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Deputy Commissioner of Income Tax Versus M/s. Bajaj Electricals Ltd.

2015 (6) TMI 210 - ITAT MUMBAI

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. ACIT [2010 (3) TMI 860 - Madras High Court] wherein after considering t .....

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A 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 loss/depreciation of the Wind Mill cannot be notionally set off against the .....

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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 windmill business without appreciating that ujs.80IA (5) deduction u/s.80IA o .....

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aged 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 with the computation of revised return of income, stated that the assessme .....

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arlier 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 32 for the relevant assessment year viz. assessment year 2005-06 ought to .....

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g 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 unabsorbed depreciation of ₹ 4,47,29,590/- has to be set off against th .....

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he 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] and submitted that the Special Bench after detailed discussion decided th .....

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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 decision of the Pune Tribunal in the case of Malpani Tea Corporation vs. D .....

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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 computing the amount eligible for deduction u/s 80IA of the Act. As point .....

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l 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 Shevie Exports vs. JCIT (36 CCH 17), the Tribunal after discussing various d .....

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usiness 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 clause which deals with the quantum of deduction for an eligible business. The .....

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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 deduction under section 80IA, for the assessment year immediately succeeding t .....

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on 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 Initial assessment year alone are to be brought forward as stipulated In se .....

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