2020 (1) TMI 908 - AT - Income Tax

Deduction u/s. 80IA(4) - initial assessment year - income of eligible business in the year under consideration without adjusting the losses/depreciation of earlier years brought forward notional losses since the assessee has chosen the assessment year 2012-13 as the initial assessment year - HELD THAT - CBDT Circular No. 1 of 2016 (F.No. 200/31/2015-ITA-I) dated 15-02- 2016 explained that to claim deduction u/s. 80IA, the assessee has option to choose the initial year from which it intends to claim deduction for 10 consecutive years out of period of 15 yea₹ 15 years is the outer limit and the same is beginning from the year in which the undertaking or enterprise develop and begin to operate any infrastructure activity etc. As already adjudicated such issue in favour of the assessee in M/S. JIVRAJ TEA INDUSTRIES LTD. VERSUS THE ACIT, CENTRAL CIRCLE-2, SURAT. 2014 (1) TMI 234 - ITAT AHMEDABAD Assessee is entitled to claim deduction u/s. 80IA for 10 consecutive assessment years beginning from the year in respect of which it has exercised such option subject to fulfillment of condition prescribed in the section. Further, it is clear before the decision of Hon ble Madras High Court in the case of CIT vs. G.R.T. Jeweler India Pvt. Ltd. 2016 (3) TMI 1071 - MADRAS HIGH COURT as referred in the decision of ld. CIT(A) after referring Board s circular held that losses/unabsorbed depreciation pertaining to wind mill which were set off in the earlier assessment years against other business income of the assessee, cannot be notionally brought forward and again set off against the income of eligible business of the year which was chosen as initial assessment year for claim of depreciation u/s. 80IA - Decided in favour of assessee.

Summary

Issues involved:
Allowing deduction u/s. 80IA(4) without adjusting losses/depreciation of earlier years brought forward notionally.

Detailed Analysis:

Issue 1: Deduction u/s. 80IA(4) without adjusting losses/depreciation
The appeal pertained to the solitary issue of allowing deduction u/s. 80IA(4) to the extent of income of eligible business without adjusting the losses/depreciation of earlier years brought forward notionally. The assessing officer contended that the deduction claimed was subject to the provisions of section 80IA(5) of the Income Tax Act, 1961. The dispute arose from the interpretation of the term "initial assessment year" for claiming the deduction u/s. 80IA. The assessing officer insisted on adjusting the notional brought forward losses against the profit for the year under consideration from the wind mill business. However, the assessee argued that the deduction u/s. 80IA had been correctly claimed and relied on judicial pronouncements and circulars issued by the CBDT.

Issue 2: Decision of the CIT(A)
The CIT(A) allowed the claim of the assessee after following the appellate order for the assessment year 2012-13. The CIT(A) referred to Circular No. 1 of 2016 issued by the CBDT, which clarified the meaning of the term "initial assessment year." The circular emphasized that once the initial assessment year is opted for by the assessee, they are entitled to claim deduction u/s. 80IA for ten consecutive years from that year. The CIT(A) held that losses/depreciation of the wind mill business for years prior to the initial assessment year, which had already been set off against other business income, cannot be notionally brought forward and set off against the income of the eligible business. The CIT(A) directed the assessing officer to allow the deduction u/s. 80IA(4) without adjusting the losses/depreciation of earlier years brought forward notionally.

Issue 3: Appellate Tribunal's Decision
The Appellate Tribunal, after considering the CBDT circular and the finding of a Coordinate Bench, affirmed the entitlement of the assessee to claim deduction u/s. 80IA for ten consecutive assessment years beginning from the year in which the option is exercised. The Tribunal noted that losses/unabsorbed depreciation pertaining to the wind mill business, which were set off against other business income in earlier years, cannot be notionally brought forward and set off against the income of the eligible business. Based on these findings, the Tribunal dismissed the appeal of the revenue, upholding the decision of the CIT(A) to allow the deduction u/s. 80IA(4) without adjusting the losses/depreciation of earlier years brought forward notionally.

In conclusion, the appellate tribunal upheld the decision of the CIT(A) and dismissed the appeal of the revenue, emphasizing the correct interpretation of the term "initial assessment year" for claiming deduction u/s. 80IA and disallowing the notionally brought forward losses to be set off against the income of the eligible business.