2015 (8) TMI 71 - AT - Income Tax

Eligibility for deduction u/s 80IB denied - whether the initial assessment year is the year in which the assessee started functioning its business or the year in which the prescribed authority granted approval u/s 80IA of the Act for the claiming deduction u/s 80IA of the Act? - Held that - The assessee is eligible for deduction u/s 80IA (now section 80IB) for ten assessment years from the initial assessment year, i.e. the year in which the business of hotel started functioning. It does not say that the year in which the approval was granted by the prescribed authority. For the purpose of taking the initial assessment year, the approval of the prescribed authority may not be relevant. The assessee may not be eligible for deduction u/s 80IA if the approval of the prescribed authority was not obtained for the initial assessment year. But that does not mean that the initial assessment year has to be excluded from the provisions of the Act. Taxation statute has to be interpreted on the basis of plain language employed by the legislature. A harmonious reading of the Act clearly says that though the approval of the prescribed authority, viz. the DGIT(Exemption) is a pre-condition, the initial assessment year shall be the year in which the assessee hotel started functioning for the purpose of computing ten assessment years for grant of deduction u/s 80IA of the Act. If the assessee could not obtain the approval of the prescribed authority, viz. DGIT (Exemption) for any of the years after started functioning of the hotel, then the assessee may not be eligible for deduction u/s 80IA for those assessment years. The assessee can claim deduction only in respect of the remaining assessment year from the year in which the approval was granted by the prescribed authority. A harmonious reading of section 80IA as it stood at the relevant point of time and the provisions of section 80IB, as it stands now, this Tribunal is of the considered opinion that the initial assessment year is the year in which the assessee started functioning of the hotel and not the year in which the approval was granted by the prescribed authority. Thus the Administrative Commissioner has rightly exercised his revisional jurisdiction since grant of deduction u/s 80IB was not only erroneous but also prejudicial to the interest of revenue. Hence, the order of the Administrative Commissioner is confirmed. - Decided against assessee.

Summary

Issues:
1. Eligibility for deduction u/s 80IB for the assessment year 2009-10.
2. Interpretation of initial assessment year for claiming deduction u/s 80IA of the Act.

Analysis:
1. The appellant claimed eligibility for deduction u/s 80IB based on approval granted by the DGIT (Exemption) from 12-04-1999, relevant for the assessment year 2000-01. The appellant argued that the approval allowed exemption for 10 assessment years, making them eligible for the deduction for the year under consideration. The representative highlighted the provisions of section 80IA and 80IB, emphasizing the importance of the approval by the prescribed authority for claiming deduction u/s 80IA. The contention was that the initial assessment year should be the year of approval, not when the hotel started functioning. The Administrative Commissioner's revision was challenged on this basis.

2. The dispute centered on determining the initial assessment year for claiming deduction u/s 80IA. The appellant argued that the year of approval by the DGIT (Exemption) should be considered the initial assessment year, while the respondent contended that it should be the year the hotel started functioning. The Tribunal analyzed the relevant provisions of section 80IA and 80IB, emphasizing that the initial assessment year is when the business starts functioning, as defined in the Act. While approval by the prescribed authority is crucial, it does not alter the definition of the initial assessment year. The Tribunal concluded that the initial assessment year is when the hotel started functioning, not when the approval was granted, affirming the Administrative Commissioner's revision as correct and dismissing the appellant's appeal.

In conclusion, the judgment upheld the revision by the Administrative Commissioner, affirming that the initial assessment year for claiming deduction u/s 80IA is when the hotel started functioning, not when approval was granted. The Tribunal's analysis focused on the statutory provisions and the plain language of the Act to interpret the eligibility criteria for deductions accurately.