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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-3, Pune dated 11-07-2016 for the assessment year 2012-13. The solitary issue raised by the Revenue in appeal is against allowing assessee’s claim of deduction u/s. 80IA of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) amounting to Rs.1,23,14,806/-.
2 ITA No. 2421/PUN/2016, A.Y. 2012-13
The brief facts of the case as emanating from records are : The assessee is engaged in trading of drugs, medicines and generation of power through wind mill. In the return of income for assessment year under appeal, the assessee claimed deduction u/s. 80IA in respect of income from generation of power through wind mill. The Assessing Officer disallowed assessee’s claim on the ground, that the assessee has claimed set off of unabsorbed depreciation loss of Rs.2,79,06,261/- against the business profit from trading in Drugs, Medicines and general items i.e. business other than generation of power. The net profit from wind mill division earned during the period i.e. Rs.1,23,14,806/- should have been first set off against unabsorbed depreciation of wind mill. On the remaining profit, if any the assessee should have claimed deduction u/s. 80IA. Since, the unabsorbed depreciation of wind mill is much more than the profit earned, the remaining profit from wind mill division would be Nil and hence, the assessee has wrongly claimed deduction of Rs.1,23,14,806/- u/s. 80IA of the Act.
The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by placing reliance on the decision of Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax reported as 340 ITR 477 and on the decision of Pune Bench of the Tribunal in the case of Serum International Ltd. Vs. Addl. Commissioner of Income Tax in ITA Nos. 290 to 292/PN/2010 decided on 28-09-2011 allowed assessee’s claim of deduction u/s. 80IA. Against the relief granted by Commissioner of Income Tax (Appeals) to the assessee, the Department is in appeal before the Tribunal.
3 ITA No. 2421/PUN/2016, A.Y. 2012-13
Shri Shekhar Shah appearing on behalf of the assessee submitted at the outset that the issue raised in appeal by the Revenue is squarely covered by the decision of Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax (supra). The ld. AR strongly supported the findings of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeal of Revenue.
Shri Mukesh Jha representing the Department vehemently defended the action of Assessing Officer in rejecting assessee’s claim of deduction u/s. 80IA of the Act and prayed for reversing the findings of Commissioner of Income Tax (Appeals).
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The Revenue in appeal has assailed the action of Commissioner of Income Tax (Appeals) in allowing deduction u/s. 80IA amounting to Rs.1,23,14,806/- to the assessee. The stand of the Revenue is that before claiming deduction u/s. 80IA, the assessee should have set off unabsorbed depreciation from the income arising from sale of power from wind mill. In the present case we find, that the assessee has claimed set off of unabsorbed depreciation against the business profit derived from trading of drugs, medicines etc. The Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. Assistant Commissioner of Income Tax (supra) has held that loss and depreciation of the years earlier to initial assessment year which have already been absorbed against the profits of other business cannot be notionally brought forward and set off against the profits of the
4 ITA No. 2421/PUN/2016, A.Y. 2012-13
eligible business for computing the deduction u/s. 80IA of the Act. The relevant extract of the judgment reads as under : “17. From reading of sub-s. (1) of s. 80-IA, 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-s. (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 per cent 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-s. (4). Sub-s. (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 develops and begins to operate any infrastructure activity etc. Sub-s. (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-s. (5) and the same is not defined under the provisions. It is to be noted that 'initial assessment year' employed in sub-s. (5) is different from the words "beginning from the year" referred to in sub-s. (2). Important factors are to be noted in sub-s. (5) and they are as under : "(1) it starts with non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored; (2) it is for the purpose of determining the quantum of deduction; (3) for the assessment year immediately succeeding the initial assessment year; (4) it is a deeming provision; (5) fiction created that the eligible business is the only source of income; and (6) during the previous year relevant to the initial assessment year and every subsequent assessment year." 18. From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and not 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 created in sub-s. (5) does not contemplates to bring set off amount notionally. Fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created.”
The ld. DR has not brought to our notice any judgment contrary to the law laid down by the Hon’ble Madras High Court.
5 ITA No. 2421/PUN/2016, A.Y. 2012-13
Thus, in view of the aforesaid decision we do not find any infirmity in the order passed by the Commissioner of Income Tax (Appeals) in allowing assessee’s claim of deduction u/s. 80IA of the Act. Accordingly, the findings of Commissioner of Income Tax (Appeals) are upheld and the appeal of Revenue is dismissed.
In the result, the appeal of Revenue is dismissed.
Order pronounced on Wednesday, the 17th day of July, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 17th July, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-3, Pune 3. 4. The Pr. Commissioner of Income Tax-2, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune