TMI Blog2015 (6) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) erred in confirming disallowance of deduction u/s 80IA made by the AO and not considering the fact that deduction u/s 80IA is to be claimed and allowed on a standalone basis as if the eligible business was the only source of income. b) The Ld. CIT(A) erred in holding that losses of earlier year had to be reduced before allowing claim u/s 80 IA and disregarding the fact that there were no losses of earlier years as they had been set off against other incomes of those years. 2. The Ld. CIT(A) erred in denying deduction u/s 80IA by following Tribunal decisions dealing with position prior to Finance Act, 1999 and not following the Madras High Court decision which is a Higher Authority than the Full Bench of the Tribunal and is based on similar facts/post Finance Act, 1999 position when the Windmills were set up. 2. The brief facts qua the issue involved are that, the assessee company besides engaged in the business of manufacturing of various items is also engaged in the business of generation electricity/power through its windmill plant which was set in the previous year, relevant to the A.Y. 2006-07. The assessee opted to claim deduction u/s 80IA for the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2009. 4. Before us, learned counsel, Shri Prakash Jotwani submitted that the Hon ble Karnataka High Court in the case of Velayudha Swami Spinning Mill Pvt. Ltd. Vs. ACIT reported in (2012) 340 ITR 477 has dealt exactly the similar issue and held that the assessee can chose the initial assessment year for the purpose of deduction and the earlier losses cannot be notionally brought forward and set off against the profit of the eligible business. Even the Madras High Court in the case of CIT Vs. Emerald Jewel Industries has reiterated the same ratio. Besides this he also pointed out various other decisions of the Tribunal including the decision of ITAT Mumbai Bench in the case of M/s. Shevie Exports Vs. JCIT ITAT No. 321/Mum/2012 order dated 10.04.2013, wherein this issue has been discussed in detail after considering the various decisions. 5. On the other hand, Ld. DR strongly relied upon the order of the AO as well as Ld. CIT(A). 6. After careful considering the rival submissions, facts of the case and the issues involved, we find that only issue involved is that whether the earlier year losses of the eligible unit can be set off against the profit of the said unit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the assessee can choose the period of claiming the deduction. Sub-section (5) is a non-obstante clause which deals with the quantum of deduction for an eligible business. The relevant provisions of sub-section (5) of section SOIA, reads as under:- (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 determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent 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 up 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 the initial assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same conclusion:- From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to 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. Fiction created in sub- section does not contemplates to bring set off amount notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 14. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no rectification possible under s. 80-1 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 s. 80-1 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. From 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 s. 80-1 for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view. 12. This judgment has been further followed by the same High Court in CIT v/s Emerald Jewel Industry (P) Ltd. [2011] 53 DTR 262 (Mad.). From the above, ratio of the High Court, it is amply clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1999- 2000. Thus, in the assessment year 1999-2000, the definition of initial assessment year was already there in the Act and there was no provision through which the assessee could have chosen its initial assessment year. This provision was brought in statute w.e.f. 1st April 2000, by virtue of section 80IA. Thus, this decision also will not help the case of the Department. In assessee's case, as specifically stated in the foregoing paragraphs, the assessee's claim for initial assessment year i.e., assessment year 2008-09 and its claim for deduction under section 80IA made for the first time from assessment year 2008-09, has not been disputed. Thus, the aforesaid judgment relied upon by the learned Departmental Representative will not be applicable to the facts of the present case. Thus, following the aforesaid decisions, we hold that the assessee s claim for deduction u/s 80IA is allowable from the profits derived from the Windmill unit, starting from A.Y. 2009-10, which is the initial assessment year chosen by the assessee. The earlier year losses cannot be set off against the profits for eligible units in this year. Accordingly, grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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