TMI Blog2017 (12) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA - Held that:- The impugned forex gains earned by the assessee were assessable as Business Income and the same were not eligible for deduction u/s 80-IA. Resultantly, Ground No. 2 of assessee’s appeal stands partly allowed. The Ld. AO is directed to re-compute assessed income of the assessee under normal provisions as well as under Section 115JB, being consequential in nature, in terms of our above order. - I.T.A. No. 1031/Mum/2015 - - - Dated:- 4-10-2017 - Shri Mahavir Singh, JM And Shri Manoj Kumar Aggarwal, AM Assessee by : Lal Chand Choudhary, Ld. AR Revenue by : V. Justein, Sr. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by assessee for Assessment Year [AY] 2010-11 assails the order of the Ld. Commissioner of Income-Tax (Appeals)- 7 [CIT(A)], Mumbai, Appeal No.CIT(A)-7/DCIT-3(3)/IT-41/13- 14 dated 14/11/2014 in denying deduction u/s 80-IA. The assessment was framed by Ld. Deputy Commissioner of Income Tax [AO], Circle 3(3), Mumbai on 27/02/2013. The Grounds of appeal raised by the assessee reads as follows:- 1. The CIT(A) erred in confirming the order of the Assessing Officer denying the deduction of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd adjusted from the income of the eligible unit in impugned AY. Since, net cumulative losses of first 5 years were ₹ 4.75 crores and the income earned by the assessee from eligible unit in the impugned AY was ₹ 1.34 crores and therefore, no deduction could be granted to the assessee u/s 80-IA. 2.3 The assessee contended that Section 80-IA(5) did not apply to depreciation or loss related to a period prior to initial AY opted by the assessee and already adjusted in earlier years. The provisions mandated only the loss or depreciation for the initial AY and for any subsequent years and did not allow moving backward. In nutshell, the assessee contended that losses of years earlier to initial AY for which a claim u/s 80-IA has been made and which had already been absorbed against the profits of other business in earlier years need not be notionally brought forward and adjusted from the income of the eligible unit. Reliance was placed on the judgment of Hon ble Madras High court rendered in Velayudhaswamy Spinning Mills Pvt. Ltd. Vs ACIT [231 CTR 368]. 2.4 However, placing reliance on several judicial pronouncements, Ld. AO concluded that initial year for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for deduction of an amount equal to 100 % of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80-IA further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Sub-section (5) of section 80-IA further provides as under- Notwithstanding 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 assessment year and to every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned. Further, Hon ble Karnataka High Court in the cited case has held that where depreciation and losses of earlier assessment years have already been set off in those years and subsequently deduction u/s 80-IA is claimed by the assessee, there is no need to notionally carry forward the same and set off from the income of the current year. Same view has been taken in other judicial pronouncements. Respectfully following the same, we hold that there was no need to notionally carry forward the earlier year s losses / depreciation to impugned AY before deduction could be granted to the assessee. Resultantly, the first ground of assessee s appeal stands allowed. 6. In Ground No. 2, Ld. AR, by alternative submissions, has pressed for deduction u/s 80-IA against foreign exchange gain of ₹ 23.10 Lacs earned by the assessee in the eligible unit. 7. The Ld. AR, first of all, explained that the assessee obtained certain term loan facility from Robo Bank, Singapore vide credit facilities offer letter dated 31/03/2005 for the purpose of setting up of Wind Farm Project which constitute capital assets in the hands of the assessee. The outstanding term loan is re-casted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are assessable as Business income only and also in view of rule of consistency. The revenue in all the other years has accepted the same under the head Business Income. Undoubtedly, the principles of res judicata do not apply to Income Tax proceedings, yet rule of consistency demands that there being no change in facts or circumstances, the revenue is debarred from shifting stands without any cogent reasons as held by Hon ble Apex Court in Radhasoami Satsang vs. CIT [193 ITR 321]. On the basis of above, we conclude that the foreign gains were assessable under the head Business Income only. 12. Proceeding further, let us first examine the assessee s contention that resultant gain was not chargeable to tax at all, being on capital account. At the outset, the issue in hand is not covered by the provisions of Section 43A since the asset has not been acquired from outside India but only a term loan has been taken by the assessee toward setting up the project and therefore, Section 43A has no applicability. This contention is well supported by the decision of Hon ble Apex Court rendered in CIT Vs. Tata Iron Steel Co. Ltd. [1998 231 ITR 285] where it has been held that cost of an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x gains arose directly on export sales transactions which were eligible for deduction u/s 80-IA. Similarly, the judgment of Hon ble Bombay High Court rendered in CIT Vs. Xylon Holdings Private Limited [ITA No. 3704 of 2010 dated 13/09/2012] dealt with a situation where there was a remission / cessation of liability u/s 41(1) by way of waiver of loan against capital asset. This decision placed reliance on the decision of same court rendered in Mahindra Mahindra Ltd. Vs. CIT [128 Taxman 394]. Similarly, the decision of Hon ble Delhi High Court rendered in Logitronix (P) Ltd. Vs. CIT [197 Taxman 394] dealt with a situation where there was waiver of loan taken for acquiring capital asset. 17. To sum up, we conclude that impugned forex gains earned by the assessee were assessable as Business Income and the same were not eligible for deduction u/s 80-IA. Resultantly, Ground No. 2 of assessee s appeal stands partly allowed. The Ld. AO is directed to re-compute assessed income of the assessee under normal provisions as well as under Section 115JB, being consequential in nature, in terms of our above order. 18. In nutshell, the appeal of the assessee stands partly allowed in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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