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TMI Blog2016 (6) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rule 46A of the I.T. Rules. 3. The assessee is engaged in the business of manufacturing and job work in electronically engraved copper rollers and trading of pipes, circles etc. 4. While scrutinizing the return of income, the A.O. found that the assessee has claimed deduction u/s. 80IA of the Act at Rs. 4,77,722/-. The income was generated on account of Wind Mill business. The A.O. was of the firm belief that the profit from the eligible business for the purpose of determination of quantum of deduction u/s. 80IA has to be computed after deduction of notional brought forward losses and depreciation of eligible business though they might have been allowed set off against other income in earlier years. The A.O. was of the firm belief that the assessee is not eligible for claim of deduction u/s. 80IA of the Act and accordingly denied the claim of deduction of Rs. 48,77,722/-. 5. On further probe, the A.O. found that the assessee has claimed an expenditure of Rs. 10,00,000/- under the head quantity discount. The A.O. was of the firm belief that this claim relates to the prior period expenditure and, therefore, disallowed the same and completed the assessment. 6. Assessee car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year and every subsequent assessment years when the assessee exercises the option, only losses 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 to a period of ten years from the initial assessment year is contemplated. The Hon'ble Court has further held that the revenue cannot look backward to find out whether there was any losses of earlier years and bring forward the same notionally even though it were set off against other income of the assessee. In the case of the appellant, there is no dispute that the losses incurred in earlier years were already set off and adjusted against the other income in that year. The claim of deduction u/s. 80IA has been made for the first time in the current assessment year and, therefore, the findings of the Hon'ble High Court are squarely applicable to the present set of facts. For the sake of reference, relevant paras of the order which contains the provisions of section 80IA and the finding of the Hon'ble Court are reproduced hereunder: " 16. Section 80-IA reads as follows : "80-IA. (1) Where the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." 17. From a reading of sub-section (1),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 computing the total income of the assessee, a deduction of an amount equal to 100 percent, of the profits and gains derived from such business for ten consecutive assessment years. Deduction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 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 80-1, which is the corresponding provision of subsection (5) of section 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 v. Mewar Oil and General Mills Ltd. (No. 1) [2004] 271 ITR311 (Raj); [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-1 and held as follows (page 314 of 271ITR): "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 fosses of 1983-84, which could be set off against the income of the current assessment year 1984-85, the recomp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is accordingly allowed. 7. Aggrieved by this, the revenue is before us. 8. The ld. D.R. could not bring any distinguishing decision in favour of the revenue; ld. counsel for the assessee reiterated what has been stated before the lower authorities. 9. We have given a thoughtful consideration to the facts in issues and the orders of the authorities below. We find that the facts of the case in hand are identical to the facts which were before the Hon'ble High Court of Madras in the case of Velayuddhaswamy Spinning Mills Pvt. Ltd. We find that the First Appellate Authority has drawn support from the decision of the Hon'ble Madras High Court and has rightly held the assessee eligible for the claim of deduction u/s. 80IA of the Act. We, therefore, decline to interfere. Ground no. 1 is accordingly dismissed. 10. In so far as the addition of Rs. 10,00,000/- considered as prior period expenditure is concerned, we find that though the quantity discount was given during the year under consideration but were on account of sales made in earlier years. In our considered opinion, this cannot be considered as a prior period expenditure since the expenditure has been incurred during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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