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The Deputy Commissioner of Income Tax., Yamuna Nagar Circle Versus M/s Yamuna Power & Infrastructure Ltd.,

2016 (2) TMI 904 - ITAT CHANDIGARH

Deduction under section 80IA - initial assessment year selection - Held that:- Choosing of initial assessment year for claiming deduction under section 80IA of the Act in a block of ten years out of fifteen years is with the assessee i.e. it is the option of the assessee to choose the initial assessment year for claiming deduction under section 80IA of the Act. Further, the loss claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other .....

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een able to give any evidence to prove that these expenses were incurred wholly and exclusively for the purposes of business. Wherever required, the CIT (Appeals) has given relief to the assessee. We hereby confirm the order of the learned CIT (Appeals) in this regard. - Disallowance of rental expenses - Held that:- We are in agreement with the findings of the learned CIT (Appeals) that even though the sister concerns have not paid their part of rental expenses for using the premises but to .....

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IN, A.M. These two appeals filed by the Revenue are directed against the separate orders of learned Commissioner of Income (Appeals), Panchkula, dated 22.9.2014 and 26.9.2014 for assessment years 2010 11 and 2011-12 respectively. The assessee has filed Cross Objection against the appeal of the Revenue in ITA No.1062/Chd/2014. ITA No.1062/Chd/2014 : 2. Briefly the facts of the case are that the Assessing Officer during the assessment proceedings noted that the .....

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o 2006-07. These losses were set off by the assessee against the income derived from the business of cable joining etc., which does not qualified for deduction under section 80IA of the Act. Further referring to the provisions of section 80IA(5) of the Act he observed that the brought forward losses of the eligible business need to be set off against the income from eligible business even though they were set off against the non-eligible business in the respective years. .....

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Vs. Goldmine Shares & Finance Pvt. Ltd., 113 ITD 209(Ahd), the Assessing Officer disallowed the claim of the assessee under section 80IA of the Act of ₹ 1,09,82,471/-. 3. Before the learned CIT (Appeals), the assessee submitted that as per section 80IA(2) of the Act, the deduction at the option of the assessee can 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 begins to oper .....

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section 80IA(5) of the Act is 2008-09 and not assessment year 2004-05. The provisions of section 80IA of the Act will be applicable only from assessment year 2008-09 and it will be assumed that the only source of income of the assessee is income from generation of power for the purpose of computing the quantum of deduction under section 80IA of the Act. Reliance was placed on the following judgments :- a) Mohan Breweries & Distilleries Ltd. Vs. CIT (2008) 23 SOT 32 (Chennai (URO .....

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and Report of the Assessing Officer and rejoinder filed by the assessee, the learned CIT (Appeals) allowed the appeal of the assessee. 5. Aggrieved by this the Department has come up in appeal before us, raising the following grounds of appeal : 1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in law that deleted the addition of disallowing the deduction claimed u/s 80IA of the IT Act. 2. It is prayed that the order of the Ld. CIT .....

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The learned counsel for the assessee reiterated the submissions made before lower authorities and reliance was placed on another judgment of the Karnataka High Court in the case of CIT Vs. Anil H. Lad, 102 DTR 241 (Kar). 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 perusal of the order of the learned CIT (Appeals) we see that he has given very detailed f .....

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ng the infrastructure facility. Under section 80IB and also u/s 80IC, 80ID and 80IE, the first year in which the production is started is taken as initial previous year whereas, after the amendment in provisions of section 80IA w.e.f. 01.04.2000 the initial assessment year is at the option of the assessee. It may be first year of the commencement of activity or a subsequent year as selected by the assessee for the purpose of claiming deduction u/s 801 A of the Act. In the appellant's case, t .....

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om the eligible business as if such eligible business was the only source of income of the assessee during the previous year relevant to the initial assessment year or to every subsequent assessment year upto and including the assessment year for which the determination is to be made. In the instant case, the provisions of section 80IA(5) would be applicable from previous year relevant to A. Y. 2008-09. Any profit or loss arising from the wind mills business would be considered for the computati .....

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on the applicability of provisions of section 80IA(2) and (5) and judicial pronouncements, the AO was not justified in disallowance of claim of deduction of ₹ 1,09,82,471/-u/s 801 A of the Act. The AO is directed to delete the addition made on this account. This ground of appeal is allowed. " 9. On perusal of the above, we do not find any infirmity in the order of the learned CIT (Appeals) as the only controversy to be decided is whether for claiming deduction under secti .....

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inning Mills (P) Ltd. (supra), which has been relied very heavily by the assessee. The findings of the Hon'ble Court are at paras 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 enterpris .....

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to choose 10 consecutive assessment years out of 15 years. Option has to be exercised. If it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity etc. Sub- section (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-section (5) and the same is no .....

