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TMI Blog2007 (10) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... oss relief to the unit which claims deduction tinder section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction u/s 80-IA. At the cost of repetition, we make it clear that the case laws relied on by the DR are delivered before the amendment to section by Finance Act, 1999. Before the amendment the initial assessment year was defined in the Act but after the amendment there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the year of claiming relief u/s 80-1A. In view of this, we are of the opinion that there is no question of setting off notionally carried forward unabsorbed depreciation or loss against the profits of the units and assessee is entitled to claim deduction u/s 80-IA on current assessment year on the current year profit. Accordingly we allow the claim of the assessee. In the result, the appeal of the assessee is allowed. - N. VIJAYAKUMARAN, J.M. AND CHANDRA POOJARI, A.M. For the Appellant : V. Jayaram For the Respondent : Sudhakar Tiwari ORDER CHANDRA POOJARI, A.M. 1. This appeal by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking. He submitted that there is no concept under the IT Act of notionally carrying forward the losses. Further he submitted that the assessee has option to claim deduction under Section 80IA(1) for any 10 consecutive years out of 15 years beginning from the year in which the undertaking begins to operate/generate power. He submitted that the assessee can claim this deduction for 10 consecutive years out of 15 years from the assessment year immediately succeeding the initial assessment year or subsequent assessment years. Further he submitted that it is at the option of the assessee to claim deduction from first; second; third; fourth or fifth or any year. It is the option of the assessee. The Department cannot compel the assessee to claim the deduction from first year only. When the assessee exercises such option then deduction should be computed as if such eligible business were only the source of income of the assessee during the previous year relevant to the initial assessment year and every subsequent assessment year upto and including the assessment year which the determination has to be made. Further he submitted that the case law in the cases of Prasad Productions (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IA was not claimed, depreciation and loss relating to an eligible unit, which has not been set off against the income of the other business of the assessee, cannot be notionally carried forward under Sub-section (5) of 80-IA--as it is not at all operative or applicable for those years. The decision of the Mumbai Tribunal in the case of Cipla Ltd. also supports this view. 4.3 The learned Counsel submitted that: (d) In the case of an enterprise carrying on the business of developing, operating and maintaining any infrastructure facilities, there was an option to claim deduction under Section 80-IA for a period of 10 consecutive assessment years, within a block of 12 assessment years from the year of commencement of the activity. In this context, the initial assessment year has been defined as the assessment year specified by the assessee at his option to be the initial year not falling beyond the 12th assessment year from the previous year in which the enterprise begins to operate the facility. Therefore, wherever the option for claiming the relief is given in the statute, the initial assessment year would mean the year from which the deduction is claimed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account in determining the quantum of deduction under Section 80-IA, even though these may have actually been set off against the profits of the assessee from other sources. In that view of the situation, the AO had rightly denied the deduction under Section 80-IA in respect of these two units, there being a loss in respect of the said units as computed within the meaning of Section 80-IA(7). Section 80-IA, being beneficial provision, even though liberal interpretation has to be given to such a provision, the interpretation has to be as per the wordings of the section. The wordings of Section 80-IA(7) are clear and there is no ambiguity therein. Therefore, there was no scope for conferring the benefit sought by the assessee by ignoring or misinterpreting words in Section 80-IA(7). The Departmental Representative also placed reliance on the Tribunal decision in the case of ITO v. Kanchan Oil Industries Ltd. (2005) 92 TTJ (Kol) 739 : (2005) 92 ITD 557 (Kol) wherein it is held as follows: Conversely, the unabsorbed losses, unabsorbed depreciation etc. relating to the eligible business are to be taken into account in determining the quantum of deduction admissible under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion service or develops an industrial park or develops a special economic zone referred to in Clause (iii) of Sub-section (4) or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission of distribution lines: Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in Clause (a) or Clause (b) or Clause (c) of the Explanation to Clause (i) of Sub-section (4), the provisions of this Sub-section shall have effect as if for the words 'fifteen years', the words 'twenty years' had been substituted. (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of Sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that Sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction in any assessment year starting from the first assessment year. The provision of Section 80-IA(5) is applicable only when assessee chooses to claim deduction under Section 80-IA and if the assessee has not chosen to claim the deduction under Section 80-IA, Section 80-IA(5) cannot be made applicable. In the present case, there is a categorical finding by the AO and CIT(A) that the first year claimed is from the asst. yr. 2004-05. At the time of hearing the learned Departmental Representative filed a letter which reads as follows: Assessee's claim is that asst. yr. 2004-05 is the 'initial assessment year'. However, from a perusal of records the following facts are observed: Asst. yr. 1999-2000 Assessee claimed deduction of Rs. 2,15,59,112 under Section 80-IA of the IT Act. The AO rejected the claim under Section 143(3) r/w Section 263. Aggrieved by the order the assessee preferred an appeal before the CIT(A) agitating inter alia the claim for a deduction under Section 80-IA. The CIT(A) vide his order in ITA No. 39/2005-06/dt. 4th Aug., 2005 in para No. 12 directed the AO to allow the claim under Section 80-IA which was accordingly allowed. Asst. yr. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arts from 2004-05. Since the assessee has opted to claim this deduction only in this assessment year, the initial assessment year cannot be the year in which the undertaking commenced its operations and in this case the initial assessment year is the assessment year in which assessee has chosen to claim deduction under Section 80-IA. Hence the provisions of Section 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which assessee opted to claim relief under Section 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction under Section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under Section 80-IA. At the cost of repetition, we make it clear that the case law relied on by the Departmental Representative are delivered before the amendment to section by Finance Act, 1999. Before the amendment the initial assessment year was defined in the Act but after the amendment there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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