TMI Blog2010 (5) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... l in nature - levy of interest under section 234D is purely a legal ground and is chargeable, following the order of the Hon’ble ITAT, Delhi E, Special Bench in ITO v. Ekta Promoters (P.) Ltd. [2008 (7) TMI 452 - ITAT DELHI-E] - the assessee’s appeal is allowed - 200 (BANG.) OF 2010 - - - Dated:- 21-5-2010 - SMT. P. MADHAVI DEVI, A. MOHAN ALANKAMONY, JJ. H.N. Khincha for the Appellant. Smt. Jacinta Zimik Vashai for the Respondent. ORDER A. Mohan Alankamony, Accountant Member. - This appeal of the assessee-company is directed against the order of the ld. CIT (A), Hubli in ITA No. 111/CIT(A) HBL/08-09, dated 15-1-2010 for the assessment year 2006-07. 2. The assessee-company ( the assessee in short) has raised three grounds in an exhaustive manner. On a perusal, the essence and substance of the assessee s grievances are reformulated as under : (i) the ld. CIT (A) erred in confirming the Assessing Officer s stand in not allowing the set-off of unabsorbed depreciation on windmill against the income from manufacturing business; and (ii) charging of interest under sections 234B, 234C and 234D of the Act. 3. The assessee was in the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f quantum of deduction in respect of such eligible business referred in section 80-IA(1) as discussed in para 4.1 above. The sub-section (5) to section 80-IA stipulates as under : ** ** ** It clearly transpires from the above provisions of law that for the purpose of determining the quantum of deduction referred in sub-section (1) in respect of an eligible business, the computation will be done as if such eligible business is the only source of income to the assessee in all the relevant years of claim commencing from the initial assessment year. It is further seen from the relevant provisions of law cited above that since sub-section (5) of section 80-IA starts with a non obstante clause, the provisions contained therein have over-riding affect over the other provisions of the Act. 4.3 It thus becomes clear from the relevant provisions of law that deduction under section 80-IA is allowable to an undertaking or an enterprise carrying out an eligible business and not to an assessee. The carried forward losses of the eligible business are required to be set off first against the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there does not exist other business. The case of the appellant is in contravention to the provisions of law inasmuch as firstly, that the appellant has set-off the depreciation loss/income from power generation business against the profits of manufacturing of copper wires and secondly, that the non-taxable income under section 80-IA is set off against non-eligible business income of the appellant. Thirdly, that the depreciation from windmill has not got absorbed fully against the eligible business profits. All these cumulative factors entail the appellant disqualified to set-off of such loss against the non-eligible business profits being in contravention to the relevant provisions of law. Therefore, the action of the Assessing Officer to allow the depreciation loss of ₹ 73,20,339 to be carried forward for set-off against the eligible business and bringing the profits of ₹ 60,00,829 attributable to the regular business activity of manufacturing of copper wires to tax is justified. ... 5. Disappointed with the finding of the Ld. CIT(A), the assessee has come up with the present appeal. The contention of the ld. A.R. was more or less revolved around what was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction of depreciation on windmill of ₹ 73.20 lakhs against the business profits of ₹ 60 lakhs and the remaining balance of ₹ 13.19 lakhs was claimed as carried forward to the next assessment year. Even then, the total income as per the revised statement of income was arrived at Rs. Nil and also no claim as regards the deduction under section 80-IA was made. 6.2 The crux of the issue now is - whether the action of the assessee has the backing of the relevant provisions of the Act? Let us have a glimpse of section 80-IA(1) which categorically stipulates that - (1) Where the gross total income of an assessee includes any profits referred to in sub-section (4) (such business being hereafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. What section 80-IA (4) says? (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of determining the quantum of deduction as referred in sub-section (1) to section 80-IA in respect of an eligible business, the computation will have to be done as if such eligible business was the only source of income to the assessee in all the relevant years of claim commencing from the initial assessment year. On a broad reading of the Act, it may appear that the carried forward loss of the eligible business were 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 80-IA of the Act and set-off of losses from other sources under the same head is not permissible. However, it should not be forgotten that section 80-IA of the Act is a beneficial section permitting certain deductions in respect of certain income under Chapter VIA of the Act. A provision granting incentive for promotion of economic growth and development in taxing statutes should be liberally construed and restriction placed on it by way of exception, should be construed in a reasonable and purposive manner so as to advance the objects of the provision. It is a generally accepted principle that the deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. Thus, the income chargeable to tax for the previous year 2004-05 will be ₹ 1,40,000 (2,40,000 - 1,00,000). 6.8 In the previous year 2005-06, there is a profit of ₹ 60,000 from the eligible business of the assessee under section 80-IA. However, on this year also, no deduction under section 80-IA is allowable because for the purpose of deduction, it is assumed that such business is the only source of income of the assessee and notional brought forward loss (since the assessee had already set off ₹ 1,00,000 under section 70(1) of the Act during the earlier previous year), is to be set-off under the same source before allowing deduction under section 80-IA of the Act. Thus, the balance notional loss of ₹ 40,000 (1,00,000 - 60,000) will be carried forward to the next previous year. 6.9 In the previous year 2006-07, the profit of eligible business is ₹ 1,20,000 and the carry forward of notional loss of ₹ 40,000, therefore, the deduction under section 80-IA will be allowed at 100 per cent i.e., on ₹ 80,000 (1,20,000 - 40,000). The total income of the assessee for the assessment year 2007-08 will be computed as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to denote 100 per cent, as prior to its amendment in 1972, it provided only for 60 per cent (sic) of the income being deducted and after the further amendments effected in the year 1984, the deduction was limited to 50 per cent. The income referred to in this section is the income computed in accordance with the provisions of the Act. The Tribunal was, therefore, clearly in error in holding that the assessee was entitled to the deduction of the gross amount of the fees received by it for the work done by it abroad under section 80-O of the Act, and in further directing that the amounts claimed as unabsorbed depreciation relating to the assessment years 1977-78 and 1978-79 were required to be carried forward. The Income-tax Officer had properly computed the income by way of fees and in finding that after making the deductions required to be made under the provisions of the Act, the amount eligible for deduction under section 80-O of the Act was nil . He had also rightly deducted the amount of the business loss of earlier years and unabsorbed depreciation from the gross total income of the assessee, and had found that the assessee had, after making all such deductions, a tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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