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2016 (3) TMI 914 - ITAT PUNE

2016 (3) TMI 914 - ITAT PUNE - TMI - Denial of deduction u/s.80IA - claim for initial assessment year - that:- All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of .....

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rounds raised by the Revenue are as under : 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was correct to interpret the operation of Section 80IA(5) only from the year of first claim of deduction u/s 80IA(1) even when the eligible business had commenced in earlier years? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) and Hon'ble ITAT, Pune, on which the Ld.CIT(A) placed reliance was correct to treat the judgement of non-juri .....

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n which the assessee claimed deduction u/s.80IA(iv)(4) for ignoring the operation of Sec. 80IA(5) of the I.T. Act, 1961 ? 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal. 3. Facts of the case, in brief, are that the assessee is engaged in the business of manufacturing of rubber items as well as energy generation business. It filed its return of income on 06-10-2010 declaring total income of ₹ 6,10,14,820/-. 4. During the course of assessment proceedi .....

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.Y. from which Power Generation started Amount of Profit during the year (Rs.) Windmill 1 2001-02 12,60,699/- Windmill 2 1999-2000 10,96,404/ - Windmill 3 2000-01 15,31,630/ - Windmill 4 2006-07 - 5. However, the AO observed that the above computation was incorrect as it was made without application of section 80IA(5). According to the AO, as per provisions of section 80IA(5) the assessee has to compute profit of each undertaking separately as if it were the only business of the assessee. He not .....

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06 Brought Forward losses (Rs.) 1,31,42,486 1,17,49,745 1,15,37,123 3,42,22,434 Profit during the year (Rs.) 12,60,699 10,96,404 15,31,630 - Set off of loss allowed 12,60,699 10,96,404 15,31,630 - Losses of earlier years to be carried forward 1,18,81,787 1,06,53,341 1,00,05,493 3,22,66,511 6. The major portion of resultant loss of windmills of ₹ 7,06,51,788/- as on 01-04-2009 computed above adjusted with other income of the earlier years by the assessee, were notionally brought forward by .....

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as also been claimed in this year on the same basis. According to the AO, section 80IA(5) creates a fiction, as per which while computing the deduction from initial year onwards, it has to be computed as if the eligible business is the only business of the assessee. As per AO the losses of the eligible business of even prior to the first year of claim of deduction has to be notionally brought forward, if not already set off, against the income of eligible business while computing the deduction. .....

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of ₹ 38,88,733/- claimed by the assessee company u/s 80IA of the Income-tax Act, 1961. The claim of the assessee that sec. 80IA(5) will operate from the 1st year of claim and not from the year of commencement of eligible business even when business commences prior to the year of 1st claim was also not accepted by the A.O. 8. Before CIT(A) it was submitted that it has the option to claim the deduction u/s 80IA of the LT. Act, for any 10 consecutive assessment years falling within the perio .....

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to be its initial assessment year for claiming deduction. Hence, depreciation loss of the years earlier to A.Y. 2009-10, which have already been set off against the income, cannot be notionally carried forward to compute deduction u/s.80IA. The assessee further contended that the loss from eligible business in the years prior to initial year of claim absorbed against the profits of other business need not be notionally brought forward and has no effect on the deduction claimed. As per assessee, .....

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Y. 2009-10 need not be notionally carried forward and adjusted against current year s income. Relying on various decisions it was submitted that the claim made by the assessee should be allowed. 9. Based on the arguments advanced by the assessee, the Ld.CIT(A), following the decision of the Pune Bench of the Tribunal in the case of Serum International Ltd. vide ITA Nos. 290 to 292/PN/2010 order dated 28-09-2011 for A.Y. 2004-05 and the decision of Hon ble Madras High Court in the case of Vellayu .....

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is not acceptable : (i) The Ld.CIT(A) has ignored the decision of Special Bench of ITAT, Ahmedabad in the case of Goldmine Shares and Finance Pvt. Ltd. (Supra) wherein it is held that the profit from the eligible business, for the purpose of determination of quantum of deduction u/ s.801A, has to be computed after deduction of the notional brought forward loss and depreciation of eligible business even though it has been allowed set off against other income in the earlier years. (ii) The Departm .....

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ted by the Department and further appeal has been filed before the Hon'ble High Court. (v) The Ld.CIT(A) and the ITAT both have erred in treating the judgement of Hon ble Madras High Court given in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT (2010) 38 DTR 57 as a binding precedent, to ignore the judgement of Ahmedabad Special Bench given in the case of DCIT Vs. Goldmine Shares and Finance Pvt. Ltd. 116 TTJ 705 and own judgement of IT AT, Pune given in favour of revenue in th .....

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issue. The 'initial year' has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. Reliance is also placed on the decision of Hon'ble Delhi High Court in the case of CIT vs. Nestor Pharmaceuticals Ltd. 322 ITR 631. Initial year is not defined in the Act. It may represent year of commencement of production or first claim but cannot change the interpretation of Section 80IA(5), which has be .....

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rought forward losses of windmill unit of earlier years, there was no profit left and thus, the assessee is not entitled for deduction u/s.80IA(4) of the Income-tax Act, 1961. He accordingly submitted that the order of Ld.CIT(A) be reversed and that of the AO be restored. 12. The Ld. Counsel for the assessee on the other hand referring to the series of decisions filed in the paper book submitted that the issue stands decided in favour of the assessee after considering all the points raised by th .....

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he case of Serum International Ltd. Vs. ACIT vide ITA Nos. 290 to 292/PN/2010 order dated 20-09-2011 for A.Yrs. 2004-05 to 2006-07 has decided the issue in favour of the assessee and dismissed the appeal filed by the revenue by observing as under: 13. Having been considered the above submissions, we find that the issue raised in Ground No. 1 as to what would be the initial A.Y for the purposes of Section 80IA(5) of the Act has been decided in favour of the assessee by the Pune Bench of the Tribu .....

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.s. 80IA (5) was the year in which the assessee started generating electricity from the wind mill activity. We also find that the issue raised in Ground No. 2 regarding the eligibility of the assessee to claim deduction u/s. 80IA undiminished by unabsorbed losses and depreciation also set off in earlier years against the other income, is fully covered by the decision of Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (Supra) holding that as per Sub-section .....

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ad already been set off against the other income of assessee and set off against the correct income of the eligible business. Fiction created by Sub-section (5) of Section 80IA does not contemplate such notional set off, held the Hon ble High Court. The Hon ble Madras High Court in that decision has also referred the decision of Hon ble Supreme Court in the case of Liberty India Vs. CIT (Supra) and the decision of Special Bench of the Tribunal in the case of Goldman Shares & Finance (P) Ltd. .....

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l is bound by the decision of High Court , even of a different State, so long as there is no contrary decision of any other High Court. The Hon ble Bombay High Court has been pleased to hold further that the Tribunal had no option but to follow the judgment of the Madras High Court. An authority like an Income Tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Cour .....

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issue under almost similar facts, hold that when the assessee exercising the option, only the losses of the year beginning from the initial A.Y. are to be brought forward and not the losses of earlier year which have been already set off against the other income of the assessee. The revenue cannot notionally bring forward any loss of earlier years which has already been set off against any other income of the assessee and set off the same against the current income of the eligible business. We t .....

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