2016 (2) TMI 987 - AT - Income Tax

Interpretation of provision of section 80IA(5) - initial assessment year - Held that - As Poonawalla Stud and Agro Farm Pvt. Ltd. Vs. ACIT 2010 (9) TMI 1080 - ITAT PUNE the initial A. Y for the purpose of claiming deduction u/s. 80IA was the first year in which the assessee claimed the deduction u/s. 80IA (1) after exercising his option as per the provisions of 80IA (2) of the Act. It was held that the Ld. CIT(A) has erred in holding that the initial A. Y for the purposes of Section 80IA(2) r.w.s. 80IA (5) was the year in which the assessee started generating electricity from the wind mill activity. Also see Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT 2010 (3) TMI 860 - Madras High Court When the assessee exercising the option, only the losses of the year beginning from the initial A. Y. are to be brought forward and not the losses of earlier year which have been already set off against the other income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee and set off the same against the current income of the eligible business. We thus set aside the orders of the authorities below and direct the A. O to allow the claimed deduction u/s. 80IA without bringing the notionally brought forward any loss or depreciation of earlier years which has already been set off against other income of the assessee.

Summary

Issues:
Interpretation of 'initial assessment year' for claiming deduction under section 80IA(4)(iv)(a) of the Income-tax Act, 1961.

Detailed Analysis:
The single issue in this case revolves around the interpretation of the 'initial assessment year' concerning the eligibility for claiming a deduction under section 80IA(4)(iv)(a) of the Income-tax Act, 1961. The Revenue challenged the order of the CIT(A) related to the assessment year 2011-12, arguing that the CIT(A) incorrectly interpreted the provisions of section 80IA(5) in light of a specific case law. The Revenue also questioned the applicability of the definition of 'Initial Assessment Year' under Section 80IB(14) to the provision of Section 80IA of the Act. The dispute primarily stemmed from the computation of profits and gains from power generation, leading to the rejection of the assessee's deduction claim by the Assessing Officer based on the existence of cumulative unabsorbed losses from previous assessment years.

The assessee, a company engaged in manufacturing automobile components, had claimed a deduction under section 80IA(4)(iv)(a) of the Act. However, the Assessing Officer disallowed the deduction, citing the cumulative unabsorbed losses from prior assessment years, particularly related to power generation business. The Assessing Officer emphasized the application of Section 80IA(5) of the Act, which, in their view, overrode other provisions. Despite the initial disallowance, the CIT(A) ruled in favor of the assessee in the first appeal.

In the subsequent appeal before the ITAT Pune, the Revenue contested the CIT(A)'s decision, while the assessee's representative highlighted a previous Tribunal decision favoring the assessee on a similar issue. The ITAT Pune, after considering the arguments and previous rulings, found that the issue was conclusively settled in favor of the assessee by a Co-ordinate Bench decision in the assessee's own case for prior assessment years. This decision was supported by references to judgments from the Madras High Court and the Pune Bench of the Tribunal, emphasizing the treatment of losses and deductions under Section 80IA. Ultimately, the ITAT Pune upheld the CIT(A)'s decision, dismissing the Revenue's appeal and confirming the allowance of the deduction under Section 80IA(4)(iv)(a) for the assessee.

In conclusion, the ITAT Pune's judgment reaffirmed the consistent interpretation of the 'initial assessment year' for claiming deductions under Section 80IA(4)(iv)(a), aligning with previous decisions and judicial precedents. The ruling emphasized the treatment of losses and profits concerning eligible business activities, providing clarity on the application of relevant provisions and upholding the assessee's entitlement to the claimed deduction.