2016 (4) TMI 221 - HC - Income Tax

Entitled to deduction under Section 80IA - Held that - It is abundantly clear from Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term initial assessment year would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 801A in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied.

Summary

Issues:
1. Deduction under Section 80IA without setting off losses/unabsorbed depreciation.
2. Interpretation of the term 'initial assessment year' in Section 80IA(5).
3. Assessee's option to choose the initial assessment year for deduction under Section 80IA.

Analysis:
1. The first issue revolves around whether the Income Tax Appellate Tribunal was correct in allowing the assessee to claim deduction under Section 80IA without setting off losses/unabsorbed depreciation from the windmill against other business income. This question arises from the pending appeal before the Supreme Court in SLP.Civil No.1136 of 2011. The judgment mentions the consistent application of the decision in M/s. Velayudhaswamy Spinning Mills (340 ITR 477) by the High Court. The Circular No.1/2016 issued by the Central Board of Direct Taxes further clarifies the interpretation of the term 'initial assessment year' in Section 80IA(5), which impacts this issue.

2. The second issue involves the interpretation of the term 'initial assessment year' in Section 80IA(5) of the Income Tax Act, 1961. The Circular No.1/2016 provides detailed clarification on this term, emphasizing that the assessee has the option to choose the initial/first year for claiming deduction under Section 80IA. The Circular directs Assessing Officers to allow deduction in accordance with this clarification and highlights the importance of continuity in availing the deduction.

3. The third issue pertains to whether the assessee has the discretion to select the first/initial assessment year for claiming deduction under Section 80IA. The judgment notes that the Circular No.1/2016 addresses questions of law 2 and 3, indicating that the appeal should be dismissed based on the circular's coverage of these issues. The judgment ultimately dismisses the tax case appeal and the connected CMP, highlighting the importance of adhering to the Board's directives and avoiding repeated appeals on settled matters.

In conclusion, the judgment delves into the interpretation and application of Section 80IA of the Income Tax Act, emphasizing the significance of following precedents, circulars, and directives issued by the Central Board of Direct Taxes. The decision underscores the need for clarity and consistency in tax assessments while encouraging the Department to seek resolution at higher judicial levels for definitive legal interpretations.