2019 (11) TMI 934 - HC - Income Tax

Deduction u/s 80-IA - initial assessment year - Whether Tribunal was right in holding that the decision reported in the case of Velayudhaswamy Spinning Mills 2010 (3) TMI 860 - MADRAS HIGH COURT is applicable to the facts of the present case and thereby allowing the deduction on windmill income u/s 80IA? - HELD THAT - Division Bench of this court in Principal Commissioner of Income Tax-3, Coimbatore v. Prabhu Spinning Mills (P) Ltd. 2016 (3) TMI 1309 - MADRAS HIGH COURT held 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 801A. 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 80IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in Sub-Section (5) of that section for which the Standing Counsel/DRs be suitably instructed.

Summary

Issues:
Interpretation of Section 80-IA of the Income Tax Act, 1961 for claiming deduction under initial assessment year.

Analysis:
The judgment revolves around the interpretation of Section 80-IA of the Income Tax Act, 1961 concerning the deduction claim under the initial assessment year. The controversy in the present Appeals is addressed in light of a Division Bench judgment in a previous case. The Court allowed the Assessee to choose the initial assessment for claiming deduction under Section 80-IA based on a circular issued by the Central Board of Direct Taxes. The question of law raised by the Revenue pertains to the applicability of a decision in a specific case regarding the deduction on windmill income under Section 80-IA.

The Division Bench, in a previous case, consistently followed a decision despite the Supreme Court ordering notice. The circular issued by the Central Board of Direct Taxes clarified the term 'initial assessment year' under Section 80-IA(5) of the Income Tax Act, emphasizing the assessee's option to choose the first year for claiming deduction for ten consecutive years out of a prescribed slab. The circular directed Assessing Officers to allow deduction under Section 80-IA in accordance with the clarification provided, ensuring satisfaction of all prescribed conditions. Pending litigation related to the interpretation of the 'initial assessment year' was instructed not to be pursued.

The judgment concludes that the second question of law raised in the present case is covered by the circular, leading to the dismissal of the appeals. The Court emphasizes adherence to the clarification provided in the circular for allowing deductions under Section 80-IA. Consequently, the present Appeals are disposed of accordingly, with no costs imposed on either party.