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Income Tax Appellate Tribunal, “G”
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
आदेश / O R D E R
Per Sandeep Gosain, Judicial Member:
The present Appeal filed by the revenue is against the order of Commissioner of Income Tax (Appeals)-16, Mumbai 2 Empilon Fabrics Pvt. Ltd. dated 04.03.15 for AY 2010-11 on the grounds mentioned herein below:- I) "Whether on the facts and in the circumstances of the case and in law, the Ld. C/T(A) erred in allowing deduction us 80/A thereby ignoring the non-obstante provisions of Section 801A(5) according to which the assessee is not eligible for deduction since he has carry forward losses of the eligible business." ii) "Whether and in the circumstances of the case, the Ld. CIT-(A) erred in ignoring the judgement of the Hon'ble ITAT Mumbai in the case of Pidilite Industries Limited (ITA No. 33551M12009 dated 10th June 2011) whose ratio-decidendi is totally applicable to the facts of the present case." iii) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the disallowance of deduction made by the AO after applying provisions of section 801A(5) by placing reliance on the judgement of Velayudhaswamy spinning Mills (P) Ltd. thereby ignoring the fact that in the present case the assessee company also has other sources of income from The appellant prays that the order of the CIT(A) on the above ground above set aside and that of the A,O. be restored.
The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
As per the facts of the present case, the assessee company has set up a wind mill at village Navadra of taluka Kalyanpur, Distt-Jamnagar, Gujarat and has shown receipts of Rs. 61,87,740/-. The assessee had claimed deduction u/s 80IA amounting to Rs. 52,88,366/-. The AO was of the view that since the wind mill project was started in AY 2006-07 and the assessee has claimed deduction u/s 80IA(4)(iv)(a) for the first time in AY 2010-11. The AO disallowed the deduction u/s 80IA by applying the provisions of 80IA(v) by calculating the profit on wind mill business starting from the year in which said wind mill was set up and not from the initial assessment year in which the deduction have been claimed for the first time.
Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties allowed the appeal of the assessee. Now before us, the revenue has preferred the appeal by raising the above grounds.
Ground No. 1 to 3. 3. All the grounds raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in allowing deduction u/s 80IA to the assessee, therefore we thought it fit to dispose of the same thorough this common order.
4. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 2.1 to 2.3 of its order. The operative portion of the order of Ld. Vide grounds of appeal no. 4 to 10 the action of the AO of disallowing the deduction u/s 80IA by applying the provisions of section 801A(v) by calculating the profits on wind mill business starting from the year in which said wind mill was setup and not from the initial assessment year in which the deduction has been claimed for the first time, has been challenged by the appellant. The AO has relied upon the decision of tribunal in the case of ACIT vs Gold Mine Shares and Finance 116 TTJ 705 for doing so. According to the A/R of the appellant the Madras High Court in the case of Velayudhaswamy Spg. Mills (P.) Ltd. v. Asstt. CIT [20121 340 ITR 477/21 taxmann.com 95 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 the same depreciation and loss in computing the quantum of deduction available under section 80-IA. The Court has held further that the year of commencement alone need not be the 'initial year', but depending upon the facts of the 6 Empilon Fabrics Pvt. Ltd. case and the option exercised by the assessee, the year of claim also can be considered as 'initial assessment year'. The above said case law has been followed by different benches of the Hon'ble ITAT. Recently Mumbai Bench 'E' in the case of Shevie Exports 33 taxmann.com 446 held as under:- "Section 80-IA, read with section 263, of the Income- tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings [Computation of deduction] - Assessment year 2008-09 - Whether in terms of provisions of section 80-IA(5), it is only loss incurred in initial year that has to be carried forward and adjusted against profits of subsequent assessment years for purpose of computing amount of deduction - Held, yes - Whether option of choosing initial assessment year is wholly upon assessee in post amendment period i.e. after 1-4-2000 by virtue of section 80-IA(2) - Held, yes - Whether loss incurred prior to initial assessment year is not required to be notionally carried forward and adjusted within meaning of section 80-IA(5) so as to disallow a part of deduction claimed - Held, yes [Paras 10, 12 & 13] [In favour of assesseel" The Jurisdictional bench of the ITAT while dealing with the matter of 263 invoked by CIT held that:-
7 Empilon Fabrics Pvt. Ltd. "Moreover, the claim of deduction under section 80-IA was based on a possible legal view which has been allowed by the Assessing Officer, therefore, it cannot be held that the same is erroneous insofar as it is prejudicial to the interests of the revenue. Thus on this count, there was no reason to uphold the cancellation of assessment order under section 263 on the ground that it is erroneous insofar as it is prejudicial to the interests of Revenue. Consequently, the impugned order passed under section 263 by the Commissioner is set aside and the assessment order passed by the Assessing Officer is upheld. [Para 16]" Respectfully following the order of the jurisdictional bench, the AO is directed to re-compute the deduction u/ s 801A by adopting the year in which the deduction has been claimed for the first time as initial assessment year and the grounds of appeal are allowed.
5. After having gone through the facts of the present case as well as considering the orders passed by revenue authorities and hearing the parties at length, we find that Ld. CIT(A) while deciding these grounds have taken into consideration the facts of the present case as well as judgments passed by different courts. We noticed that AO while disallowing the deduction u/s 80IA 8 Empilon Fabrics Pvt. Ltd. had relied upon the decision of Hon’ble Tribunal in the case of ACIT vrs. Gold Mine Shares and Finance 116 TTJ 705 for doing so. However, Ld. CIT(A) after appreciating the facts had relied upon the judgment passed by Hon’ble Madras High Court in the case of Velayudhaswamy Spg. Mills (P.) Ltd. v. Asstt. CIT [20121 340 ITR 477/21 taxmann.com 95 wherein it has been 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 the same depreciation and loss in computing the quantum of deduction available under section 80- IA. The Court has held further that the year of commencement alone need not be the 'initial year'. The year of claim also can be considered as 'initial assessment year'. The said judgment has also been followed by different benches of the Hon'ble ITAT. Apart from above, Ld. AR has also drawn our attention to paper book page no. 4 which relates to Circular nO. 1/2016 issued by CBDT dated 15.02.16 wherein it has been clearly held that the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s 80IA. We have also 9 I.T.A. No. 3981/Mum/2017 Empilon Fabrics Pvt. Ltd. noticed that in the above circular, a direction has been given to the AO to allow deduction u/s 80IA and 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 sub section (5) of that section. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these grounds raised
by the revenue stands dismissed.
6. In the net result, the appeal filed by the revenue stands dismissed. Order pronounced in the open court on 1st Nov., 2017 Sd/- Sd/- (Shamim Yahya) (Sandeep Gosain) लेखासदस्य / Accountant Member न्याययकसदस्य / Judicial Member मुंबई Mumbai;यदनांकDated : 01.11.2017 Sr.PS. Dhananjay