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iction is created by introducing a deeming provision and therefore, 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 set off against the income of the assessee. Looking forward .....

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ction 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. 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% deduction of the profits and gains from the eligible business. The quantum of deduction is to be calculated when the cla .....

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ther source and compute the profit under Section 80IA. 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 80IA against the losses and depreciation of the eligible business which is already setoff from other source before such a claim is putforth. Thus, there is no error committed by the Tribunal in setting aside the order passed by the Assessing Au .....

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1st April 2000, provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking from any eligible business referred to in sub- section 4, there shall, in accordance with and 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 80IA, provides that an option is .....

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hstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under 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 assess .....

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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 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, 1 .....

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annot be brought forward and adjusted into the period of ten years from the initial assessment year as contemplated or chosen by the assessee. It is only when the loss have been incurred from the initial assessment year, then the assessee has 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 .....

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ment years. This aspect of the matter has been very well elaborated by the Madras High Court in Velayudhaswamy Spinning Mills Pvt. Ltd. (supra) after considering the Special Bench decision of the Tribunal in Goldmine Shares And Finance Pvt. Ltd. (supra) 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 re .....

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forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier 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 .....

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o 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-s. (6) of s.80-I, which is the corresponding provision 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. .....

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rward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the CIT(A), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the face of the record which could 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 .....

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here was no rectification possible under s. 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current 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 cas .....

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ifferent view. 12. This judgment has been further followed by the same High Court in CIT v/s 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 80IA 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 1st April 2000 by virtu .....

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sment year for claiming deduction under section 80IA of the Act. Further, the loss claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other ineligible business as in respect of assessment years and there is not need to notionally carry forward these losses up to the initial assessment year and write off the same out of the profits of eligible business. 12. The appeal of the Revenue in ITA No.1062/Chd/2014 is dismissed.

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llowance of ₹ 2,45,872/- made by the Assessing Officer under section 37(1) (after giving relief of ₹ 1,67,925/-) as per para 5.4 of his order. 15. Briefly, the facts are that on perusal of the ledger account, the Assessing Officer noted that the assessee had incurred expenses in cash for unlawful purposes. The narration of expenses showed that these were in the nature of bribe or illegal gratification which are not allowable under section 37 of the Act. After considering .....

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Appeals), the assessee stated that the expenses totalled to ₹ 1,54,317/- instead of ₹ 2,45,872/- as taken by the Assessing Officer. It was also stated that all these expenses were incurred wholly and exclusively for the purpose of business only. IN the Remand Report called from the Assessing Officer, it was stated that the assessee had debited an amount of ₹ 1,54,317/- under the head business promotion which are required to be deleted. After going through the submission of the .....

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p> 17. Aggrieved by this act of the learned CIT (Appeals), the assessee has filed Cross Objection before us. The learned counsel for the assessee submitted that the entire expenses have been incurred wholly and exclusively for the purposes of business. 18. The learned D.R. relied on the order of the learned CIT (Appeals). 19. After hearing both the parties and perusal of the order of the learned CIT (Appeals), we see that the learned CIT (Appeals) has given detailed findi .....

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No.2 raised by the assessee in Cross Objection reads as under : 2. That the Worthy CIT(A) has erred in confirming the disallowance of ₹ 15,67,116/- as per para 6.5 of his order out of total rental expenses claimed at ₹ 26,11,860/- by the appellant. 3. That the respondent, craves leave to add or amend any ground of cross-objections before the appeal is finally heard or disposed off. 21. Briefly, the facts are that the Assessing Officer noted that th .....

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/o:p> The Assessing Officer concluded that a part of the expenses of the said premises was attributable to the sister concerns of the assessee and disallowed 60% of the rental expenses being ₹ 15,67,116/-. 22. Before the learned CIT (Appeals), the assessee submitted that although the sister concerns M/s Yamuna Cable Accessories Pvt. Ltd. and YGC Project Ltd. had also given their address at the same office premises but they did not utilize the office space. The assessee plans to .....

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ls), in which he reiterated the findings as given in the assessment order. The rejoinder to the Remand Report was filed by the assessee. After considering the submission of the assessee, the learned CIT (Appeals) concluded that there was arrangement of bifurcation of rental expenses among the three companies though the other companies have not paid their part of rental expenses. He was in agreement with the Assessing Officer in disdallowing 60% of rental expenses. 23. Against this, t .....

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d CIT (Appeals), we see that he has given his findings at page 15, para 7.5 as under : 6.5 After considering the facts of the case and the submission, I referred to the provisions of section 37(1) of the Act. The section 37(1) is a residuary section which provides for general deduction. In order to claim deduction under this section one of he conditions stipulated is the expense which should have been expended wholly and exclusively for the purpose of such business. Te premise for wh .....

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