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2015 (6) TMI 210 - ITAT MUMBAI

2015 (6) TMI 210 - ITAT MUMBAI - [2015] 43 ITR (Trib) 701 (ITAT [Mum]) - Deduction u/s 80IA - income from windmill business - whether the unabsorbed depreciation accumulated in earlier years prior to the initial year needs to be adjusted while computing the amount eligible for deduction u/s 80IA? - eligible business being the only source of income of the assessee - Held that:- This issue has been considered by the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs .....

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rt in the case of CIT & DCIT vs. Anil H. Lad [2014 (3) TMI 808 - KARNATAKA HIGH COURT].

Thus choosing of initial assessment year for the purpose of claiming deduction for the period of 10 years out of 15 years is with the assessee and secondly, before claiming deduction u/s 80IA of the Act, the loss on depreciation claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other source, that is, other business income and earlier lo .....

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by the ld. CIT(A), Mumbai for the quantum of assessment passed u/s 143(3) of the Income Tax Act, 1961 for assessment year 2006-07, on the following grounds:- "1. The order of the CIT(A) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the unabsorbed depreciation of the period prior to the opted initial assessment shall be ignored while computing deduction ujs.80IA in respect of income from wind .....

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IA." 2. Brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of various electrical and consumer appliances. It has set up a Wind Mill division and installed Wind Mills at Vankusawade, Village Sitara Dist, Maharashtra. The said Wind Mill was commissioned in September, 1999. In revised return of income, the assessee has claimed deduction of ₹ 1,45,86,123/- u/s 80- IA (4) for the A.Y. 2006-07. The assessee in its note filed along w .....

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07, the assessee has ignored the set off of unabsorbed depreciation of earlier years of the Wind Mill Unit amounting to ₹ 4,47,29,590/- against the profits of the division for the year. The A.O. rejected the assessee's claim for A.Y. 2005-06. The assessee's submission in this regard, before the A.O. were as under:- "Without prejudice to above it is submitted that if at all depreciation under section 32 is to be deducted only the depreciation claimed and allowed under section .....

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nt year 2005-06 and not the first year in which the unit starts generating power."' 3. However, the A.O. rejected the assessee's claim for treating the A.Y. 2005-06 as initial assessment year for claiming deduction u/s 80IA of the Act on the ground that the year of the operation of the unit was A.Y. 2000-01. After discussing the provisions of sub-section (5) of section 80IA of the Act, he held that unabsorbed depreciation of eligible business cannot be ignored and the amount of unab .....

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ing to the various observations of Hon'ble High Court and following the ratio, held that there is no question of notionally bringing forward and setting of the unabsorbed depreciation or loss against the current year's income from the units for which the assessee is claiming deduction u/s 80IA of the Act. 5. Before us, the ld. D.R. strongly relied upon the decision of the Special Bench of ITAT in the case of CIT vs. Goldmine Shares and Finance (P) Ltd. [2008] 302 ITR (AT) 208 (Ahd.)[SB] .....

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nsel before us are as under:- 1. Copy of the decision of the Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd vs. ACIT [2012] 340 ITR 477 (Mad) dated 11 March 2010. 2. Copy of the decision of the Karnataka High Court in the case of CIT & DCIT vs. Anil H. Lad [2014] 102 DTR 241 (Kar) dated 5 February 2014 3. Copy of the decision of the Bangalore Tribunal in the case of Anil H. Lad vs. DCIT [2012] 13 ITR(Trib) 581 (Bang) dated 7 January 2011. 4. Relevant extracts of the d .....

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Pvt. Ltd vs. DC IT (ITA No. 4311/Mum/2013) dated 11 February 2015 8. Copy of the decision of the Mumbai Tribunal in the case of Shevie Exports vs. JCIT (36 CCH 17) dated 10 April 2013. 9. Copy of the decision of the Mumbai Tribunal in the case of Excel Crop Care Ltd vs. CIT (ITA No. 3100/M/10, 3101/M/10, 8741/M/10, 7155/M/11) dated 25 July 2014 7. The only dispute before us, is, whether the unabsorbed depreciation accumulated in earlier years prior to the initial year needs to be adjusted while .....

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80IA of the Act, held that if the loss in the earlier years to the initial assessment year has already been absorbed, then it cannot be notionally brought forward and set off against the profits of the eligible business. This view has been reiterated again by the Hon'ble Karnataka High Court in the case of CIT & DCIT vs. Anil H. Lad [2014] 102 DTR 241 (Kar). Following the said High Court decisions, the various Benches of the Tribunal have been following the same ratio. In the case of She .....

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amount equal to 100 percent of the profits and gains derived from such business for 10 consecutive years. Substituted sub-section (2) of section 80IA, provides that an option is given to the assessee for claiming any 10 consecutive assessment year out of 15 years beginning from the year in which the undertaking or the enterprise develops and begin to operate. The 15 years is the outer limit within which the assessee can choose the period of claiming the deduction. Sub-(5) is a nonobstante claus .....

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t assessment year, be computed as if such eligible business were the only source of Income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year to and Including the, assessment year for which the determination is to be made." 10. From a plain reading of the above, it can be gathered that it is a non- obstante clause which overrides the other provisions of the Act and It Is for the purpose of determining the quantum of deduc .....

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ment year was defined for various types of eligible assessees under section 80IA(12). However, after the amendment brought in statute by the Finance Act, 1999, the definition of "initial assessment year" has been specifically taken away. Now, when the assessee exercises the option of choosing the initial assessment year as culled out in sub-section (2) of section 80IA from which it chooses its 10 years of deduction out of 15 years, then only the losses of the years starting from the In .....

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