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2021 (11) TMI 105 - AT - Income TaxDeduction u/s 80IA - manner of computation of amount of deduction allowable u/s 80IA - AO had arrived at the amount of eligible profits for the purpose of deduction u/s 80IA of the Act by setting off of unabsorbed losses of earlier years against current year profits of the eligible unit i.e. Windmill - HELD THAT:- As provisions of section 80IA of the Act are separate and distinct and has to be treated on standalone basis and also lays down a special method of computing the profits and gains entitled to deduction u/s 80IA of the Act. Further, it also suggests that the provisions of section 80IA of the Act are overriding in nature and the provisions of section 80IA of the Act shall be 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. As in the case of CIT Vs. Dewan Kraft Systems [2007 (2) TMI 149 - DELHI HIGH COURT] 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. 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 the unabsorbed losses are pertaining to the prior period to the initial assessment year as opted by the assessee or after the initial assessment year. CIT(A) merely granted the relief by accepting the legal position without discussing it in detail on the factual aspects. Since the order of ld. CIT(A) is bereft of material facts necessary for adjudication of issue in appeal, we have no other option but to remit the matter back to the file of AO to examine the claim of assessee after due verification on the aspects whether the unabsorbed losses set off by the AO against current year eligible profits falls prior to the initial assessment year or after the initial assessment year. Appeal of Revenue for A.Y. 2013-14 is partly allowed for statistical purposes.
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