TMI Blog2010 (9) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IA in respect of the profits of the windmill activity - initial assessment year - HELD THAT:- When the statute have granted the option to choose the initial assessment year and when the assessee has so chosen the current assessment year as the initial assessment year and when the assessee accordingly paid the taxes on the profits of the windmill activity in the earlier years as per the statute, the AO s decision to thrust the initial assessment year on the assessee is not in tune with the provisions of s. 080-IA(2). Accordingly, we are of the opinion, the learned CIT(A) erred in holding that the initial assessment year for the purposes of s. 080-IA(2) r/w s. 080-IA(5) was the year in which the assessee started generating the electricity. Therefore, the order of the CIT(A) has to be reversed on this issue. It is clear that the initial assessment year for the above purposes was the first year in which the assessee claimed the deduction u/s 080-IA(1) after exercising his option as per the provisions of s. 080-IA(2). Consequently, the assessee is entitled to claim the deduction of ₹ 25,44,326 u/s 080-IA in respect of the profits from the windmill activity. Accordingly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 73,93,189. The total income was determined at ₹ 1,26,34,050 under s. 143(1) of the IT Act. The Assessing Officer disallowed the claim of ₹ 23,00,000 out of the claim of advertisement and sales promotion expenses. Further, Assessing Officer also denied the benefit of deduction under s. 80-IA(5) to the extent of ₹ 25,44,326-the profit earned from windmill activities. In the process, AO did not accept the assessee s exercises of the option that the asst. yr. 2004-05 is an initial assessment year. The CIT(A) confirmed the above decision of the Assessing Officer. 3. Aggrieved with the same, assessee filed an appeal before the Tribunal with the abovesaid ground. In connection with the claim of s. 80-IA(5), assessee filed a clarificatory ground which reads as under : 1.The learned CIT(A) erred in holding that the initial assessment year for the purposes of s. 80-IA (2) r/w s. 80-IA(5) was the year in which the assessee started generating the electricity without appreciating that the term initial assessment year for the above purposes was the first year in which the assessee claimed the deduction under s. 80-IA(1). 2. The learned CIT(A) erred in denyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of India Ltd. during the scrutiny proceedings under s. 143(3) of the Act. Further, the Revenue took a different stand and held identical claim as capital expenditure in the case of the assessee. This is a case of violation of established rule of consistency by the Revenue and rule of res judicata does not apply in this case. Learned counsel relied on judgment of Supreme Court in Radhasoami Satsang v. CIT [1991]) 100 CTR (SC) 267 /[1992] 193 ITR 321 (SC). On the other hand, learned Departmental Representative for the Revenue relied on the order of the Revenue. 6. We have heard the parties and perused the orders of the Revenue and the cited apex Court judgment on the principle of the judicial principles of res judicata and the rule of consistency vis-a-vis the facts of the issue in the case of this assessee and the case of Serum Institute of India Ltd., we find that the facts are identical and it is a fact that the Revenue held that the impugned expenditure is revenue in nature in the case of Serum Institute of India Ltd. contrary to the finding that it is capital in nature in assessee s case. This is a case of paradox and it is case of absurdity on part of the law. This kind of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing claim of deduction without going to the merits of the issue raised in the appeal. Accordingly, grounds 1 and 2 are allowed. 8. The grounds 3 and 4 together with the clarificatory grounds raised deal with the issue relating to the claim of the deduction under s. 80-IA in respect of the profits of the windmill activity and the meaning of initial assessment year . 9. Relevant facts of the issue are that the assessee owns windmill commencing from the asst. yr. 2002-03. However, he earned the loss of ₹ 1,43,92,762 out of windmill activity. Assessee adjusted this said loss against the income from other ineligible business under s. 80-IA(5). Later in the asst. yr. 2003-04, assessee earned profit of ₹ 28,25,523 from the windmill activity and did not claim deduction under s. 80-IA and paid taxes as per the Act. Finally, in the current assessment year i.e., 2004-05, assessee earned income of ₹ 25,44,326 from the windmill activity and claimed deduction under s. 80-IA of the Act. The details of claim of deduction as given by the assessee at p. 68 of the paper book are as under: Particulars Asst. yr. 2002-03 Asst. yr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee cannot jump the assessment years for one reason or the other. (ii) The definition provided in the pre-amended s. 80-IA(12C) also provides for some question of such option. (iii) Sub-s. (5) of s. 80-IA will come into operation only after the assessee exercises his option of selecting initial assessment year. (iv) The computation of income on standalone basis envisaged in sub-s. (5) will apply after the initial assessment year as per sub-s. (2) of s. 80-IA is exercised. 12. Next assessee s counsel relied on various citations for the proposition for various propositions including that the assessee has option to choose the initial assessment year . On the other hand, the learned Departmental Representative for the assessee relied on the orders of the Revenue and stated that the AO has an authority to alter the initial assessment year. 13. We have heard both the parties and perused the factual matrix of the case and orders of the Revenue and the paper book. We have also examined the legal position on the matter. Before adjudicating the issue in question, it is necessary to examine the scope of the provisions relating to the initial assessment year : 80-IA. Deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard i.e., on the issue of assessee s option to select the initial assessment year , we have perused the citations relied upon by the assessee s counsel. The conclusion by the Tribunal Mumbai Bench decision in ITA No. 4620/Mum/2007 (asst. yr. 2004-05) in the case of Dy. CIT v. Ushdev International Ltd., is straight on this issue of initial assessment year and the option to the assessee and the held portion of the decision reads as under : In view of the above learned CIT(A) s order to the extent of holding that initial assessment year and subsequent succeeding assessment years can only be considered for the purpose of computing deduction under s. 80-IA. Coming to the facts of the case, however, as seen from the schedule of details available in the learned CIT(A) s order the assessee has incurred losses in the asst. yrs. 1997-98 and 1998-99 only. Subsequently in all the years there were profits till asst. yr. 2004-05. It is not clear whether the assessee has claimed any deduction in earlier years under s. 80-IA. This being the 8th year of starting the project, assessee would be left with only another 7 years of claim out of the 10 years available to the assessee. Consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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