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TMI Blog2016 (11) TMI 1645X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal against the order of ld.CIT(A)-XIV, Ahmedabad dated 3.6.2013 passed for the Asstt.Year 2010-11. 2. Revenue has taken three grounds of appeal, but its grievance revolves around a single issue viz. the ld.CIT(A) has erred in deleting disallowance of claim of ₹ 85,71,651/- made under section 80IA(iv) of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee has filed its return of income on 15.9.2010 declaring total income at ₹ 10,85,43,640/-. The assessee was engaged in manufacturing and trading of tubular tower and also generation of electricity through wind turbine generator. It has claimed deduction under section 80IA of the Act. The assessee has independent power generation undertaking at Maharashtra and Rajasthan. It has claimed deduction of ₹ 1,74,64,075/- qua Maharashtra Unit and ₹ 85,71,651/- qua Rajasthan undertaking. It emerges out from record that Maharashtra undertaking was established in the Asstt.Year 2002-03 and that of Rajasthan was established in the Asstt. Year 2003-04. As per section 80IA(ii) of the Act, assessee may opt 10 years out of block of first 15 years for cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power i.e A.Y.2003-04 and not from the initial year A.Y.2008-09, wherein the for the deduction u/s. 80IA(4)(iv) has been made for the first time. Accordingly, the Assessing Officer has nationally brought forward losses of the years prior to the initial year; nationally set-off the same against the current year's income and denied deduction of ₹ 85,71,651/- as claimed by the Appellant u/s 80IA(4)(iv) of the Act. The appellant has argued, that its case is squarely covered by the Madras High Court decision in the case of Velayudhaswamy (supra), wherein after taking into cognizance of the Special Bench decision of Goldmine (supra), it has been held that when the assessee 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 assesse. Before giving finding, I would like to narrate the law of deduction as laid down in s. 80-IA in conjunction with s. 80-IA(5) of the Act. The scheme of the IT Act, 1961 as contained in its various chapters is that Chapter II details the basis of charge of income-tax. In Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in cl. (a) or cl. (b) or cl. (c) of the Explanation to cl. (i) of sub-s. (4), the provisions of this sub-section shall have effect as if for the words 'fifteen years', the words 'twenty years' had been substituted. (2A) Notwithstanding anything contained in sub-s. (1) or sub-s. (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in cl. (ii) of sub-s. (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-s. (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (3) This section applies to an undertaking referred to in c/. (ii) or cl. (ii) or cl. (iv) of sub-s. (4) which fulfils all the following conditions, namely: (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation.......... Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-s. (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking: Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars has been extended to 20 years in respect of certain business. Likewise sub-s. (2A) restricts this deduction in respect of undertakings providing telecommunication services. Sec. 80-IA(3) imposes certain restrictions where-under, this deduction is not allowed to undertakings if it is formed by splitting up or reconstruction of an already existing business but reconstruction, re-establishment or revival of the business subject to s. 33B have been excluded, etc., etc. with which we are not concerned for deciding the present appeal. But we are concerned mainly with s. 80-IA(5). Sub-section (5.) of s. 80-1A qualifies deduction of sub-s. (1) of s. 80A with anon obstante clause and overrides every other provision in this Act providing mechanism by way of assumption that for determining the quantum of deduction for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, it would be deemed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every assessment year upto and including the assessment year for which the determination is to be made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of counsels of both the sides, their Lordship has held as under: 14. ................... In the present case, we are concerned with the provision of section 80-IA. The said provision was introduced by the Finance Act, 1999, with effect from April ], 2000. The provisions of sections 80-1 and 80-IA are also more or less identically worded. Sections 80-1 and 80-IA come in Chapter VI-A of the Income-tax Act. Chapter VI-A deals with deductions to be made in computing total income. There are two tax incentives contemplated in , Chapter VI-A. One is investment incentive and the other one is profit-linked investment. Chapter VI-A was introduced by the Finance Act, 1965, with effect from April 1, 1965, and it consists of four headings. They are A, B, C and D. Heading A ;s general and it also contains definition. It consists of sections 80A, 80AA, 80AB, 80AC and 808. Section 80AB deals with Deductions to be made with reference to the income included in the gross total income , which reads as follows: Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C-Deductions in respect of certain incomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment that sub-section (5) of section 80-IA provides for manner of computation of profits of an eligible business. Accordingly such profits are to be computed as if such eligible business is the only source of income of the assessee. - 16. Section 80-IA reads as follows : 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble business and the same is defined in sub-section (4). Subsection (2) provides 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-section (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)lt starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; (2)lt is for the purpose of determining the quantum of deduction; (3)For the assessment year immediately succeeding the initial assessment year; (4)lt is a deeming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4] 271 ITR 311 (Raj) ; [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-1 and held as follows (page 314 of 271 ITR) : Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 198485, the recomputation 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yer from other sources. 22. We are not agreeing with the counsel for the Revenue. We are, therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of other business cannot be nationally brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5). 23. Under these circumstances, we set aside the order of the Tribunal and answer all the questions in favour of the appellant/assessee and against the Revenue in Tax Case Nos. 909 and 940 of 2009 respectively. Accordingly, tax cases are allowed. Having regard to above discussion and respectfully following the decision of Madras High Court in the case of Velayudhaswamy (supra), I hereby allow the claim of the Appellant u/s 80IA(4)(iv) of the Act and addition as made by the AO is directed to be deleted. These grounds of appeal are accordingly allowed. 7. A perusal of the above finding would indicate that it is based primarily on the decision of the Hon ble Madras High Court and that decision has been upheld by the Hon ble Supreme Court also. As far as selection of initia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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