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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
PER MAHAVIR PRASAD, JM:
Both appeals have been filed at the instance of the assessee against the orders of the Commissioner of Income Tax (Appeals)-I, Baroda (‘CIT(A)’ in short) both dated 15.10.2013 arising in the assessment orders dated 28.03.2008 & & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 2 - 17.08.2009; respectively, passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 250 of the Income Tax Act, 1961 (the Act) concerning AYs. 2006-07 & 2007-08.
The Ground of appeal raised by assessee for A.Y. 2006-07 reads as under:
“1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in not allowing deduction u/s 80IA on the income of Rs.23,00,00,000/-.”
The grounds of appeal raised by assessee for A.Y. 2007-08 read as under:
“1. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in not allowing deduction u/s 80IA on the income of Rs. 39,00,00,000.
2. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in not reducing an amount of Rs.16,01,04,788 from the book profits u/s. 115JB.
3. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of AO in not considering matter relating to reduction of the amount of Rs.16,01,04,788 from the book profits u/s. 115JB.”
Issue No.1 relates to disallowance of deduction under section 80IA of the Act. The learned Counsel for the assessee submitted that there is no dispute that the Assessee has satisfied all the conditions for claiming deduction u/s 80IA of the Act. The learned AR further submitted that regarding the issue of set off of losses as per section 80IA(5) for computation of income of eligible unit, the issue of "Initial Assessment Year" is settled & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 3 - by CBDT Circular No. 1 of 2016 dated 15-02-2016. As per the Circular, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80-IA. As per CBDT Circular, AY 2006-07 would be the Initial Assessment Year since for the SLPP unit, the Assessee has claimed the deduction u/s 80IA for the first time in AY 2006-07. Therefore the requirement of setting off unabsorbed depreciation and losses shall arise from AY 2007-08 i.e. immediately succeeding the initial assessment year i.e. AY 2006-07.
4.1. Relevant portion of CBDT Circular No. 1/2016 dated 15.02.2016 is extracted below:
In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 801A. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 4 - years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 80IA in accordance with this clarification satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in subsection (5) of that section for which the Standing Counsels/D.R.s be suitably instructed.”
4.2. In reply, the Ld DR appearing for the Revenue admitted that the above Circular No.1/2016 issued by the CBDT has put to end all the issues following the judgement rendered by the High Court of Madras in the case of Velayuthasamy Spinning Mills.
We have given our thoughtful consideration on the materials placed before us the issue is now settled by the Circular No.1/2016 issued by the CBDT that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. The Circular further clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 5 - deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. Thus the Assessing Officers are directed to allow deduction u/s 80IA in accordance with this clarification and Standing Counsels/D.R.s are suitably instructed pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in subsection (5) of section 80IA of the Act.
Following this Circular the SLP filed by the department was also dismissed against High Court's ruling that loss in year earlier to initial assessment year already absorbed against profit of other business cannot be notionally brought forward and set off against profits of eligible business as no such mandate is provided in section 80-IA(5) of the IT Act reported in Assistant Commissioner of Income-tax, Tirupur -Vs- Velayudhaswamy Spinning Mills (P.) Ltd. reported in [2016] 76 taxmann.com 176 (SC). Following the same we hereby reject the Grounds of appeal filed by the Revenue and allow the claim of deduction u/s.80IA in favour of the assessee.
7. Next issue regarding disallowance of deduction of amount of Rs.16,01,04,788/- from the book profits under s.115JB of the Act. The findings of the CIT(A) is as follows:
4.2 From the above decision of Ld. CITCA) as given by him vide appeal order dated 22-05-2012 and from the fact of the case it can be seen that the issue in question were mainly the taxability of interest Income of Rs.71.01 crore u/s 115JB of the IT Act. The AO had held the entire amount of Rs.78.01 crore was appellant’s & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 6 - income both as per normal provisions and as per provisions of section 115JB of the IT Act for AY 2004-05. However, the Ld. CIT(A) has held that out of interest income of Rs. 71.01 crore, only Rs.16.01 crore should have been Included in the book profit u/s 1153B as well as In the Income chargeable to tax under normal provision of the Act. The Ld, CIT(A) has further directed the AO to tax delayed payment charges (i.e interest income) of Rs.23 crores in AY 2006-07 and delay payment charges of Rs.39.09 crores for AY 2007-08 under the normal provisions of the Act besides being included in book profit for the purpose of section 115JB of the Act. Accordingly, the AO has passed the ‘Order Giving Effect to Appeal Order of CIT(A)' dated 27-07-2012. As per direction given by Ld. CIT(A) vide his order No. CAB-I/264/08-09 dated 12-08-2010, the AO has assessed Rs.39 crore in AY 2007-08 and has given the credit of TDS of Rs.8,01,32,000/- to the appellant for such interest income. In my opinion the AO is required to give effect to the above order of C1T(A) exactly as per direction and the AO cannot travel beyond that. The AO is required to confine to the direction of Ld. CIT(A) while giving effect to his order. On perusal of above order of Ld, CIT(A), it is seen that nowhere In such order the Issue regarding allowability or disallowabiiity of deduction u/s 80IA of the Act for AY 2007-08 has been discussed. Obviously, the appellant has not raised any ground of appeal before the Ld. CIT(A) at the time of appellate proceedings in respect of above quantum addition for AY 2004-05 with regard to its claim of deduction u/s 80IA of the Act for AY 2006-07 and 2007-08. Rather the appellant has taken different stand by way of disclosing the above entire Income of Rs.71.01 crore in the revised return for AY 2004-05. Thus, it can be said that it was not the stand of appellant that above interest income of Rs.39 crores be taxed for AY 2007-08. Thus, allowability or disallowability of deduction u/s 80IA has never been a subject matter of appellate proceedings of AY 2004-05 in respect of which above appeal order dated 27-07- 2012 has been passed by the Ld. CIT(A). Thus, in my opinion the AO has correctly given effect in his ‘Order Giving Effect to Appeal Order of CIT(A)’dated 27-07-2012 for the year under consideration. Considering all these facts, the ground of appeal of the appellant is hereby dismissed.”
By a common order passed by the Tribunal in & ors. relating to A.Ys. 2003-04 & ors., dated 28.02.2022, co-ordinate Bench of this Tribunal allowed the claim of deduction under s. 80IA of the Act in favour of the assessee for earlier assessment years. Considering above, this issue is also remitting back to the AO for verification and ITA Nos. 19 & 20/Ahd/2014 (Gujarat Industrial Power Co. Ltd. ) - 7 - allowed the necessary deductions in accordance with the provisions of law.
In the result, both appeals filed by the assessee are partly 9. allowed.
This Order pronounced in Open Court on 13/04/2022
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 13/04/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।