2018 (2) TMI 340 - AT - Income Tax

Eligibility to benefit u/s 80-IA - initial assessment year - choice of year - Held that - It is the option given by the Act to the assessee to opt for the initial year for availing of the benefit of section 80-IA. It is not for the Assessing Officer to decide which year would be the initial year for claiming the benefit under section 80-IA. Therefore, once the assessee exercises his right and opted the initial year, then the benefit flowing under section 80-IA is available to the assessee. See COMMISSIONER OF INCOME TAX And DEPUTY COMMISSIONER OF INCOME TAX Versus SHRI ANIL H LAD 2014 (3) TMI 808 - KARNATAKA HIGH COURT - Decided against revenue

Summary

Issues:
Appeal filed by Revenue against CIT(A) order for AY 2012-13 - Claimed deduction under section 80-IA - Disallowance by AO - CIT(A) allowing appeal - Revenue's grounds of appeal - Sustainability of CIT(A) order - Interpretation of section 80-IA(5) - Initial assessment year determination - High Court judgment applicability - Assessee's right to opt initial year - AO's role in determining initial year.

Analysis:
The appeal pertains to the Revenue challenging the CIT(A) order for the assessment year 2012-13 regarding the deduction claimed under section 80-IA. The assessee, a firm, declared a total income of ?3,33,03,214 for the year. The AO disallowed the deduction claimed under section 80-IA, considering notional loss carried forward from earlier years. The CIT(A) allowed the appeal, citing the decision of the High Court and held that the deduction is in accordance with the law. The Revenue raised several grounds of appeal, questioning the CIT(A)'s decision and the interpretation of section 80-IA(5). They argued that the deduction should be business-specific and computed after setting off losses and depreciation of eligible business, even if set off against other income in earlier years.

The Revenue contended that the CIT(A) erred in allowing the appeal without considering the provisions of section 80-IA(5) which require computation of deduction after deducting brought forward losses and depreciation of eligible business. They argued that holding the initial assessment year from when positive income is earned without setting off carried forward losses would render section 80-IA(5) redundant. The Revenue also raised concerns about setting off losses of the eligible unit against incomes prior to the initial assessment year and maintaining the integrity of the specific unit for deduction purposes.

During the proceedings, the Departmental representative argued against the sustainability of the CIT(A) order based on the High Court's decision in a specific case. However, the authorized representative highlighted the High Court judgment and a Board Circular supporting the CIT(A)'s decision. The ITAT analyzed the High Court judgment, emphasizing the assessee's right to opt for the initial year for claiming benefits under section 80-IA. The ITAT upheld the CIT(A) order, stating that once the assessee exercises the right to choose the initial year, the benefit under section 80-IA becomes available. The ITAT dismissed the Revenue's appeal, affirming the CIT(A) order based on the High Court's interpretation and the assessee's right to determine the initial assessment year.

In conclusion, the ITAT's detailed analysis focused on the interpretation of section 80-IA, the applicability of the High Court judgment, and the assessee's right to select the initial assessment year for claiming deductions. The decision emphasized the importance of following the statutory provisions and upheld the CIT(A) order in favor of the assessee.