided under the Act, which pre-supposes that the gross total income shall be arrived at after adjusting loss of other division against the profits derived from an industrial undertaking. [Para 27] The second sub-head is emanating from the provisions of section 80-IA(7)/80-IA(5) which starts with non obstante clause reading as 'Notwithstanding anything contained in any provisions of the Act'. It means that it overrides all the provisions of the Act. Profits and gains of a business are determined, by allowing all deductions including under section 32 and set-off under the provisions of sections 70, 71 and 72; it is on the balance that the deduction is allowed under Chapter VI-A. By this overriding provision these sections, to the extent provided otherwise in sect....
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....he object of this section, was not that sections 32(2), 70, 71 and 72 would not be applicable, had also no force. It amounts to permit imagination to boggle when it comes to the inevitable corollaries of the deemed state of affairs and also reading something which is prohibited by the fiction and is not there in the provisions. Because of the fiction, even if any set-off of eligible business loss was made against other sources of income, it has to be assumed as not so set-off. The fiction is to clarify the position that the deduction is to be granted only with respect of the profits of the eligible business, if the assessee was carrying out many activities and was having many sources of income. As if that was the only source of income means if there was no other source of income. If that be so, the depreciation and loss could not be absorbed and be set-off against any other source or head of income. It is because by virtue of deeming fiction one has to assume that there is no other source of income and, consequently, it has to be carried forward and set-off against the income of this very source only for which the deduction is being computed. The argument that if the loss incurred ....
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....Pvt. Ltd. (supra) Section 80IA which has been amended w.e.f. 1.4.2000 provides that where the gross total income of the assessee includes any profits and gains derived by an undertaking from any eligible business referred to in sub section 4 shall in accordance with the provisions of the section be allowed in computing the deduction of an amount equal to 100% profits and gains derived from such business for the 10 consecutive years. The option is given to the assessee for claiming any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops and begins operating. 15 years is the outer limit within which the assessee can choose a period of 10 consecutive years for claiming the deduction. Sub section 5 of section 80IA is non- obstant clause which deals with the computation of business profits. Once the assessee exercises the option of choosing the initial assessment year as culled out in sub section 2 of Section 80IA , the time limit starts for the assessee to claim the deduction out of the profits derived from the eligible business. The losses incurred during the 10 years tax holiday period commencing from the initial....