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TMI Blog2011 (1) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/- as deduction u/s. 80IA of the Act. 3. There was a search and survey action in assessee's concerns as well as the associate concerns. In the back drop of the search action, assessment was made by the assessing authority u/s. 153A. Naturally, 153A assessments covered even the earlier assessment years. In the course of the assessment proceedings for the impugned assessment year 2008-09, the Assessing Officer disallowed the deduction of Rs. 1,97,73,931/- claimed by the assessee as deduction u/s.80IA. The Assessing Officer has also made an addition of Rs. 24,06,700/- on the ground of seizure of cash at the time of search. He has further made an addition of Rs.1,68,43,841/- by way of 50% of the disallowance of expenses incurred on running and maintenance of helicopter. The disallowance was made on the ground of personal user. Accordingly, the Assessing Officer determined a total income of Rs. 8,31,46,500/- as against a total income of Rs. 4,41,22,030/- returned by the assessee. 4. The assessment was taken in first appeal. The Commissioner of Income-tax (A) confirmed the order of the assessing authority disallowed the claim made by the assessee u/s.80IA and upheld the addition of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of windmill and claimed the entire amount as deduction u/s.80IA. The depreciation and loss pertaining to the earlier assessment years 2006-07 and 2007-08 were in fact set off by the assessee against the profit generated from other business including mining business carried on by the assessee. Even though the assessee could not claim the deduction u/s.80IA for those assessment years 2006-07 and 2007-08, the depreciation and loss relating to those assessment years have already been set off against the profits generated from other business carried on by the assessee. Therefore, according to the assessee, there was no unabsorbed depreciation and loss to be set off against the profit of Rs. 1,97,73,931/- pertaining to the impugned assessment year 2008-09 and it is therefore that the assessee has claimed the entire profit of the impugned assessment year as deduction u/s. 80IA. 10. But the Assessing Officer held that even though the depreciation and loss relating to the earlier assessment years have already been set off against the profit of the assessee generated from other businesses, it is necessary for the purpose of deduction u/s. 80IA to carry forward those depreciation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward and set off has to be exercised on a notional basis. In other words, even though no amount is available as unabsorbed depreciation and loss by virtue of the fact that they have been set off against the profits of other business of the assessee for those assessment years, still for the purpose of section 80IA(5), carry forward and set off has to be exercised on a theoretical basis through the medium of notional carry forward and set off. In coming to the above finding the Assessing Officer has relied on the judgement of the Bombay High Court in the case of Indian Rayon Corporation v. Commissioner of Income-tax (261 ITR 98), for the proposition that the special deduction under Chapter VIA should be restricted to the profits derived from the newly established undertakings. 14. The assessee placed before the Commissioner of Income-tax (A) decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. ACIT (38 DTR 57), where the court has held that there was no need of any such notional exercise of carry forward and set off of earlier period depreciation and loss in the process of computing the deduction u/s. 80IA. But the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be set off against other income of those assessment years. 19. As the issue raised in all the three cases including the present one is one and the same, we cannot overlook the judgement of the Hon'ble Madras High Court only on the basis of a feeble argument that the facts and circumstances of that case are different from the present case in hand. 20. It is needless to say that the judgement of a constitutional court has got an overriding effect on the decision of a Special Bench of the Appellate Tribunal. Therefore, in the present case, the relevance of the judgement of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. ACIT (38 DTR 57) need not be over emphasized. Therefore, we have to first examine that how far the said judgement of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. ACIT (38 DTR 57) governs the issue in hand. 21. The facts relevant in the case of Velayudhaswamy Spinning Mills are as follows. The assessee in that case is engaged in the business of manufacture of yarn and electricity generation through wind electric generator. It filed its return of income for the relevant assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in s. 80IA(5) would only mean the year of commencement and not the year of claim ? (c) Whether on the facts and circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of claim, which has already been absorbed, could be notionally carried forward and taken into consideration for computation of deduction under s. 80IA ? (d) Whether on the facts and circumstances of the case, the Tribunal is right in law in following the decision of the Special Bench in the case of Gold Mines Shares & Finance P. Ltd (supra) when admittedly the said decision was rendered prior to the amendment to s. 80-IA by Finance Act, 1999 ?" 23. From the above questions placed before and considered by the Hon'ble Madras High Court, it is clear that the issue raised in the present appeal is exactly the same issue adjudicated by the Hon'ble Madras High Court. 24. The Hon'ble Madras High Court while considering the said issue referred to the judgement of the same court dated.23. 12.2009 in a Tax Case (Appeal) No.298 of 2004 rendered in the context of section 80I (6). It was held in the said unreported judgement that the cum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1999 w.e.f. 1st April, 2000. Provisions of ss.80-I and 80-IA are also more or less identically worded. Secs. 80-I and 80-IA come in Chapter VI-A of the IT Act .......... "Where any deduction is required to be made or allowed under any section included in this chapter under the head 'C- Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." A mere reading of the above provision makes it clear that any income of the nature specified in that section, which is included in the gross total income of the assessee for the purpose of computing the deduction under that section, the amount of income of that nature as computed in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised. If it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity etc. Sub-s. (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-s. (5) and the same is not defined under the provisions. It is to be noted that 'initial assessment year' employed in sub-s. (5) is different from the words "beginning from the year" referred to in sub-s. (2). Important factors are to be noted in sub-s. (5) and they are as under : "(1) It starts with non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored ; (2) It is for the purpose of determining the quantum of deduction ; (3) For the assessment year immediately succeeding the initial assessment year ; (4) It is a deeming provision ; (5) Fiction created that the eligible business is the only source of income ; and (6) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of section 80AB and therefore bringing the notional concept of carrying forward and set off will be contrary to the scheme of section 80AB and concept of gross total income. 28. Now it is clear as we find that this issue is squarely covered by the above discussed judgement of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. ACIT (38 DTR 57). Where such an overriding judgement of the constitutional court is governing the issue, we are not permitted to rely on the decision of the Special Bench of the Ahmedabad Tribunal. 29. Therefore, following the above judgement of the Hon'ble High Court of Madras, we accept the contention of the assessee and reverse the order of the Commissioner of Income-tax (A) on this point and direct the assessing authority to grant deduction to the assessee u/s. 80IA for the quantum claimed by the assessee without diluting the same by the notional deduction of earlier loss and depreciation. 30. This ground is decided in favour of the assessee. 31. The next issue is the addition of Rs. 24,06,700/- in the nature of cash seized in the course of search. We have gone through the detailed submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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