TaxTMI 
TaxTMI 
2020 (7) TMI 525
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....adjusting the losses/depreciation of earlier years brought forward notionally since the appellant has chosen the year under consideration as the "initial assessment year" , "without appreciating that the A.O. had correctly disallowed assessee's claim of deduction u/s. 80IA of the Act, in accordance with the provision of section 80IA(5) of the Act. 2. On the facts and circumstances of the case and in law, the Ld. C.I.T. (A) erred In holding that " The action of the Assessing Officer is not as per the provision of law and he is directed to allow the deduction u/s. 80IA(4) to the extent of income of eligible business i.e. Rs. 3,61,15,115/- in the year under consideration without adjusting the losses/depreciation of earlier years brought forward notionally since the appellant has chosen the year under consideration as the "initial assessment year" . "without appreciating that for the purpose of deduction u/s. 80IA of the Act, not only provision of section 80IA(2) & 80IA(4) of the Act have to be considered but the provision of section 80IA(5) of the Act has to be considered in its entirety." 3. Briefly stated, the assessee is engaged in generation of electricity through wind mill....
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....tion of electricity. The business of generation of electricity has started on different dates in different Wind Mills from 31.12.2005 to 27.02.2010. Undisputedly, the appellant has chosen the year under consideration as "initial assessment year" as per provisions of section 80IA(5) and claimed the deduction for the first time. Undoubtedly, the appellant had incurred losses including depreciation loss in the years prior to the year under consideration to the tune of Rs. 19,14,93,281/- and the same had been adjusted against the income of Bidi manufacturing business. Therefore, there was no brought forward business loss or unabsorbed depreciation available to be set off against the income of current year. However, the Assessing Officer has held that since the Wind Mill business being eligible business, has to be treated as only source of income as per provisions of section 80IA(5), the losses and unabsorbed depreciation of earlier years should be notionally brought forward and set off against the income of eligible business before allowing any deduction u/s. 80IA(4). Accordingly, the Assessing Officer has disallowed the deduction claimed u/s. 80IA(4) at Rs. 3,61,15,115/- since a....
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....ckward 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 contemplate 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 created. Thus, loss in the year earlier to initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business, as no such mandate is provided in section 80-IA(5). Following the above mentioned decision, the Hon'ble jurisdictional ITAT has also decided the matter under consideration in the favour of assessee in the following cases:- i) Jivraj Tea & Industries Ltd. v/s ACIT [2014] 42 taxmann.com 462 (Ahd - Trib.) Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains fro....
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....Thus, the fiction created is that the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year. Prior to 1-4-2000, the initial assessment year was defined for various types of eligible assessees under section 80-IA (12). However, after the amendment brought in statute by the Finance Act, 1999, the definition of 'initial assessment year' has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in sub-section (2) of section 80-IA from which it chooses its 10 years of deduction out of 15 years, then only the losses of the years starting from the initial assessment year alone are to be brought forward as stipulated in section 80- IA(5). The loss prior to the initial assessment year which has already been set-off cannot be brought forward and adjusted into the period of ten years from the initial assessment year as contemplated or chosen by the assessee. It is only when the loss have been incurred from the initial assessment year, then the assesses has....
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....itial assessment year which had been set off against profits of non-eligible units and beginning of initial assessment year as adopted by assessee is assessment year 2005-06 only, losses of assessment years 2003-04 & 2004-05 could not be notionally carried forward within meaning of section 80-IA(5) - Held, yes [Para 9] [In favour of assessee] . 4.1.1. The decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. (Supra) has been followed subsequently in various decisions, a few of them, are as under:- a) ACIT Vs. Patankar Wind Farms Pvt. Ltd. (2014) 36 ITR (Trib) 0510 (Pune) b) CIT Vs. Anil H. Lad (2014) 102 DTR 241 (Kar-HC) c) CIT Vs. Ramraj Handlooms (2015) 93 CCH 0133 (Mad-HC) d) CIT Vs. Eastman Shipping Mills Pvt. Ltd. (2015) 372 ITR 88 (Mad) e) CIT Vs. Meera Textiles Mills Pvt. Ltd. (2015) 93 CCH 57 (Mad-HC) f) CIT Vs. Ucal Fuel Systems Ltd. (2016) 383 ITR 15 (Mad) g) CIT Vs. Prem Textile International (2016) 96 CCH 28 (MadHC) h) CIT Vs. P.V. Chandran (2016) 385 ITR 479 (Mad) 4.1.2. In order to settle the controversy and also to avoid litigation, CBDT has also issued a circular clarifying the meaning of term "Initial as....
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....e the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80-IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80-IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 80-IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting '....
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....ded in Section 80IA(5) of the Act. The learned senior counsel also pointed out that the identical issue has earlier cropped up in assessee's own case in ITA No. 1849/Ahd/2017, order dated 05.12.2019 concerning AY 2013-14 where the issue has been adjudicated in favour of the assessee. The learned senior counsel also referred to para 4.1 of the CIT(A) order and submitted that the issue has now attained finality by the decision of the Hon'ble Madras High Court in Velayudhaswamy Spinning Mills (P.) Ltd. vs. ACIT [2012] 340 ITR 477 (Madras). It was submitted that SLP by Revenue against the aforesaid decision has been dismissed as reported in [2016] 76 taxmann.com 176(SC). 8. We have carefully considered the rival submissions. The short issue that arises for consideration in the present case is whether the assessee is entitled in law for claim of deduction of income arising from eligible business during the year under s. 80IA(1) r.w.s. 80IA(4) of the Act without making adjustments towards losses arising in the earlier assessment years prior to exercise of option of 'initial assessment year' with reference to the eligible business. Hence, the central question for consideration is whether....