TMI Blog2016 (6) TMI 290X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law:- 1. Whether, on the facts and in the circumstances of the case and in law, the Honourable Income Tax Appellate Tribunal is correctin law to hold that the assessee is entitled for deduction under section 80IA of Income Tax Act? 2. Whether, for the purpose of section 80IA(5) of the Act, the initial assessment year would only mean the year of claim and not the year of commencement of operations of an undertaking? 3. Whether, for the purpose of computing deduction under seciton 80IA of the Act, the losses of the year prior to the initial year, which had already been absorbed cannot be brought back notionally and adjusted against the income of the initial and subsequent assessment years? 2. The core issue raised in this Tax Case (Appeal) is whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the respondent/assessee is entitled to claim deduction under Section 80-IA of the Income Tax Act. 3. Though it is brought to the notice of this Court that the issue involved in this appeal has already been decided by this Court in the decision reported in Velayudhaswamy Spinning Mills Vs Asst. CIT [2012) 340 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 80-I brought forward losses and unabsorbed depreciation of the new industry need not be taken into consideration once they have been set off from other sources of income earlier. In the present case, we are concerned with the provision of section 80-IA. The said provision was introduced by the Finance Act, 1999, with effect from April 1, 2000. The provisions of sections 80-I and 80-IA are also more or less identically worded. Sections 80-I and 80-IA come in Chapter VI-A of the Income-tax Act. Chapter VI-A deals with deductions to be made in computing total income. There are two tax incentives contemplated in Chapter VI-A. One is investment incentive and the other one is profit-linked investment. Chapter VI-A was introduced by the Finance Act, 1965, with effect from April 1, 1965, and it consists of four headings. They are A, B, C and D. Heading A is general and it also contains definition. It consists of sections 80A, 80AA, 80AB, 80AC and 80B. Section 80AB deals with Deductions to be made with reference to the income included in the gross total income , which reads as follows : Where any deduction is required to be made or allowed under any section included in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral provisions. The Supreme Court further observed in the said judgment that sub-section (5) of section 80-IA provides for manner of computation of profits of an eligible business. Accordingly such profits are to be computed as if such eligible business is the only source of income of the assessee. Section 80-IA reads as follows : 80-IA. (1) 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) (such business being hereinafter referred to as the eligible business) there shall, in accordance with and subject to 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-section (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 telecommunica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is given to eligible business and the same is defined in sub-section (4). Sub-section (2) provides option to the assessee 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 not defined under the provisions. It is to be noted that initial assessment year employed in sub-section (5) is different from the words beginning from the year referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under : (1) It starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored ; (2) It is for the purpose of determining the quantum of deduction ; (3) For the assessment year immediately succeeding the initial assessment year ; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Raj) ; [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-I and held as follows (page 314 of 271 ITR) : Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 1984-85, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income-tax (Appeals), 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 previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all required that los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Revenue. We are, therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of other business cannot be notionally brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5). Under these circumstances, we set aside the order of the Tribunal and answer all the questions in favour of the appellant/assessee and against the Revenue in Tax Case Nos. 909 and 940 of 2009 respectively. Accordingly, tax cases are allowed. 7. It is relevant to note that as against the above-said decision rendered by this Court, the Revenue has filed appeals before the Supreme Court, which are stated to be pending, in which, only notice has been ordered and they are not yet admitted by the Supreme Court. 8. The facts in the present case are also identical to the above-said decision of this Court that the business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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