TaxTMI 
TaxTMI 
2016 (11) TMI 1645
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....ion under section 80IA of the Act. The assessee has independent power generation undertaking at Maharashtra and Rajasthan. It has claimed deduction of Rs. 1,74,64,075/- qua Maharashtra Unit and Rs. 85,71,651/- qua Rajasthan undertaking. It emerges out from record that Maharashtra undertaking was established in the Asstt.Year 2002-03 and that of Rajasthan was established in the Asstt. Year 2003-04. As per section 80IA(ii) of the Act, assessee may opt 10 years out of block of first 15 years for claiming deduction. In this way, the assessee had claimed deduction qua Rajasthan Undertaking from the Asstt.Year 2008-09. The AO observed that since the assessee has loss in the initial year, therefore, those loss which were set off against other stream of income are to be brought forwarded notionally and to be set off against eligible income under section 80IA(iv). In this way, he did not allow deduction to the assessee under section 80IA(iv) of the Act. 4. On appeal, the ld.CIT(A) has allowed deduction by following decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P.Ltd. Vs. ACIT 38 DTR (Mad.) 57. ....
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....after taking into cognizance of the Special Bench decision of Goldmine (supra), it has been held that 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 assesse. Before giving finding, I would like to narrate the law of deduction as laid down in s. 80-IA in conjunction with s. 80-IA(5) of the Act. The scheme of the IT Act, 1961 as contained in its various chapters is that Chapter II details the basis of charge of income-tax. In Chapter III certain incomes are defined which do not form part of income. In Chapter IV elaborate method of computation of total income from different sources of income and the sources of income include- incomes from salary, from house property, from profits and gains of business or profession, from capital gains and from other sources. In Chapter V, incomes of other persons, how and when is to be 'included in appellant's hands is described. Chapters VI and VI-A are important as they provide for the mode of aggregation of income and set off or carry forward of loss and pr....
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.... sub-s. (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-s. (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (3) This section applies to an undertaking referred to in c/. (ii) or cl. (ii) or cl. (iv) of sub-s. (4) which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result- of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in s.33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose : Provided that nothing contained in this sub-section shall apply in the case of t....
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....nterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation.......... Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-s. (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking: Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words 31st day of March, 2006', the figures, letters and words '31st day of March, (2011)' had been substituted; (iv) an undertaking which,- (a)is set up in any part of India....
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.... respect of undertakings providing telecommunication services. Sec. 80-IA(3) imposes certain restrictions where-under, this deduction is not allowed to undertakings if it is formed by splitting up or reconstruction of an already existing business but reconstruction, re-establishment or revival of the business subject to s. 33B have been excluded, etc., etc. with which we are not concerned for deciding the present appeal. But we are concerned mainly with s. 80-IA(5). Sub-section (5.) of s. 80-1A qualifies deduction of sub-s. (1) of s. 80A with anon obstante clause and overrides every other provision in this Act providing mechanism by way of assumption that for determining the quantum of deduction for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, it would be deemed 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 assessment year upto and including the assessment year for which the determination is to be made. The above provisions are very clear, plain and direct in meaning. But only difficulty is cas....
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....; 14. ................... In the present case, we are concerned with the provision of section 80-IA. The said provision was introduced by the Finance Act, 1999, with effect from April ], 2000. The provisions of sections 80-1 and 80-IA are also more or less identically worded. Sections 80-1 and 80-IA come in Chapter VI-A of the Income-tax Act. Chapter VI-A deals with deductions to be made in computing total income. There are two tax incentives contemplated in , Chapter VI-A. One is investment incentive and the other one is profit-linked investment. Chapter VI-A was introduced by the Finance Act, 1965, with effect from April 1, 1965, and it consists of four headings. They are A, B, C and D. Heading "A" ;s general and it also contains definition. It consists of sections 80A, 80AA, 80AB, 80AC and 808. Section 80AB deals with "Deductions to be made with reference to the income included in the gross total income", which reads as follows: "Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C-Deductions in respect of certain incomes' in respect of any income of the nature specified in that sec....
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....r of computation of profits of an eligible business. Accordingly such profits are to be computed as if such eligible business is the only source of income of the assessee. - 16. Section 80-IA reads as follows : "80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business) there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to hundred per cent, of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to....
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....ed in sub-section (4). Subsection (2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised, if it is not exercised, the assessee will not be getting the benefit. Fifteen years 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-section (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that "initial assessment year" employed in sub-section (5) is different from the words "beginning from the year" referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under: "(1)lt starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; (2)lt is for the purpose of determining the quantum of deduction; (3)For the assessment year immediately succeeding the initial assessment year; (4)lt is a deeming provision ; : (5)Ficti....
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....1 (Raj) ; [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-1 and held as follows (page 314 of 271 ITR) : "Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 198485, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income-tax (Appeals), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the face of the record which could be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all requi....