2011 (8) TMI 1365 - AT - Income Tax

Summary

Issues involved:
The issues involved in the judgment are the denial of deduction u/s 80IA, determination of the initial assessment year for claiming deduction u/s 80IA, set off of past losses against current year's profit for claiming deduction u/s 80IA, applicability of provisions of section 80IA(5), and interpretation of case law regarding the initial assessment year.

Denial of deduction u/s 80IA:
The appeal was against the order of the Commissioner of Income-tax (Appeals) confirming the denial of deduction u/s 80IA of Rs.27,26,580 by applying the provisions of section 80IA(5). The assessee argued that the revenue cannot thrust the 'initial assessment year' on the assessee, citing a reported decision of the Bench in another case. The Tribunal held that the assessee has the option to select the 'initial assessment year' and upheld the assessee's claim for deduction u/s 80IA in respect of profits from the windmill activity.

Determination of initial assessment year for claiming deduction u/s 80IA:
The Tribunal examined the scope of provisions relating to the initial assessment year under section 80IA. It was noted that the assessee is granted the option to select the 'initial assessment year' for claiming deduction u/s 80IA for any ten consecutive assessment years out of fifteen years. The Tribunal held that the assessing officer erred in thrusting the initial assessment year on the assessee and that the initial assessment year should be the first year in which the assessee claimed the deduction u/s 80IA after exercising the option as per the provisions of section 80IA(2) of the Act.

Set off of past losses against current year's profit for claiming deduction u/s 80IA:
The Tribunal considered the argument that past losses of the undertaking entitled to claim deduction u/s 80IA should have been set off against the profit of the current year. It was clarified that the provisions of section 80IA(5) are applicable only from the initial assessment year, and there was no reason to set off notional brought forward losses/depreciation while computing the deduction u/s 80IA for the present assessment year.

Applicability of provisions of section 80IA(5):
The Tribunal addressed the contention that the provisions of section 80IA(5) were applicable only from the initial assessment year in which deduction u/s 80IA was first claimed by the assessee. It was emphasized that the initial assessment year for the purposes of section 80IA(2) should be the first year in which the assessee claimed the deduction u/s 80IA(1) after exercising the option as per the provisions of section 80IA(2) of the Act.

Interpretation of case law regarding the initial assessment year:
The Tribunal referred to case law to support the assessee's argument regarding the initial assessment year. It highlighted that the assessee has the option to choose the initial assessment year, and the assessing officer cannot thrust the initial assessment year on the assessee. The Tribunal reversed the order of the Commissioner of Income-tax (Appeals) and allowed the appeal of the assessee based on the interpretation of the provisions of section 80IA and relevant case law.

Conclusion:
The Tribunal reversed the order of the Commissioner of Income-tax (Appeals) and allowed the appeal of the assessee, emphasizing the assessee's right to choose the initial assessment year for claiming deduction u/s 80IA and rejecting the denial of deduction based on the incorrect determination of the initial assessment year.