TMI Blog2017 (10) TMI 1643X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities have grossly erred in setting off notional losses with the profit of the eligible unit in the current year. The Hon ble High Court of Madras in the case of Velayudhaswamy Spinning Mills (P) Ltd [ 2010 (3) TMI 860 - MADRAS HIGH COURT] held as under: we are therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of the 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 80IA (5) of the Act. We therefore, do not find any merits in the findings of the first appellate authority. We, accordingly, direct the Assessing Officer to allow the claim of deduction u/s 80IA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relates to confirmation of disallowance of deduction of Rs.1,24,93,596 under section 80IA(5) of the Act. 4. Briefly, stated the facts of the case are that the assessee company is engaged in the business of import of rough diamonds, manufacturing of polished diamonds and trading and selling of polished diamonds. The major turnover is export turnover. The assessee has income for generation of power through windmill. The AO noticed that the claim of deduction of Rs. 1,24,93,596 in respect of generation of power through windmill is not available as per provisions of section 80IA (5) of the Act as the loss of power unit in initial year was to be carry forward and setoff against the current year s profit of power unit. As there is no profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd loss or depreciation of power unit as it is a separate unit in the A.Y. 2008-09. Since nothing remains to be carry forward in the A.Y. 2007-08 as it was set-off against income of diamond division in earlier year, the entire income of power division for the assessment year 2008-09 is eligible for deduction. The fiction as to it is the only source of income is for the year in which the deduction under section 80IA is claimed. In a case if there is other taxable income also in this year, the carry forward loss/depreciation of the earlier years is first to be set-off against the income from windmill due to the said fiction of the section. The assessee has also placed reliance on following decisions: Velayudhaswamy Spinning Mills (P) Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Velayudhaswamy Spinning Mills (P) Ltd. (340 ITR 477) (Mad) held as under: we are therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of the 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 80IA (5) of the Act. . The facts of the case in hand are identical to the facts of the case decided by the Hon ble Madras High Court (supra). We therefore, do not find any merits in the findings of the first appellate authority. We, accordingly, direct the Assessing Officer to allow the claim of deduction under section 80IA of the Act to the assessee as claimed by it. It was further sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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