TMI Blog2010 (11) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect has also not been disputed by the assessee - Commissioner invoked the provisions of section 263 of the Act, upheld - however, his direction to disallow the claim modified - Assessing Officer is directed to examine the assessee's claim on the basis of the scheme under which the assessee has availed the sales tax benefits after allowing the assessee a reasonable opportunity of being heard on this aspect and thereafter decide the matter afresh in accordance with law – Appeal allowed partly - ITA NOS. 583 & 584/PN/2009 - - - Dated:- 24-11-2010 - ORDER Per G.S. Pannu, Accountant Member : Both the captioned appeals by the assessee are directed against the respective orders of the Commissioner of Income-tax -II, Kolhapur ( in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby the total income has been assessed at Rs. Nil. Subsequently, the Commissioner examined the record of the proceedings and show-caused the assessee as to why the assessment order dated 26/10/06 be not considered as erroneous insofar as it is prejudicial to the interests of the Revenue on two aspects. Firstly, as per the Commissioner, the Assessing Officer failed to apply the provisions of section 80-IA(5) of the Act while computing the deduction u/s 80-IA of the Act. As per section 80-IA of the Act, the profits and gains of the eligible business are required to be computed as if such eligible business were the only source of the income of the assessee during the previous year relevant to initial assessment year and to every subsequent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven with regard to the receipts on account of sales tax benefits, the claim of the assessee was that the same constituted a part of the profits of the business of generation and distribution of power and was, therefore, eligible for deduction u/s 80-IA of the Act. 6. On both the aspects, the Commissioner has not accepted the pleas of the assessee. The Commissioner held that the deduction u/s 80-IA of the Act allowed by the Assessing Officer was incorrect and he directed the Assessing Officer to recompute the eligible deduction in terms of section 80-IA(5) of the Act, by setting off the losses and unabsorbed depreciation of earlier years on notional basis, against this year's profits of the eligible industrial undertaking. Secondly, with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... load factor and it is only in such situation, it can avail sales tax benefit and, the scheme shows that such profits can be said to have been derived from the eligible business. According to the learned counsel, the Commissioner has erred in holding to the contrary without appreciating the scheme of the State Government in terms which the sales tax benefits have accrued to the assessee. 8. On the other hand, the learned DR appearing for the Revenue has defended the action of the Commissioner on both the aspects by placing reliance on the same. 9. We have carefully considered the rival submissions, perused the impugned order of the Commissioner as well as the assessment order passed by the Assessing Officer u/s 143(3) on 26/10/06 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P.) Ltd. v. ACIT [2010] 38 DTR 57 upheld the principle that losses and depreciation of the years earlier to the 'initial assessment year', which have already been absorbed against the profits of other business, cannot be notionally brought forward against the profits of the eligible industrial undertaking for the purpose of computing deduction u/s 80-IA of the Act. Notably, in terms of section 80-IA(2) of the Act, the assessee has an option to claim deduction in any of the ten consecutive years out of the fifteen years beginning from the year in which the undertaking generates the power or undertakes transmission of power. It is only when the assessee chooses the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking. Admittedly, the Assessing Officer allowed the claim of the assessee without proper enquiry and the said aspect has also not been disputed by the assessee before us. In these circumstances, in principle, we uphold the action of the Commissioner in invoking the provisions of section 263 of the Act, however, his direction to disallow the claim is modified. The Assessing Officer is directed to examine the assessee's claim on the basis of the scheme under which the assessee has availed the sales tax benefits after allowing the assessee a reasonable opportunity of being heard on this aspect and thereafter decide the matter afresh in accordance with law. As a result, the directions of the Commissioner in para 23 of the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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