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TMI Blog2018 (6) TMI 1608X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer u/s.14A of the Income Tax Act. 4. The brief facts of the case are that assessee has filed its return of income electronically, on 14/10/2010 and 30/09/2010 declaring total income at Rs. 30,50,790/- and Nil in A.Y. 2010-11 and 2011-12 respectively. The returns of both the years were processed u/s 143(1) and thereafter, cases were selected for scrutiny assessment, notice u/s. 143(2) of the Act was issued and served in both the years. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee has shown tax free dividend income of Rs. 2,28,073/- in A.Y. 2010-11, whereas no tax free income is being noted by the Assessing Officer in A.Y. 2011-12. The assessee has made total investment of Rs. 19,49,122/- in A.Y. 2010-11 as well as in A.Y. 2011-12. The Assessing Officer with the help of Rule 8D disallowed a sum of Rs. 89,206/- in A.Y. 2010-11 and Rs. 80,578/- in A.Y. 2011-12. This disallowance made by the AO has been deleted partly by the Ld. CIT(A). The findings of the Ld. CIT(A) recorded in A.Y. 2010-11 on this issue read as under: "2.2 I have carefully considered the contentions of the appellant. As far as the claim of the appellant that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome was disallowable, notwithstanding the fact that no such income was earned. Appellant's case is clearly a case of mixed fund as highlighted by the A.O. being used for the purpose of earning taxable as well as exempt income. Appellant has not been able to show before the A.O. that no interest expenses have been incurred by it in relation to the assets capable of generating exempt income. It may be pertinent to note here that the Ld.CIT(A)-XI, Ahmedabad vide appellate order dated 02/11/2011 for A.Y.2008-09 in case of the appellant itself has held as under:- "the appellant during the appellate proceedings submitted that in the year 2005-06, "it had invested a sum of Rs. 5,00,000/- in SBI MEG Fund. This investment was switched out to SBI MEG COMMA and fund during the year 2007-08 for Rs. 9,48,622/-. It was contended by the appellant that it had not invested Rs. 4,48,622/- (948622 - 500000) from the business funds and disallowance of this sum should not be made. I am inclined to agree with the submissions of the appellant to this extent In view of it, it is held that disallowance u/s. 14A be made on an investment of Rs. 15,00,500/- (1949122-448622) only." In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary report in Form 10CCB. According to the Assessing Officer, assessee has made a claim of Rs. 43,58,443/- however, on appeal Ld. CIT(A) pointed out that this claim was for Rs. 41,97,875/-. The Assessing Officer has notionally taken the figure of Rs. 43,58,443/-. The Ld. CIT(A) observed that sum of Rs. 1,60,568/- was claimed u/s.80G. In A.Y. 2011-12 this claim has been restricted by the assessee to gross total income of Rs. 37,05,554/-. The Ld. CIT(A) has upheld the allowance to this extent. Thus, grounds mentioned in the appeal are not correct. 8. The dispute between the assessee and Assessing Officer is that Assessing Officer has notionally brought forward business losses and depreciation of earlier years and notionally set off against the income of the windmill. The case of the assessee is that as per Section 80IA(5) if the deprecation and business losses have already been set off against other income of the assessee before selection of initial year for claiming of deduction u/s.80IA(iv) then such unabsorbed depreciation would not be brought forward notionally and set off against the current year income in which deduction u/s. 80IA(iv) has been claimed. The Ld. Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, the A.O has stated that there is no income from windmill for the assessment year 2010-11. On the other hand the appellant has submitted that the unabsorbed losses including the unabsorbed depreciation of earlier assessment years in respect of the eligible unit being windmill have already been set off against the income from non-eligible business and for the assessment year under appeal, there is no unabsorbed losses of the windmill. Therefore, for computing the deduction u/s. 80IA(iv) of the Act, no adjustment on account of unabsorbed losses of eligible business on notional basis can be made as if there is only one source of income i.e. eligible business (in the present case windmill). If the unabsorbed losses including depreciation loss of earlier years have already been set off against the income of non-eligible business, then such notional adjustment is outside the purview of sec. 80IA(5) of the Act. The ratio laid down in the various case laws relied upon by the appellant also supports the said contention of the appellant. The Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT 231 CTR 368 (Madras) relied upon by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business) there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to hundred per cent, of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication 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 or power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines. (4) This section applies to- (i) any enterprise carrying on the business of ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lops and begins to operate any infrastructure activity, etc. Subsection (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that "initial assessment year" employed in sub-section (5) is different from the words "beginning from the year" referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under : "(1) It starts with a 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) During the previous year relevant to the initial assessment year and every subsequent assessment year." From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income-tax (Appeals), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the face of the record which could be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under section 80-1 in the present case, albeit, for reasons so ..... X X X X Extracts X X X X X X X X Extracts X X X X
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