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TMI Blog2016 (2) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of “Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT” ( 2010 (3) TMI 860 - Madras High Court)has held that the assessee is entitled to claim deduction u/s 80IA for 10 consecutive years out of 15 years and that initial year of benefit can be opted by the assessee. Losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against profits of other businesses cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA - Decided in favour of assessee - ITA No. 5056/M/2014 - - - Dated:- 24-2-2016 - Shri Sanjay Garg, Judicial Member And Shri Ashwani Taneja, Accountant Member For the Petitioner : Shri Madhur Agarwal, A.R. For the Respondent : Shri K. Mohandas, D.R. ORDER Per Sanjay Garg, Judicial Member The present appeal has been preferred by the Revenue against the order dated 16.05.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. 2. The Revenue has taken the following grounds of appeal: i. Whether on the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be restored. 3. A perusal of the above grounds of appeal reveals that the Revenue has taken only two effective grounds through the above grounds of appeal. The first issue is relating to the nature of the receipts received on account of forfeiture of warrant/share application money as to whether the same is to be treated as capital in nature or the Revenue income of the assessee. The second issue raised by the Revenue is relating to the carry forward of notional loss under section 80IA of the Act for the purpose of computation of eligible claim/deduction to the assessee under section 80IA of the Act. 4. So far as the first issue is concerned, the Ld. A.R. of the assessee, at the outset, has stated that the issue is squarely covered in favour of the assessee by various decisions of the Tribunal. He, in this respect, has relied upon the decision of the Kolkata Bench of the Tribunal in the case of Asiatic Oxygen Ltd. vs Dy. Commissioner of Income Tax (1994) 49 ITD 0355 wherein, the Tribunal has held that the amount forfeited from shareholders for default in payment of call moneys is a capital receipt and further that the amount received on reissue of forfeited shares credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar Sons Ltd. (supra). The Tribunal in the said case has held as under: 15. Thus, the earnest money or an advance amount received on account of issuance of NCDs, if forfeited on account of non-payment of call money, the loan liability would only convert into a capital receipt. It would not assume a character of revenue receipt or business receipt because NCDs were not issued in the course of regular business of the assessee as evident from the facts of the case. Assessee's main business is of cement and it was in the process of set up of cement manufacturing plant at Satna during the impugned assessment year. In these circumstances, we are constrained to hold that the amount received by the assessee in lieu of issuance of NCDs which were forfeited later, on account of non-payment of call money assumes a character of capital receipt which earlier was shown as a loan liability in the books of account of the assessee. If we consider this receipt to be a business receipt even then it would not be taxable to tax under the provisions of s. 41(1) of the Act, inasmuch as there was no allowance or deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at ₹ 1,11,14,473/-. This profit derived from wind mill unit had been claimed exempt u/s. 80IA(4)(iv)(a) being 100% of its profit derived from the wind mill project. The AO noted that though the project was started in AY 2006-07, the assessee had claimed deduction u/s. 80IA(4)(iv)(a) for the first time in AY 2009-10 and the year under consideration was the second year of such claim of deduction u/s. 80IA(4)(iv)(a) of the Act. The AO observed that as per the provision of section 80IA(5), while quantifying the amount of deduction under section 80IA, it has to be presumed that the eligible business is the only source of income and hence the losses incurred in earlier year has to be first set off with the profits of eligible business and balance profit, if any is only eligible for deduction under section 80IA. He also further observed that since the assessee had incurred huge losses in earlier year, if the same are set-off from the income of the windmill of this year, deduction under section 80IA would not be available. He further observed that as per the provisions of section 80IA(5), a taxpayer has the option to claim deduction for a period of 10 consecutive assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the AO on this issue. 12. We have considered the rival contentions. We find that the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT (2010) 231 CTR (Mad) 368 (BCAJ) has held that the assessee is entitled to claim deduction u/s 80IA for 10 consecutive years out of 15 years and that initial year of benefit can be opted by the assessee. Losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against profits of other businesses cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA. Similar view has been taken in the decision of Hon'ble Madras High Court in the case of CIT vs. Emerald Jewel Industry P. Ltd. (supra) and by the Mumbai Tribunal in the case of M/s Prashant Caterers vs. ITO (supra). Respectfully following the same, this issue is accordingly decided in favour of the assessee. The AO is directed to allow the claim of deduction in the light of the above stated decisions. 13. In view of the above, there is no merit in the appeal of the Revenue and the same is accordingly dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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