2007 (10) TMI 354 - ITAT MADRAS-B

Deduction u/s 80-IA - Profits of the units - Industrial Undertaking - Entitled to claim deduction u/s 80-IA? - setting off notionally carried forward unabsorbed depreciation or loss - Initial assessment year - HELD THAT:- The initial assessment year in this case starts from 2004-05. Since the assessee has opted to claim this deduction only in this assessment year, the initial assessment year cannot be the year in which the undertaking commenced its operations and in this case the initial assessment year is the assessment year in which assessee has chosen to claim deduction u/s 80-IA. Hence the provisions of section 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which assessee opted to claim relief u/s 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction tinder section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction u/s 80-IA.

At the cost of repetition, we make it clear that the case laws relied on by the DR are delivered before the amendment to section by Finance Act, 1999. Before the amendment the initial assessment year was defined in the Act but after the amendment there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the year of claiming relief u/s 80-1A.

In view of this, we are of the opinion that there is no question of setting off notionally carried forward unabsorbed depreciation or loss against the profits of the units and assessee is entitled to claim deduction u/s 80-IA on current assessment year on the current year profit. Accordingly we allow the claim of the assessee.

In the result, the appeal of the assessee is allowed.