DEPUTY COMMISSIONER OF INCOME-TAX vs. K.J. INFRASTRUCTURE PROJECTS INDIA PVT. LTD.,, PUNE

The grounds raised by the Revenue in appeal are as under : “1) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in interpreting the provisions of Sec. 80IA(5) as per the decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Sipping Mills (P) Ltd. Vs. ACIT(2012) 340 ITR 477 whereas the Hon'ble Karnataka High Court in the case of Microlabs Ltd. Vs. Asstt. CIT reported in 2015 56 taxmann.com 160 (Karnataka)(2015) 230 taxmann. 647 has on a similar issue held that interpretation of the Madras High Court (Supra) as erroneous since the provisions of Sec. 80IA(5) are Non-obstante and require strict interpretation. 2) On the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the appeal of the assessee and ignoring the fact that the eligible business as per Sec. 80lA(5) had to be considered as a stand along business and the provisions of intra head Set off of losses could not be considered for the purpose of claim of deduction u/s. 80IA. 3) The order of the Ld. CIT(A) may be vacated and the Assessing Officer be restored. 4) The appellant craves leave to add, alter amend and modify any of the above grounds of appeal.”

The notice of appeal was sent to the assessee through RPAD on 30- 11-2017 for 08-01-2018. Thereafter, the appeal of assessee was adjourned to 22-03-2018. None has appeared on behalf of the assessee nor any letter of adjournment has been received from assessee’s side. Therefore, we are taking up this appeal for hearing with the assistance of ld. DR and on the basis of material available on record.

The brief facts of the case as emanating from records are : The assessee is a private limited company engaged in the business of Fabricators, Contractors, Mechanical Engineers, Agent, Sub-agent in civil engineering and industrial components. The assessee has also generating power through windmills. The assessee filed its return of income for the impugned assessment year on 30-03-2013 declaring total income of Rs.12,22,26,240/-. During the course of scrutiny assessment proceedings,

Dr. Vivek Aggarwal representing the Department vehemently supported the findings of Assessing Officer in respect of disallowance of deduction u/s. 80IA(5) of the Act. The ld. DR prayed for setting aside the findings of Commissioner of Income Tax (Appeals) and restoring the disallowance of deduction u/s. 80IA(5) of the Act.

We have heard the submissions made by ld. DR and have perused the orders of authorities below. The Revenue in appeal has raised solitary issue of assessee’s eligibility for claiming deduction u/s. 80IA(5) of the Act. Undisputedly, the assessee’s claim of deduction u/s. 80IA in the assessment years 2009-10 and 2010-11 was accepted by the Revenue. In the assessment year under appeal, the Assessing Officer disallowed deduction on the ground that before claiming deduction, the assessee has not considered the notional brought forward losses on the windmills. We do not concur with the proposition of Assessing Officer for disallowing assessee’s claim of deduction u/s. 80IA of the Act. The Commissioner of Income Tax (Appeals) has allowed the claim of assessee by following the order of Co-ordinate Bench of Tribunal in the case of Advik Hi Tech (P.) Ltd. Vs. Additional Commissioner of Income Tax (supra). The relevant extract of the findings of Commissioner of Income Tax (Appeals) are as under : “11. I have considered the facts of the case and the law as decided by various authorities. The special bench decision in the case of Goldmine Shares is not followed by the jurisdictional ITAT Pune bench. In its recent decision in the case of Advik Hi Tech Pune Ltd (67 SOT 158) (51 Taxmann.com 245), the honourable tribunal held as under: “9. The Assessing Officer had disallowed the claim of deduction u/s. 80IA(4)(iv)(a) of the I. T. Act amounting to Rs.43,93,235/-. The Assessing Officer also treated Sangli and Dhule units as single one having same eligible business. The claim was made in respect of wind mill located at Sangli. The issue pertains to losses of the undertaking before the initial year already adjusted against other income. During the course of the assessment proceedings, the assessee relied upon various decisions including Pune Tribunal's decision in the case of Poonawala Finvest & Agro (P.) Ltd. v. Asstt. CIT [2009] 27 SOT 47 (URO). The Assessing Officer however relying upon Special 8ench decision of Ahmedabad Tribunal reported in the case of Asstt. CIT v. Goldmine Shares & Finance (P.) Ltd. [2008] 113 ITD 209 (58), disallowed the claim of the assessee. While doing so, the Assessing Officer also held that initial assessment year has to be considered as the year in which power generation commences and not the year in which it chooses to make claim for deduction for the first time. The Assessing Officer held that the current

Thus, the Hon'ble Madras High Court has 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 of the same depreciation and loss in computing the quantum of deduction available u/s. 80I. The Hon‟ble Court has held further that the year of commencement alone need not be the „initial year‟, but depending upon the facts of the case and the option exercised by the assessee, the year of claim also can be considered as “initial assessment year”. The court has also examined the issue from a different legal angle and held that the proposition argued by the Revenue is not compatible with the scheme of gross total income conceptualized in the IT Act especially in the light of section 80AB which are all relevant while considering the deduction u/s. 80IA which is falling under Chapter VIA of the I. T. Act, 1961. Where the earlier depreciation and losses have already been set off, those loss and depreciation do not go to reduce the gross total income of an assessee within the meaning of sec.80AB and therefore, bringing the notional concept of carrying forward and set off will be contrary to the scheme of sec. 80AB and concept of gross total income.

Now, it is clear as we find that this issue is squarely covered by the above discussed judgement of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. v. ACIT (3B DTR 57). Where such an overriding judgement of the constitutional court is governing the issue, we are not permitted to rely on the decision of the Special Bench of the Ahmedabad Tribunal.

Therefore, following the above judgment of the Hon‟ble High Court of Madras, we accept the contention of the assessee and reverse the order of the Commissioner of Income-tax(A) on this point an direct the Assessing authority to grant deduction to the assessee u/s. 80IA for the quantum claimed by the assessee without diluting the same by the notional deduction of earlier loss and depreciation.‟

We do not find any infirmity in the order of First Appellate Authority. Accordingly, the same is upheld and the appeal of Revenue is dismissed.

In the result, appeal of the Revenue is dismissed.