2018 (9) TMI 2131 - AT - Income Tax

Deduction u/s 80-IA - initial assessment year for claim of deduction - whether the lower authorities are right in law and facts of the case in concluding that A.Y 2006-07 is to be taken as the initial assessment year for claim of deduction u/s 80-IA(4)(ii) by the assessee? - HELD THAT - We find that an eligible assessee has the option for claiming deduction under Sec. 80IA(1) for a period of ten consecutive years falling within a period of fifteen years beginning from the year in which the undertaking or the enterprise had started providing telecommunication services. However as can be inescapably gathered from the term consecutive used in sub-section (2) of Sec. 80-IA once the assessee has exercised such option and claimed deduction under Sec. 80-IA(1) then his entitlement to claim deduction would stand restricted to the ten consecutive years beginning from the year in which it was first claimed. We are of the considered view that the fact as to when the assessee had for the first time exercised its option and claimed deduction under Sec. 80-IA as observed by us at length hereinabove would be the only decisive factor for identifying the initial assessment year opted by the assessee for claim of deduction u/s 80-IA. We thus not being impressed with the adverse inferences drawn by the lower authorities by referring to the opinion of Mr. Bharat Agarwal(consultant-an associate of the auditor of the assessee company) thus vacate the adverse inferences drawn by the lower authorities on the said count in the hands of the assessee. Before parting we may herein observe that as concluded by us hereinabove after necessary deliberations that no infirmity emerges arises from the claim of the assessee that it had opted A.Y 2007-08 as the initial assessment year for claim of deduction under Sec. 80-IA(4)(ii) and the same had wrongly been taken by the lower authorities as A.Y 2006-07 thus the observations of the A.O that the assessee alongwith its authorized representatives CAs and tax auditors had intentionally provided misleading information to the department would not survive and are thus vacated. We herein conclude that as the assessee had opted A.Y 2007-08 as the initial assessment year for claim of deduction u/s 80IA(2) therefore it would be entitled for 100% deduction from A.Y 2007-08 to A.Y 2011-12 and thereafter 30% from A.Y 2012-13 to A.Y 2016-17 subject to satisfaction of all other conditions.

Summary

Issues Involved:
1. Determination of the initial assessment year for claiming deduction under Section 80-IA of the Income Tax Act.
2. Validity of the Chartered Accountant's certificate and its impact on the initial assessment year.
3. Interpretation of Section 80-IA(2) concerning the option to claim deductions.
4. Whether the assessee provided misleading information to the department.

Detailed Analysis:

1. Determination of the Initial Assessment Year for Claiming Deduction under Section 80-IA:
The primary issue was whether the initial assessment year for claiming deduction under Section 80-IA was A.Y 2006-07 or A.Y 2007-08. The assessee argued that the initial year should be A.Y 2007-08 because no deduction was claimed in A.Y 2006-07 due to nil gross total income. The Assessing Officer (A.O) and CIT(A) held that A.Y 2006-07 was the initial year based on the Chartered Accountant's certificate.

2. Validity of the Chartered Accountant's Certificate:
The A.O observed that the Chartered Accountant's certificate in Form 10CCB for A.Y 2006-07 mentioned A.Y 2006-07 as the initial assessment year. However, the assessee contended that this was a clerical error and pointed out that no deduction was claimed in A.Y 2006-07 due to nil gross total income, as supported by the computation of income and the audit report's remarks.

3. Interpretation of Section 80-IA(2):
The Tribunal examined Section 80-IA(2), which allows the assessee to claim deductions for any ten consecutive assessment years out of fifteen years from the year the undertaking begins operations. The Tribunal noted that the deduction could only be claimed when there is positive gross total income. Since the assessee did not claim any deduction in A.Y 2006-07 due to nil gross total income, it could not be considered the initial assessment year. The Tribunal emphasized that the actual claim of deduction is crucial, not just the exercise of the option.

4. Misleading Information Allegation:
The A.O alleged that the assessee and its representatives provided misleading information by changing the initial assessment year from A.Y 2006-07 to A.Y 2007-08. The Tribunal found no merit in this allegation, concluding that the error in the Chartered Accountant's certificate was inadvertent and did not reflect an actual claim of deduction in A.Y 2006-07.

Conclusion:
The Tribunal allowed the appeal, holding that A.Y 2007-08 was the initial assessment year for claiming deduction under Section 80-IA. The assessee was entitled to 100% deduction from A.Y 2007-08 to A.Y 2011-12 and 30% from A.Y 2012-13 to A.Y 2016-17, subject to other conditions being satisfied. The Tribunal also vacated the observations regarding misleading information, finding them unsubstantiated. The appeal was thus allowed in favor of the assessee.