TMI Blog2020 (12) TMI 467X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 40(a)(ii). Deduction u/s.80IA(5) - wind mills located at Sangli and Dhule - HELD THAT:- In the case of Velayudhaswamy Spinning Mills (P) Ltd. [ 2010 (3) TMI 860 - MADRAS HIGH COURT] and held that the initial assessment year in respect to claim deduction u/s.80IA of the Act would mean the first year opted for by the assessee for claiming such deduction and is allowable for 10 years from the initial assessment year chosen by the assessee out of the 15 years beginning from the year in which undertaking commences the operations. It is settled law with regard to the claim of deduction u/s.80IA of the Act, initial assessment year to be considered would be the year in which the assessee first exercises his option to claim deduction u/s.80IA of the Act. - ITA No. 1578/PUN/2017, ITA No. 1790/PUN/2017 - - - Dated:- 10-12-2020 - Shri R.S. Syal, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee : Shri Sharad Shah For the Revenue : Shri S.P Walimbe ORDER PER PARTHA SARATHI CHAUDHURY, JM: These cross appeals preferred by the assessee and Revenue emanates from the common order of the Ld. CIT(Appeals)-6, Pune dated 01.04.2017 for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(Appeals) did not find favour with the arguments put forth by the assessee in this regard and neither the Ld. CIT(Appeals) agreed on the applicability of the Hon ble Bombay High Court decision in the case of Gopal Purohit (supra.) and upheld the disallowance made by the Assessing Officer in treating the gains from the short term transactions in share as business income . 7. At the time of hearing before us, the Ld. AR of the assessee submitted that in own case of the assessee for just the preceding assessment year 2010-11, the Pune Bench of the Tribunal in ITA No.83/PUN/2015 ITA No.96/PUN/2015 for the assessment year 2010-11 dated 22.09.2017 had adjudicated this issue and had decided the ground in favour of the assessee placing reliance on the decision of the Hon ble Bombay High Court in the case of Gopal Purohit (supra.) 8. The Ld. DR submitted that the facts are identical in this year also as that was in the preceding assessment year 2010-11. 9. Having heard the parties herein, going through the relevant documents on records placed before us and the judicial pronouncements on this issue, we find that there is a categorical findings given by the Pune Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Bombay High Court in the case of Sesa Goa Limited Vs. The Joint Commissioner of Income Tax, Tax Appeal No.17 of 2013 wherein it has been observed and opined by the Hon ble Bombay High Court as follows: 22. Applying to the aforesaid principles, we find that the legislature, in Section 40(a)(ii) has provided that any rate or tax levied on profits and gains of business or profession shall not be deducted in computing the income chargeable under the head profits and gains of business or profession . There is no reference to any cess . Obviously therefore, there is no scope to accept Ms. Linhares s contention that cess being in the nature of a Tax is equally not deductable in computing the income chargeable under the head profits and gains of business or profession . Acceptance of such a contention will amount to reading something in the text of the provision which is not to be found in the text of the provision in Section 40(a)(ii) of the IT Act. 23. If the legislature intended to prohibit the deduction of amounts paid by an Assessee towards say, education cess or any other cess , then the legislature could have easily included reference to cess i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the considered opinion that the view taken by the tribunal on issue no.3 is required to be reversed and the said issue is answered in favour of the assessee. From the above, it is evident that education Cess, which is not disallowable item, on its payment, the cess is an allowable expenditure as per provision of section 40(a)(ii) of the Act. Considering the settled nature of the issue as per the ratio laid down in the above referred case by the Hon ble High Court of Judicature for Rajasthan Bench at Jaipur, ground of Cross objection No.4 is allowed. That therefore, from the legal perspective, the issue of education cess is an allowable expenditure as per provisions of Section 40(a)(ii) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) and placing reliance on the decision of the Hon ble Bombay High Court (supra.), we allow the additional ground of appeal raised by the assessee. 15. In the result, appeal of the assessee in ITA No.1578/PUN/2017 is partly allowed. 16. Now, we shall take up Revenue s appeal in ITA No.1790/PUN/2017 for the assessment year 2011-12 for adjudication. ITA No.1790/PUN/2017 (By Revenue) A.Y.2011-12 17. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s.80IA of the Act in respect of wind mills located at Sangli and Dhule amounting to ₹ 92,92,150/- and 65,44,763/- respectively. The Assessing Officer holding that the assessee had ignored the provisions of section 80IA(5) of the Act and reworked the eligibility of deduction u/s.80IA in respect of each of these units treating the date of commencement of the wind mill as the initial assessment year. The Assessing Officer relied on the decision of Special Bench of ITAT in the case of ACIT Vs. Goldmine Shares and Finance Ltd. in ITA No.116 TTJ (Ahmadabad) 705 for the proposition that the initial year means the year in which the manufacture or production or other activity begins. The assessee had placed reliance vide submitting CBDT Circular No.1/2016 dated 15.02.2016 that the Board had accepted the decision of the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT reported in 38 DTR 57. The Board has clarified through the Circular that the initial assessment year as mentioned in Section 80IA(5) of the Act would mean the first year opted for by the assessee for claiming deduction u/s.80IA. The deduction is allowable for 10 years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax reported in (2008) 118 TTJ (Pune) 68. The Assessing Officer however relying upon Special Bench decision of Ahmedabad Tribunal reported in the case of ACIT Vs. Goldmine Shares Finance (P) Ltd. reported in 116 TTJ (Ahmedabad) 705, disallowed the claim of the assessee. While doing so, the Assessing Officer also held that initial assessment year has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. The Assessing Officer held that in the current section 80IA(5), there is no option given to the assessee to choose initial assessment year. 9.1 The matter was carried before first appellate authority, wherein the various factual and legal contentions were raised on behalf of assessee and having considered the same, the CIT(A) had allowed the claim of the assessee on both accounts. The same has been opposed before us on behalf of Revenue, inter alia, submitted that the CIT(A) was not justified in holding that for the purpose of Section 80IA the year in which the assessee chooses to claim deduction has to be treated as initial assessment year. The CIT(A) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment years. When the assessee exercise option, the only losses of the years beginning from initial A.Y. 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 is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring 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 is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created. 27. Thus, the Hon'ble Madras High Court has clearly held that where the depreciation and loss of earlier assessment years have already been set off against other business income of those assessment years, there is no need for notionally carrying forward and setting off of the same depreciation and loss in computing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any sustainable decisions in faovur of the Revenue, we are of the opinion that the order of the CIT(A) is fair and reasonable and it does not call for any interference. All the 3 grounds raised by the Revenue are accordingly dismissed. 22. Therefore, this issue was answered in favour of the assessee and in this decision also, the Tribunal had relied on the decision of the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (supra.) and held that the initial assessment year in respect to claim deduction u/s.80IA of the Act would mean the first year opted for by the assessee for claiming such deduction and is allowable for 10 years from the initial assessment year chosen by the assessee out of the 15 years beginning from the year in which undertaking commences the operations. We further find the Hon ble Bombay High Court in the case of CIT Vs. Hercules Hoists Ltd. in ITA No.707 of 2014 reported in 2017 99 CCH0347 ( Mum) HC had followed the decision of the Hon ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT (supra.) and allowed the issue in favour of the assessee and also held that the said decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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