TMI Blog2016 (5) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed against the order of the learned Commissioner of Income-tax (Appeals), Panchkula, dated November 26, 2015, relating to the assessment year 2012-13, passed under section 250(6) of the Income- tax Act, 1961 (in short the Act ). 2. Briefly, the facts of the case are that the assessee established two wind mills in District Jaisalmer, Rajasthan, a 20 mega watt (MW) at village Gorera and 25 MW at village Soda Mada on March 30, 2004, and January 24, 2004, respectively. The assessee claimed deduction under section 80-IA of the Act of ₹ 95,00,547 at 100 per cent. on the income earned from the business of wind power generation projects. The Assessing Officer noted that on all these wind power plants, the assessee had incurred losses for the assessment years 2004-05 to 2006-07. These losses were set off by the assessee-company against the income derived from the business of cable jointing, etc., which does not qualify for deduction under section 80-IA of the Act. The assessee also earned and declared income from the business of wind power project for the assessment years 2007-08 to 2012-13. Referring to the provisions of section 80-IA(5) of the Act, the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) allowed the appeal of the assessee on this ground. 5. Aggrieved by this, the Department has come in appeal before us, raising following grounds of appeal : 1. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law and deleted the addition made on account of disallowances of ₹ 95,00,547 claimed under section 80-IA of the Income-tax Act. 2. It is prayed that the order of the learned Commissioner of Income-tax (Appeals) be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed of. 6. The learned Departmental representative, while arguing before us, relied on the order of the Assessing Officer submitting that by not considering the year of start of manufacturing as the initial year, the assessee gets an undue benefit in the form of claiming excess deduction under section 80-IA of the Act at its own option. 7. The learned counsel for the assessee submitted before us that similar issue was involved in the earlier assessment year, i.e., the assessment year 2010-11, whereby the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following terms : 8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. On a perusal of the order of the learned Commissioner of Income-tax (Appeals) we see that he has given very detailed findings on the issue as follows : '4.10 After considering the Assessing Officer's observations, the appellant's submission and the provisions of section 80-IA(2) and (5) of the Act, it is noted that the initial assessment year for section 80-IA means the assessment year specified by the assessee at his option to be the initial year. The initial year falls in any of the 15 assessment years at the option of the assessee starting from the previous year in which the enterprise begins operating and maintaining the infrastructure facility. Under section 80-IB and also under section 80-IC, section 80-ID and section 80-IE, the first year in which the production is started is taken as initial previous year whereas after the amendment in the provisions of section 80-IA with effect from April 1, 2000, the initial assessment year is at the option of the assessee. It may be the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80-IA of the Act, the losses which were incurred by the eligible business in the period earlier to the initial year are to be notionally carried forward to the initial assessment year and be adjusted before claiming deduction under section 80-IA of the Act. We have also perused the judgment of the Karnataka High Court in the case of Anil H. Lad (supra), whereby adjudicating the same issue, the hon'ble court has analysed the judgment of the Madras High Court in case of Velayudhaswamy Spinning Mills P. Ltd. (supra), which has been relied upon very heavily by the assessee. The findings of the hon'ble court are at paragraphs 9 and 10 of the judgment, which reads as under : '9. The Madras High Court in the aforesaid Velayudhaswamy's case interpreting the very provision held, from a reading of sub- section (1) section 80-IA, it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), i.e., referred to as the eligible business, there shall, in accordance with and subject to the provisions of the section, be allowed, in computi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 10. Therefore, keeping in mind the object with which these provisions are introduced, it is clear that an assessee is given the benefit of 100 per cent. deduction of the profits and gains from the eligible business. The quantum of deduction is to be calculated when the claim for deduction is made. If before claiming deduction, the loss and depreciation claimed by the assessee even in respect of eligible business is set off against income of the assessee or other source, the said loss or depreciation is already absolved, it does not exist. For the purpose of determining the quantum of deduction under sub-section(5) of section 80-IA, the revenue cannot take into consideration the loss and depreciation which is already set off against the income of the assessee from other source and compute the profit under section 80-IA. Therefore, the approach of the Tribunal is in accordance with law. The assessing authority and the Commissioner committed a serious error in setting off the profit earned by the assessee under section 80-IA against the losses and depreciation of the eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hered 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 80-IA, for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year to be computed as if the eligible business is the only source of income. Thus, the fiction created is that the eligible business is the only source of income and the deduction would be allowed from the initial assessment year or any subsequent assessment year. It nowhere defines as to what is the initial assessment year. Prior to April 1, 2000, the initial assessment year was defined for various types of eligible assessees under section 80-IA(12). However, after the amendment brought in the 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 80-IA from which it chooses its 10 years of deduction out of 15 years, then only the losses of the years starting from the initial assessment year alone are to be brought fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier 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 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 under section 80-IA(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in the Tax Case No. 918 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the year. The unreported judgment of this court cited supra considered the scope of sub-section (6) of section 80-I, which is the corresponding provision of sub-section (5) of section 80-IA. Both are similarly worded and therefore we agree entirely with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been set off against the income of the previous year should be reopened again for computation of current income under section 80-I 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. Emerald Jewel Industry (P) Ltd. [2011] 53 DTR 262 (Mad). From the above, ratio of the High Court, it is amply clear that sub-section (5) of section 80-IA will come into operation only from the initial assessment year or any subsequent assessment year. The option of choosing the initial assessment year is wholly upon the assessee in the post amendment period, i.e., after April 1, 2000, by virtue of section 80-IA(2).' 11. In view of the judgment of the Karnataka High Court, which has also been relied on by the Mumbai Bench of the Tribunal and in the background that no judgment of the hon'ble jurisdictional High Court has been cited before us, we hold that choosing of the initial assessment year for claiming deduction under section 80-IA of the Act in a block of ten years out of fifteen years is with the assessee, i.e., it is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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