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TMI Blog2021 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... this, the losses of ineligible units cannot be set off against the profits of eligible units for the purpose of computing the amount of deduction and this line of approach has been consistently followed by several High Courts. Whether the unabsorbed losses of eligible units should be set off against the profits of current year for the purpose of computing the amount of deduction u/s 80IA? - The Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills [ 2010 (3) TMI 860 - MADRAS HIGH COURT] clearly held that the initial assessment year would mean the first year opted by the assessee for claiming deduction u/s 80IA of the Act out of block of years and not the first year of commencement of operations of eligible business. CBDT also issued a Circular No.1/2016, dated 15.02.2016 accepting the legal position enunciated by the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Vs. ACIT (supra). Therefore, the finding of AO that the initial assessment year commences from the first year of commencement of commercial operations of eligible business has no legs to stand. Neither the ld. CIT(A) nor AO had dealt with the factual aspects as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961. (3) On the facts and in the circumstances of the case and in law, the CIT(A) is not justified in relying the decision of the ITAT in the case of M/s Jsons Foundry Ltd. for the AY 2008-09 wherein it interpreted the provisions of section 80IA(2) of the Act in respect of the assessee company's prerogative to choose any consecutive period of 10 years from the first 15 years of its operation in context of substantiating its inference that the provision is intended to consider each unit of the eligible business as a separate profit centre for computing allowable deduction as against the clear mandate of sub-sec.(1) of sec. 80IA of the Act to compute allowable deduction on the basis of profit of the eligible business and not individual units of eligible business. (4) On the facts and in the circumstances of the case and in law, the CIT(A) has erred in not appreciating the fact that the combined reading of section 80IA(4) 80IA(5) makes it amply clear that the deduction is with reference to the profits derived from eligible business of the assessee and not with reference to the profits derived from every unit engaged in the eligible business. (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat each Windmill has to be treated as separate undertaking for the purpose of computing the amount of deduction allowable u/s 80IA of the Act and also contending that the losses prior to the initial year cannot be set off against the profits of eligible units of 80IA for the purpose of computing the amount of quantum of deduction u/s 80IA of the Act. The ld. CIT(A) after due consideration of submissions made and after making a reference to the decisions of Co-ordinate Bench of Tribunal in Shreem Capacitators Pvt. Ltd. Vs JCIT and Jsons Foundry Pvt. Ltd. Vs. DCIT in ITA No.815/PN/2011 for A.Y. 2008-09 allowed the claim of the appellant. 7. Being aggrieved by the decision of ld. CIT(A), the Revenue is in appeal before us in the present appeal. 8. The ld. Sr. DR argued that having regard to the provisions of sub-section (5) of section 80IA of the Act, the amount of deduction allowable u/s 80IA should be computed after set off of unabsorbed losses of earlier years and current year s loss in view of the provisions of sections 70 and 71. He further submitted that the ratio of decision of Pune Tribunal in the cases of Shreem Capacitators Pvt. Ltd. Vs JCIT (supra) and Jsons Foundry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied as if each unit is an independent unit and one and only source of income which means that the profits and losses of other units cannot be mixed up. The Hon'ble Delhi High in the case of CIT Vs. Dewan Kraft Systems 297 ITR 305 (Del) also held to the same effect and there is long line of authority in support of the this proposition. As a natural corollary of this, the losses of ineligible units cannot be set off against the profits of eligible units for the purpose of computing the amount of deduction and this line of approach has been consistently followed by several High Courts. The Hon ble Kerala High Court in the case of CIT Vs. Swarnagiri Wire Insulations P Ltd. in ITA No.5050/Bang/2010, dated 27.05.2011 held as under: 4. Against the said order of the Commissioner of Income Tax (Appeals), the assessee preferred appeal. The Tribunal held, the carried forward loss of the eligible business was required to be set off first against the income of the subsequent years of eligible business while determining the profits eligible for deduction under Section 801A of the Act and set off losses from other sources under the same head is not permissible. However, it should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... menced the commercial production. The approach of AO is obviously against the plain provisions of sub-section (2) of section 80IA of the Act. The Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Vs. ACIT 340 ITR 477 (Mad) clearly held that the initial assessment year would mean the first year opted by the assessee for claiming deduction u/s 80IA of the Act out of block of years and not the first year of commencement of operations of eligible business. In fact, the CBDT also issued a Circular No.1/2016, dated 15.02.2016 accepting the legal position enunciated by the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Vs. ACIT (supra). Therefore, the finding of AO that the initial assessment year commences from the first year of commencement of commercial operations of eligible business has no legs to stand. However, neither the ld. CIT(A) nor AO had dealt with the factual aspects as to whether the unabsorbed losses of ₹ 2,25,91,079/- are pertaining to the prior period to the initial assessment year as opted by the assessee or after the initial assessment year. The ld. CIT(A) merely granted the relief by accepting the legal position with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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