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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 ..... TD. SUDAN SPINNING MILLS (P.) LTD. MOHAN BREWERIES [ 2010 (3) TMI 860 - MADRAS HIGH COURT] it indicated that depreciation already claimed by the assessee and set off against the regular source of income cannot be notionally brought forward and set off against the income of windmill for the current year after selection of initial year for claiming deduction u/s. 80IA(iv). The assessee has been given choice of 10 consecutive years out of 15 years for claiming deduction u/s.80IA(iv). Once assessee has selected initial year then unabsorbed depreciation and losses of that year and subsequent years could be carried forward for set off against the income of those years before computing the deduction admissible u/s.80IA(iv). In the present cases, AO has brought forward the depreciation of A.Y. 2007-08, 2008-09 etc, which has already been set off against the regular income. He brought forward such depreciation on notional basis, which is contrary to the proposition laid down by the Hon ble Madras High Court. FAA has rightly appreciated the controversy and rightly granted the deduction to the assessee. We do not find any error in the order of the CIT(A) hence, this ground of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar is concerned the same is not accepted since the act provides that the investments made by the appellant should be capable of producing or generating exempt income. This issue is amply covered by the decision of Hon'ble Delhi Special Bench in the case of Ken Investment Ltd 121 ITD 318 (2009) (S.B). With regard to the claim that the investments made by the appellant were in the nature of trade investment made with an objective of furthering the business interest of the company, this aspect has been considered by various judicial authorities, in the case of Maxopp Investments Ltd. [203 taxman 185 (Delhi)] the Hon'ble Special Bench has held that sec.14A disallowance is applicable to the interest paid on borrowings used for business related investments. Even though earning of dividend income is only incidental. Reliance is also placed on the decision of Hon'ble Kerala High Court in the case of Smt. Leena Ramchandran reported in 339 ITR 296 and decision of Hon'ble Cochin Bench of ITAT in the case of State Bank of Travancore reported in 124 ITD 332. Honable ITAT CHD [2014] 51 taxmann.com 98 (Chandigarh - Trib.)/[2014] 66 SOT 132 (Chandigarh -Trib.)(URO) in its decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of these facts, I am inclined to agree with my predecessor. On the contrary I find that sec.14A refers to expenditure on rent, taxes, salaries, interest etc., in respect of which disallowances are provided for. These deductions are for the debits in the real sense. The pay back does not constitute expenditure incurred in terms of sec.14A. in view of these facts, and in view of the decision taken by my predecessor in the case of appellant in A.Y. 08-09, I hold that disallowance for the purpose of sec.14A is to be made against interest expenditure debited in the P L A/c as per the provisions of Rule 8D of I.T. Rules, 1962 as directed by my Ld. predecessor, In view of it, it is held that disallowance u/s. 14A be made on an investment of ₹ 15,00,500/- (1949122 - 448622) only. The A.O. is directed to modify the disallowance u/s.14A as per the above directions and give necessary relief to the appellant. Similar finding has been recorded in A.Y. 2011-12. 5. With the assistance of Learned Representatives, we have gone through the record carefully. Ld. CIT(A) directed the Assessing Officer to modify the disallowance required to be made u/s. 14A becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set off against the current year income in which deduction u/s. 80IA(iv) has been claimed. The Ld. Assessing Officer did not accept this contention of the assessee. However, on appeal Ld. First appellate Authority has accepted the claim and allowed the deduction. The findings recorded by Ld. CIT(A) in A.Y. 2010-11 on this issue, read as under: 4.2 I have carefully considered the rival submissions. I have also gone through the legal decisions relied upon by the appellant and A.O. First of all it is clarified that the deduction claimed by the appellant in respect of its windmill unit u/s. 80IA(iv) is of ₹ 41,97,875/- and not of ₹ 43,58,443/- as disallowed by the A.O. The amount disallowed by the A.O. also consists of the deduction u/s. 80G of the Act of ₹ 1,60,568/-. From the perusal of the assessment order it is seen that there is no discussion and finding of the A.O in respect of the disallowance of deduction u/s. 80G of the Act. Hence, disallowance to the extent of ₹ 1,60,568/- is directed to be deleted since factually incorrect. In respect of deduction of ₹ 41,97,875/- u/s. 80IA(iv) of the Act, the A.O has disallowed the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has held that losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against the profit of other business cannot be notionally brought forward and set off against the profit the eligible business for computing the deduction under section 80-IA. Further, Hon'ble Bangalore ITAT in the similar set of facts relating to windmill, in the case of Anil H. Lad V. Dy. CIT (2012) 13 (Trib.) ITR 581 (Bang.) has followed the decision of Hon'ble Madras High Court in the case of Velayudhaswamy Spg. Mills (P) Ltd. cited supra and held that the year of commencement alone need not be the initial year, but depending upon the facts of the case and the option exercised by the assessee, the year of claim also can be considered as initial assessment year. The Court further held that where the earlier depreciation and losses have already been set off, those loss and depreciation do not go to reduce the gross total income of an assessee within the meaning of section 80AB and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution 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 (i) developing, or (ii) operating and maintaining, or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a con- sortium of such companies (or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act) ; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing, or (ii) operating and maintaining, or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st April, 1995. (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 subsequent assessment years. When the asses-see exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in sub-section does not contemplates to bring set off amount notionally. The fiction is created only for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-1 for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs. From a reading of the above, the Rajasthan High Court held that 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 u/s.80-I for the purpose of computing admissible deductions thereunder. We also agree with the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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