TMI Blog2009 (11) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deduction is allowed for ten consecutive assessment years. Sub-s. (2) of s. 80-IA gives option to the assessee to choose the 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing' telecommunication service or develops an industrial parks. Sub-s. (5.) of s. 80-IA qualifies deduction of sub-s. (1) of s. 80A with a non obstante clause and overrides every other provision in this Act providing mechanism by way of assumption that for determining the quantum of deduction for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, it would be deemed 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 assessment year upto and including the assessment year for which the determination is to be made. The above provisions are very clear, plain and direct in meaning. But only difficulty is cast by the term 'initial year' which has nowhere been defined in the Act, yet by sub-s. (2) it is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been observed by the AO that the deduction under s. 80-IA would be computed with reference to profits of the eligible unit unaffected by losses suffered in other units. That the loss suffered by the eligible unit would not be set off against profits of other units/other business/other incomes in the initial year of assessment or subsequent years and the losses of the eligible unit when remained to be adjusted against that very source it is to be carried forward to the subsequent year(s) and is to be set off in the succeeding year(s) and on the remaining profit alone the deduction would be available. It was also observed that when there was no loss(es) of the eligible unit, carried forward, in view of having been set off against profits of that very source, the losses of the earlier years, though already absorbed against other sources, are once again to be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction and that this deduction is limited to gross total income. He has treated each windmill as a separate unit. Alter holding as above, the AO has denied the assessee's claim under s. 80-IA of the Act and has added the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Special Bench decision does not overrule or come in the way of the ruling laid down by Chennai 'B' Bench in the case of. Mohan Breweries Distilleries Ltd. (supra)..The Tribunal has clearly held that the provisions of s. 80-IA(5) treating it as a separate sole source of income could not be applied to a year prior to the year in which the assessee opted to claim relief under s. 80-IA for the first time., It has been further held that the depreciation and carry forward loss relief to the unit which claims deduction under s. 80-IA cannot be notionally carried forward and set off against the income from the year in which the assessee; started claiming deduction under s. 80-IA, and hence, there was no question of setting off notionally carried forward unabsorbed depreciation or loss of earlier years against assessee's profits and the assessee would be entitled to claim deduction under s. 80-IA on the current year's profit. In the case of Goldmine (supra), it has been held that it is mandatory for the profits from eligible business to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2) The deduction specified in sub-s. (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [or develops (***) a special economic zone referred to in cl. (iii) of sub-s. (4)] or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines or lays and begins to operate a cross-country natural gas distribution network : Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in cl. (a) or cl. (b ) or cl. (c) of the Explanation to cl. (i) of sub-s. (4), the provisions of this sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ( ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c)it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995 : Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation.......... Provided that in a case where an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to the initial assessment year and to every subsequent assessment year upto and including the assessment year for which the determination is to be made. 6. In nutshell, in computing the total income of the assessee, derived from profits and gains from an eligible business, which are detailed in sub-s. (4), 100 per cent deduction is allowed for ten consecutive assessment years. Sub-s. (2) of s. 80-IA gives option to the assessee to choose the 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing' telecommunication service or develops an industrial parks..... etc. By way of a proviso, this fifteen years has been extended to 20 years in respect of certain business, Likewise sub-s. (2A) restricts this deduction in respect of undertakings providing telecommunication services. Sec. 80-IA(3) imposes certain restrictions whereunder, this deduction is not allowed to undertakings if it is formed by splitting up or reconstruction of an already existing business but reconstruction, re-establishment or revival of the business subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses suffered in other units; (b)loss suffered by the eligible unit would not be set off against profits of other units/other business/other income in the initial year of assessment or subsequent years of eligible years of assessment. (c)where losses of the eligible unit remain to be adjusted against that very source they are to be carried forward to subsequent year(s), and set off in the succeeding year(s), and on the balance profit alone would the deduction admissible be computed; (d)where there are no losses of the eligible unit carried forward (in view of having been set off against profits of that very source), the losses of earlier years, though already absorbed against other sources, are once again to be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction; (e)the deduction is limited to gross total income. Sec. 80-IA(l), (5) and other like s. 80-IA(7]/80-I(6) can be studied under five broad sub-heads : first, the deduction under s. 80-IA(l) is of/from the profits and gains included in 'gross total income'; second, the computation of deduction is made under a non obstante s. 80-IA(7)/80- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have not been in existence and therefore, the depreciation or the loss of the eligible business which could not be set off against the profits of the eligible business itself has to be carried forward and set off against the profits of the very source of eligible business in the subsequent year. Because of the fiction, even if any set off of eligible business loss was made against other sources of income, it has to be assumed not so set off. 'As if that were the only source of income' means as if there was no other source of income. If that be so the depreciation and loss could not be absorbed, and be set off against any other source or head of income. Losses of the eligible business are to be set off only against the subsequent years' income of the eligible business, even though these were set off against other income of the assessee in that earlier year. The provision overrides all other provisions of the Act only for computing the profits and gains of the eligible business for determining the quantum of deduction under the section. This restricts the application of the fiction to a specified purpose and therefore, it cannot be extended beyond the object for w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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