TMI Blog2009 (1) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the provision of s. 10A is not available to the assessee in the assessment year under consideration as this is the 11th year of its operation. The second unit is admittedly outside NEPZ area. 4. It claimed deduction under s. 10A till the asst. yr. 2002-03, i.e., till last year. There is no dispute to the fact that Unit 1 located in NEPZ area fulfilled all the conditions under the Act and was entitled for deduction under s. 10A of the IT Act. 5. Initially the assessee filed the return showing income of Rs. 11,19,69,789. The assessee discovered that it omitted to claim depreciation loss brought forward from three assessment years as follows: Asst. yr. Amount 1993-94 Rs. 4,69,82,639 1994-95 Rs. 4,83,24,449 1995-96 Rs. 80,00,892 ---------------- Total Rs. 10,33,07,980 ---------------- 6. (i) In this respect it is relevant to state that the assessee claimed the aforesaid depreciation loss aggregating to Rs. 10,33,07,980 brought forward from the aforesaid three assessment years and set off the same in the following assessment years as under: Asst. yr. Amount 1996-97 Rs. 1,40,164 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the benefit of deduction under s. 10A would be allowed from the total income of the assessee for a period of 10 consecutive years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be. As mentioned hereinabove, the assessee-company began production during the financial year 1992-93, i.e., relevant to asst. yr. 1993-94, the assessee could claim the benefit of s. 10A upto the asst. yr. 2002-03. 9. In view of the above, the assessee claimed that the unabsorbed carried forward depreciation could be set off by the assessee in the assessment year under consideration. The assessee contended that asst. yrs. 1993-94 to 1995-96 were out of the period of relevant assessment year, i.e., prior to start of relevant assessment year for the purpose of s. 10A of the Act. However, the AO considered the provision of s. 10A(6) of the Act and stated that s. 10A(6) as amended w.e.f. 1st April, 2001 assumes that full allowance under depreciation had been given effect to. The AO has stated that s. 10A(6) overrides all other provisions of the Act and enacts certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for the unexpired period of ten consecutive assessment years, therefore, the assessee gained a further exemption for two years, i.e., for the asst. yrs. 2001-02 and 2002-03. In view of the above, the assessee has availed exemption under s. 10A of the Act only for seven years, i.e., five years out of eight years as per option exercised prior to the amendment by the Finance Act, 2000 and thereafter for another two years pursuant to the amendment w.e.f. 1st April, 2001. The learned Authorised Representative submitted that the earlier three assessment years i.e., asst. yrs. 1993-94 to 1995-96 would not get included in the definition of relevant assessment years as defined in the Explanation to s. 10A of the Act. The learned Authorised Representative further submitted that the asst. yrs. 1993-94 to 1995-96 are out of the period of relevant assessment year as they relate to prior to start of the benefit availed by the assessee under s. 10A of the Act, the depreciation loss has to be allowed to be carried forward for subsequent years for set off against any other taxable income in future years. The learned Authorised Representative submitted that the amendment made by the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it starts with "notwithstanding anything contained in any other provisions of this Act" and, therefore, it overrides all other provisions of the Act. Accordingly, the brought forward depreciation cannot be, set off for computing the total income of the assessee of the assessment year succeeding the last of the relevant assessment year. He submitted that the assessment year under consideration i.e., asst. yr. 2003-04 is immediately succeeding of the last of the relevant assessment year. Therefore, the assessee could not be allowed to set off the brought forward depreciation against the income of Unit 1 or any other unit. The learned Departmental Representative submitted that the scope and effect of the amendments made by the Finance Act, 2000 has been considered by the CBDT Circular No. 794, dt. 9th Aug., 2000 and it was stated that allowances for depreciation, investment allowance, etc., were deemed to be fully absorbed in the ten assessment years and no amount of unabsorbed allowances or deduction is to be carried forward or set off against property of any subsequent year. He submitted that the CBDT again issued Circular 7 of 2003, dt. 5th Sept., 2003 and stated vide para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be, deficiency relates to any of the relevant assessment years; (iii) no deduction shall be allowed under s. 80HH or s. 80HHA or s. 80-I or s. 80-IA or s. 80J in relation to the profits and gains of the industrial undertaking; and (iv) in computing the depreciation allowance under s. 32, the WDV of any asset used for the purposes of the business of the industrial undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment years." It is also relevant to state the Expln. (ii) to s. 10A, which defines relevant year. It reads as under: "(ii) relevant assessment years means the five consecutive assessment years specified by the assessee at his