TMI Blog2010 (3) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier year which has been already set off as against the current year profit from the unit. Thus 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 under section 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 the assessee opted to claim relief under section 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction under section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under section 80-IA - Decided in favor of the assessee - 909 and 940 of 2009 and 918 of 2008 - - - Dated:- 11-3-2010 - MURUGESAN D., JANARTHANA RAJA P. P. S., JJ. JUDGMENT P. P. S. Janarthana Raja J.- 1. Tax Case (Appeal) Nos. 909 and 940 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 (Ahd.) [SB] ; [2008] 116 TTJ (Ahd) (SB) 705 ; [2008] 9 DTR (Ahd)(SB)(Trib) 282 allowed the Departmental appeal and set aside the order of the Commissioner of Income-tax (Appeals) and thereby, restored the order of the Assessing Officer. Aggrieved by the said order, the assessee filed the present appeal by raising the following substantial questions of law : "(a) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the appellant is not entitled to claim deduction under section 80-IA ? (b) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that initial assessment year in section 80-IA(5) would only mean the year of commencement and not the year of claim ? (c) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of claim, which has already been absorbed, could be notionally carried forward and taken into consideration for computation of deduction under section 80-IA ? (d) Whether, on the facts and in the circumstances of the case, the Tribunal is right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in holding that initial assessment year in section 80-IA(5) would only mean the year of commencement and not the year of claim ? (c) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of the claim, which has already been absorbed, could be notionally carried forward and taken into consideration for computation of deduction under section 80-IA ? (d) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in following the decision of the Special Bench in the case of Goldmine Shares and Finance (P) Ltd. [2008] 302 ITR (AT) 208 (Ahd.) [SB] when admittedly the said decision was rendered prior to the amendment to section 80-IA by the Finance Act, 1999 ?" Tax Case No. 918 of 2008 : 4.3 The assessee is engaged in the business of manufacture of IMFL products, generation of power through wind and biomass and also trading in iron ore and coal. The return of income for the assessment year 2004-05 was filed on November 1, 2004, admitting a total income of Rs. 9,54,41,024. The said return of income was processed under section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal is wrong in holding that deduction under section 80-IA has to be computed after deduction of notional brought forward loss and depreciation of eligible business. He further submitted that the Tribunal should have appreciated the language used in section 80-IA(5) prior to amendment and post-amendment and it will be clear that the Act itself differentiates the initial assessment year from the year of commencement. The year of commencement is used only for the purpose of reckoning the total period but in sub-section (5) the words "initial assessment year" are used for treating the undertaking as the only source of income, which clearly indicates that a separate heading is only from the initial assessment year. It is also further contended that the Tribunal failed to appreciate that losses in the years earlier to the first year claim absorbed against the profit of other business need not be notionally brought forward and the same has no effect on the deduction claim. Further, the Tribunal ought to have considered the provision of section 80-IA(5) and the notional fiction created by the said provision. In view of the same, it would be applicable only in the years subsequent to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsorbed depreciation and loss which has been already set off against the current income. 7. The learned standing counsel appearing for the Revenue submitted that the assessee is not entitled to claim deduction under section 80-IA of the Act. Since the accumulated losses and unabsorbed depreciation were more than the profits of this year, the same had to be set off against the profits and, therefore, the assessee is not entitled for any deduction as per section 80-IA read with section 80AB of the Act. Further, it is contended that the Special Bench of the Tribunal has correctly decided the issue and held that profits from the eligible business for the purpose of determination of the quantum of deduction under section 80-IA have to be computed only after deduction of notionally brought forward losses and depreciation of the eligible business even though they have been set off against other income in earlier years. Therefore, the assessee is not entitled to the relief of claim under section 80-IA of the Act. In addition to that, the learned counsel appearing for the Revenue also submitted that in respect of Tax Case No. 918 of 2008, the Tribunal is not right in holding that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80-IA of the Act. But the Assessing Officer denied the exemption on the finding that loss or depreciation already allowed and set off against other sources of the income of the assessee has to be notionally carried forward and set off against the current year's income from the units for which the assessee is claiming deduction under section 80-IA. There is no dispute that during the year, there is a profit. Therefore, the assessee claimed deduction under section 80-IA and the Revenue has no authority to notionally bring forward the unabsorbed depreciation and loss of the earlier year which has been already set off as against the current year profit from the unit. 11. It is pertinent to note that the learned senior counsel appearing for the assessee invited the attention of this court to an unreported judgment of this court dated December 23, 2009, in Tax Case (Appeal) No. 298 of 2004 wherein, this court considered the similar substantial question of law, which reads as follows : "Whether the Tribunal was right in holding that for the purpose of allowing deduction under section 80-I, the brought forward losses and unabsorbed depreciation, etc., of the new industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning or the company commences work by way of repairs to ocean-going vessels or other powered craft (such assessment year being hereafter in this section referred to as the initial assessment year) and each of the seven assessment years immediately succeeding the initial assessment year : . . . (6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accord- ance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income." 15. A mere reading of the above provision makes it clear that any income of the nature specified in that section, which is included in the gross total income of the assessee for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provision of this Act shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in the gross total income. Section 80AB defines "gross total income" which means the total income has to be computed in accordance with the Act before making deduction under this Chapter. Heading "B" deals with "deductions in respect of certain payments" which consists of sections 80C to 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines. (4) This section applies to- (i) any enterprise carrying on the business of (i) developing, or (ii) operating and maintaining, or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies (or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act) ; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing, or (ii) operating and maintaining, or (iii)developing, operating and maintaining a new infrastructure facility ; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st April, 1995. (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and every subsequent assessment year." 18. From a reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in sub-section does not contemplates to bring set off amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of computing admissible deductions thereunder. In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under section 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-I for the new industrial undertaking was not required in the present case. Accordingly, this appeal fails and is hereby dismissed with no order as to costs." 20. From a reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-I for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view. 21. The standing counsel appearing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that there was no positive income and it was held by the Assessing Officer that the eligible deduction under section 80-IA after setting off of the loss worked out to nil. Before the Assessing Officer, there was no dispute regarding the claim during the year. Aggrieved by that order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). Before the appellate authorities also there is no dispute regarding the claim during the year. Line 3 in paragraph 2 of the order reads as follows : "The appellant has claimed deduction under section 80-IA for the first time in the current year, namely, the assessment year 2004-05." 26. The Revenue has not filed an appeal against the order of the Commissioner of Income-tax (Appeals). It reached finality. Aggrieved by the order of the Commissioner of Income-tax (Appeals) regarding the quantum of deduction, the assessee filed an appeal before the Tribunal. In the assessee's appeal, the Revenue filed a letter first time before the Tribunal and disputed the fact relating to the assessee's claim that assessment year 2004-05 is the initial assessment year. The Tribunal found that both the Assessing Officer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) are wrong the Departmental representative is required to adduce the evidence as per rules 10 and 29 of the Income-tax (Appellate Tribunal) Rules, 1963, which read as follows : '10. Filing of affidavits.-Where a fact which cannot be borne out by, or is contrary to, the record is alleged, it shall be stated clearly and concisely and supported by a duly sworn affidavit. 29. Production of additional evidence before the Tribunal.-The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.' These facts are contrary to the facts recorded by the Commissioner of Income-tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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