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2015 (9) TMI 1009 - ITAT MUMBAI

2015 (9) TMI 1009 - ITAT MUMBAI - TMI - Disallowance of deduction u/s. 80IA - eligibility to claim the benefit of deduction u/s.80-IA without first setting off notional brought forward losses against the current year’s profit of exempt unit - Held that:- This fact is not in dispute that business loss/depreciation of earlier years of the exempt unit have already been set off in earlier years against other income and accepted as such by the Revenue. This fact is also not in dispute that deduction .....

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was not justified in denying the benefit of deduction u/s 80IA of ₹ 71,10,231/-. The AO is directed to grant the benefit of deduction claimed by the assessee. - Decided in favour of assessee. - ITA no.1602/Mum/2013 - Dated:- 28-8-2015 - SHRI JOGINDER SINGH AND SHRI ASHWANI TANEJA, JJ. For The Appellant Shri Madhur Agarwal (AR) For The Respondent Shri K.Ravi Kiran (DR) ORDER PER ASHWANI TANEJA, A.M. The present appeal has been filed by the Assessee against order dated 11.12.2012, passed by .....

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ofit from the eligible business for the purpose of deduction under s. 80-IA of the Act has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years. b. Holding the year of commencement of the eligible business to be initial assessment year from which deduction was available to the appellant. c. Not appreciating that Audit report in Form 10CCB to be filed for claimin .....

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ce Act, 1999 amendment. 2. The appellant craves leave to add, alter, amend or delete any of the above referred ground of appeal. 2. As per Ld Counsel of the assessee, only effective issue to be adjudicated by Tribunal is whether the assessee is eligible to claim the benefit of deduction u/s.80-IA without first setting off notional brought forward losses against the current year s profit of exempt unit. 3. The brief facts are that the assessee claimed the benefit of deduction u/s 80-IA in its ret .....

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as confirmed by the Ld. CIT(A). Before us, Ld. Counsel has submitted that the exempt unit of Windmill farms was set up in assessment year 2006-07 and no deduction has been claimed in assessment years 2006-07, 2007-08 & 2008-09. The deduction u/s 80IA has been claimed with respect to this unit for the first time in impugned assessment year i.e. assessment year 2009-10. As per law, the assessee can choose any 10 consecutive years out of first 15 years. Thus, impugned year is initial year of cl .....

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have already been actually set off against the profits in the earlier years. Therefore, nothing remained to be brought forward to the impugned year and therefore, the action of Ld. AO in notionally bringing the amount of losses as brought forward losses was contrary to law and facts. The Ld. Counsel relied upon following judgments in support of this issue:- (i) Velayudhaswamy Spinning Mills (P)Ltd. vs. ACIT 231 CTR 368(Mad) (ii) CIT vs. Anil H. Lad 102 DTR (kar) 0241 (iii) Shevie Exports vs. Jt .....

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f Shevie Exports has considered the facts & law and the decisions of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. vs. ACIT, [2011] 340 ITR 477 (Mad) and CIT vs. Emerala Jewel Industry Pvt. Ltd. [2011] 53 DTR 262 (Mad). The Hon ble co-ordinate Bench has also discussed and distinguished the judgment of Pidilite Industries Ltd. (supra). After considering entire law Hon ble Bench has decided this issue in the favour of the assessee and held as under: Quote: 8. .....

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income (which in the present case, can be considered as non-eligible unit) in the assessment year 2007-08. In the assessment year 2008-09, the assessee has earned profit of ₹ 7,16,904 and has claimed deduction under section 80IA by treating the assessment year 2008-09 as initial assessment year. The sole ground for canceling the assessment order under section 263 by the learned Commissioner in this regard is that in the subsequent year i.e., the assessment year 2009-10, the claim of the as .....

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nd subject to the provisions of this section, be allowed in computing the total income, the deduction of an amount equal to 100% of the profits and gains derived from such business for 10 consecutive years. Substituted sub-section (2) of section 8OlA, 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 withi .....

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r 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 whic .....

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It nowhere defines as to what is the initial assessment year. Prior to 1st April 2000, the initial assessment 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 .....

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s to adjust loss in the subsequent assessment years and it has to be computed as if eligible business is the only source of income and then only deduction under section 80IA can be determined. This is the true import of section 80IA(5). 11. In the decision of Goldmine Shares and Finance Pvt. Ltd. (supra), decided by the Special Bench of the Tribunal, the claim of deduction by the assessee had started from assessment year 1996-97 onwards and the assessee had claimed deduction under section 80IA s .....

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and relevant provisions of the Act i.e., pre amendment and post amendment have come to the 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 se .....

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not rework the set off amount and bring it notionally. Fiction created in subsection 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 present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised the option und .....

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ovision of sub-s. (5) of s. 80-IA. Both are similarly worded and therefore we agree entirely with the Division Bench judgment of this Court cited supra. In the case of CIT vs. Mewar Oil & General Mills Ltd. (2004) 186 CTR (Raj) 141 (2004) 271 ITR 311 (Raj), the Rajasthan High Court also considered the scope of s. 80-I and held as follows:- "Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no car .....

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uld be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. 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 computati .....

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rrent year and, therefore, recomputation of income for the purpose of computing permissible deduction under s. 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." 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 co .....

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year. The option of choosing the initial assessment year is wholly upon the assessee in the post amendment period i.e., after 1st April 2000 by virtue of section 80IA(2). 13. Now coming to the decision of the Mumbai Bench Tribunal in Pidilite Industries (supra) as relied upon by the learned Departmental Representative in this case, the Tribunal was dealing with regard to two eligible units one Gujarat Unit which was set-up in the year 1995-96 and second Maharashtra Unit in the year 2000-01. Wit .....

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eligible business in the year of commencement. In this case, it was not an issue as to whether the losses pertained to prior to initial assessment year or after the initial assessment year. If the losses have been incurred in the eligible unit and has been set-off against the non- eligible unit after the initial assessment year, then the ratio laid down by the Tribunal is in full consonance with the law. However, this is not the case in the instant case because the loss pertained to prior to ini .....

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