option under sub-s. (3)." As mentioned hereinabove that the assessee exercised its option to claim deduction in the asst. yrs. 1996-97 to 2000-01 i.e., in the five consecutive assessment years falling within the period of eight years beginning with the assessment year relevant to previous year in which the assessee's industrial undertaking began to manufacture or produce articles or things. Therefore, the assessee carried forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 80HHA or s. 80-I or s. 80-IA or s. 80-IB in relation to the profits and gains of the undertaking; and (iv) in computing the depreciation allowance under s. 32, the WDV of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and, been actually allowed the deduction in respect of depreciation for each of the relevant assessment year." 15. It is evident from the above that, the ten consecutive assessment years are to be 10 years, in which the undertaking begins to manufacture or produce articles or things. In the case of the assessee, there is no dispute to the fact that the assessee started its production in the financial year 1992-93 relevant to asst. yr. 1993-94 and as per the amended provisions, the assessee has availed the benefit of s. 10A upto the asst. yr. 2002-03. Therefore, the ten consecutive assessment years are from asst. yr. 1993-94 to asst. yr. 2002-03. It is relevant to state that prior to the amendment, the deduction was allowed only for five consecutive assessment years out of eight assessment years from commencement of production. It is also observed from the provisions of s. 10A(6) as applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, was available to him upto asst. yr. 1996-97. Hence, reliance placed by the learned Authorised Representative on the cases and not applicable to the issue before us and in view of our finding that the asst. yrs. 1993-94 to 1995-96 fall within the definition of the relevant assessment year, we hold the assessee could not carry forward unabsorbed depreciation of the period prior to 1st April, 2001 as per s. 10A(6) of the Act. 17. We also do not find merit in the submission of the learned Authorised Representative that the AO had allowed the carry forward of unabsorbed depreciation for the asst. yrs. 1993-94 to 1995-96 while passing the assessment orders for the asst. yrs. 2001-02 and 2002-03 as the same do not appear to be in accordance with law for the reasons mentioned hereinabove. 18. In view of the above, we uphold the order of the learned CIT(A) by rejecting ground No. 1 of the appeal taken by the assessee. 19. In ground Nos. 2 and 3 of the appeal, the assessee has disputed the order of the learned CIT(A) in holding that the sum of Rs. 1,34,93,000 paid to IDBI was in the nature of capital expenditure. 20. The relevant facts are that the assessee allotted 13,49,300 equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the claim of the assessee of Rs. 1,34,93,000. Being aggrieved, the assessee filed appeal before the first appellate authority. 21. The learned CIT(A) has agreed with the action of the AO. Hence, the assessee is in further appeal before the Tribunal. 22. The learned Authorised Representative in his submission submitted that the assessee-company had taken a loan from IDBI in 1994. Since the restructuring of the outstanding liability was done and pursuant thereto, the assessee allotted 13,49,300 equity shares of the face value of Rs. 10 each aggregating to Rs. 1,34,93,000 in the assessment year under consideration, the deduction has been claimed and is allowable in the assessment year under consideration. He submitted that the assessee has got the benefits, which are revenue in nature and the aforesaid amount of equity shares was allotted by way of compensation in the assessment year under consideration, the liability to the extent of Rs. 1,34,93,000 is to be allowed in this assessment year. He further submitted that the allotment of shares is to be termed as payment of interest to IDBI and, therefore, the provision of s. 43B(d) will also not apply as it is an actual payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh rupee loan and reduction of interest on it from 15 per cent to 12.5 per cent and also deferment of payment of quarterly instalments and also deduction of rate of interest from 20 per cent to 12.5 per cent per annum. On account of the above sacrifices made by IDBI in granting relief and concessions to the assessee, the assessee has allotted 13,49,300 equity shares of face value of Rs. 10 each aggregating to Rs. 1,34,93,000. It is observed that the said equity shares have been issued by the assessee to IDBI not only on account of the sacrifices made by IDBI for the assessment year under consideration but for the past liability as well as the future sacrifices, made by IDBI. In view of the above, we are of the considered view that the assessee will get the enduring benefit by way of paying less amount of interest to IDBI on the loans raised by it. We are of the considered view that the entire amount for which the assessee has issued equity shares to IDBI are not in lieu of the liability, which has accrued in the assessment year under consideration on the loan taken by it. Therefore, the assessee could not claim the entire value of the equity shares of Rs. 1,34,93,000 issued to IDBI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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