DCIT 10(2)(2), MUMBAI vs. MINEX METALLURGICAL CO.LTD, MUMBAI

Assessee by : Paresh Shaparia ,Ld.AR Revenue by : Suman Kumar , Ld. DR सुनवाई की तारीख / : 26/10/2017 Date of Hearing घोषणा की तारीख / : 01/11 /2017 Date of Pronouncement आदेश / O R D E R Per Bench 1. The captioned appeals by revenue for Assessment Years [AY] 2011-12 & 2012-13 assails the common order of the Ld. Commissioner of Income-Tax (Appeals)-17 [CIT(A)], Mumbai, Appeal No. CIT(A)-17/IT- 82/14-15 and CIT(A)-17/IT-361/14-15 dated 30/10/2015. The assessment for AY 2011-12 was framed by Ld. Additional Commissioner of Income Tax, Range 8(2), Mumbai [AO] u/s 143(3) of the Income Tax ITA.No.196 &197/Mum/2016 Minex Metallurgical Co.Limited Assessment Years-2011-12 & 2012-13 Act, 1961 on 25/03/2014 whereas the assessment for AY 2012-13 was framed by Ld. Deputy Commissioner of Income Tax, Range 10(2)(2), Mumbai [AO] u/s 143(3) of the Income Tax Act,1961 on 06/02/2015. Since, common issue in involved in both the appeals, we dispose-off the same by way of this common order for the sake of convenience & brevity. First we take up AY 2011-12 where the revenue has raised following effective grounds of appeal:-

1. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) is not justified in directing the A.O to allow deduction of Rs.45,50,492/- u/s.80IA(4)(iv)(a) of the Act as claimed by the assessee by ignoring the provisions of section 80IA(5) of the Act?

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in holding that the initial year of the deduction u/s.80IA(5) is the first year of a claim being made rather than the year of commencement of business as per plain reading of the section?

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is not justified in holding that the notional brought forward losses and unabsorbed depreciation could not be adjusted against the profits of the eligible undertaking without appreciating the fact as per the provisions of section 80IA(5), while quantifying the amount of deduction u/s.80IA, it has to be presumed that the eligible business is the only source of income and therefore, losses incurred in earlier year has to be first set off and balance profit, if any, is only eligible for deduction u/s.80IA? 2.1 Facts leading to the same are that the assessee being resident corporate assessee engaged in manufacturing of Ferro Alloys & Cored Wire was assessed for impugned AY u/s 143(3) on 25/03/2014 at Rs.25.75 Crores as against returned income of Rs.24.50 crores e-filed by the assessee on 29/09/2011. 2.2 The assessee company was engaged in the business of generation of power through its windmill plant and opted to claim deduction u/s 80IA against the same for the first time during AY 2009-10. The impugned AY was third year of claiming deduction u/s 80IA where the assessee claimed a deduction of Rs.45.50 crores u/s 80IA. It was noted that the windmill was installed in AY 2006-07 where the assessee claimed ITA.No.196 &197/Mum/2016 Minex Metallurgical Co.Limited Assessment Years-2011-12 & 2012-13 depreciation @100% on windmill and incurred losses of Rs.34.18 crores. The assessee suffered similar losses of Rs.1.87 crores & Rs.1.41 Lacs in AY 2007-08 & 2008-09 also. All these losses were set off against normal business income earned by assessee in those years. The Ld. AO opined that, in terms of provisions of Section 80IA(5), earlier years losses had to be first brought forward notionally and adjusted from income of the eligible undertaking before computing deduction u/s 80IA. The income, computed in this manner, resulted into losses from eligible undertaking and therefore, Ld. AO concluded that the assessee was not eligible to claim deduction u/s 80IA in the impugned AY.

3. Aggrieved, the assessee contested the same before Ld. CIT(A) vide impugned order dated 30/10/2015 where the assessee contended that the ‘initial Assessment Year’ under the provisions of Section 80IA would be the first year of claiming deduction by the assessee and not the first year of commencement of operations and therefore, earlier years losses which had already been adjusted from business income of those years were not required to be notionally brought forward. The Ld. CIT(A) reversed the stand of Ld. AO upon noticing that the issue stood squarely covered in assessee’s favor by the order of Tribunal for AY 2009-10. Aggrieved, the revenue is in further appeal before us.

ITA.No.196 &197/Mum/2016 Minex Metallurgical Co.Limited Assessment Years-2011-12 & 2012-13 5. Heard and perused relevant material on record including cited judicial pronouncements. We find that Tribunal in dated 28/03/2014 for AY 2009-10 & ITA No.3308/M/2014 dated 01/06/2016 for AY 2010-11 has decided the issue in assessee’s favor. Further, the revenue contested the order of the Tribunal for AY 2009-10 before Hon’ble Bombay High Court in ITA No. 76 of 2015 dated 17/07/2017 where the Hon’ble court dismissed the appeal in the following manner:- 2] Mr. Pinto, the learned counsel for the Appellant submits that the Tribunal was not correct in holding that the “Initial Assessment Year” for the deduction under Section 80IA(5) of the Income Tax Act, 1961 (for short “the Act”) is the first year of claim being made rather than the year of commencement of business. The plain reading of the section does not warrant the interpretation made by the Tribunal. As such, said deduction could not have been allowed. In Income Tax Appeal No. 707 of 2014 under order dated 14th June, 2017, we 3] have held that when the Assessee exercise the option, the only losses of the years beginning from the initial Assessment Year alone are to be brought forward and no losses of earlier years which is already set off against the income of the Assessee. Once the set-off takes place in earlier years against the other income of the Assessee, the revenue cannot rework the set-off amount notionally. It has been held that the first year is the, ‘First Year of the Assessment’ and not the commencement of the business for the purpose of Section 80IA of the Act. 4] In the light of the above, no substantial question of law arises. The appeal as such is dismissed. No costs. Similar stand has already been reiterated by CBDT vide circular No.1/2016 [F.NO.200/31/2015-ITA-I], dated 15/02/2016. Respectfully following the binding judicial precedent, we upheld the stand of Ld. CIT(A) and no hesitation in dismissing revenue’s appeal.