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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SMT ASHA VIJAYARAGHAVAN
Per Asha Vijayaraghavan, Judicial Member
This is a departmental appeal. M/s. Khivraj Motors filed its return of income declaring income at Rs. 1,92,92,870/-. The Assessing Officer passed the assessment order by determining the total taxable income at Rs.3,09,83,810/- by disallowing the deduction under section 80IA amounting to Rs.1,16,90,948/- and disallowing 20% of petrol, marketing sales promotion and telephone expenditure.
Aggrieved, the assessee preferred appeal before the CIT(A). The learned counsel for the assessee pointed out before the AO the decision of the Hon’ble Madras High Court in the case of M/s. Velayudhaswamy Spinning Mills (P) Ltd., Vs. ACIT 231 CTR 368, in support of the claim of & 1052/Bang/2015 Page 2 of 5 deduction under section 80IA. But the AO dismissed the Assessee’s contention.
On further appeal before CIT(A) it was submitted that there is no dispute that the windmills fulfilled the requisite conditions prescribed in the Act, and the profits of the windmills were eligible for deduction u/s 80IA and that there is also no dispute that the losses in the wind mill division incurred during A. Yrs. 2005-06 to 2009-10 were adjusted and set off against other business income of the appellant in such assessment years. The details were filed by the appellant as under: Assessment Year Losses (Rs.) 2005-2006 1,48,60,154.20 2006-2007 2,89,29,020.00 2007-2008 1,28,14,240.20 2008-2009 2,15,76,365.20 2009-2010 1,67,50,540.60 Total 9,49,30,319.00
The CIT (A) held that the decision in the case of M/s. Velayudhaswamy Spinning Mills (P) Ltd., (Supra) 340 ITR 477 which has been upheld by the Hon’ble Karnataka High Court in the case of CIT Vs. Shri. Anil H. Lad 102 DTR Karnataka 241 would apply to the present case. The CIT (A) held that when the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Further looking forward to a period of ten years from the initial assessment is contemplated and 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 & 1052/Bang/2015 Page 3 of 5 eligible business. The CIT(A) held that 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. Aggrieved with the orders of the CIT (A) the department is in appeal before us and has filed the following grounds of appeal:
1. The order of the CIT(A) is opposed to law and the facts and circumstances of the case.
2. The CIT(A) erred in directing to allow the assessee’s claim of deduction of Rs. 1,16,90,948/- u/s 80IA in A.Y. 2010-11 being the initial assessment year by relying on the order of the Madras High Court in the case of M/s. Velayudhaswamy Spinning Mills (P) Ltd., and the decision of Jurisdictional High Court in the case of Shri. Anil H. Lad and the decision ITAT, Mumbai in the case of Excel Cropcare Ltd without appreciating that the relied upon orders of the High Courts has not been accepted and the SLP has been preferred against the said order. 3. The CIT(A) was not justified in allowing the assessee’s appeal without appreciating that the deduction u/s 80IA is on the profits of “eligible business” and that the provisions of Section 81IA have to be understood along with the provisions of sections 80B(5) and 80AB of the IT Act, 1961. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.
& 1052/Bang/2015 Page 4 of 5 5. We find that assessment year 2010-11 is the “initial assessment year” of the claim of deduction under section 80IA for the windmill division or undertaking of the assessee, consisting of four windmills, as per the option exercised by the assessee. The profits of the undertaking shall be accordingly eligible for the said deduction for 9 more succeeding assessment years. It is only in case of loss in business of the eligible undertaking during the tax holiday period of 10 years beginning AY 2010-11 that the same can be carried forward and set off against the profits of the undertaking.
We respectfully follow the decision of the jurisdictional High Court of Karnataka in the case of CIT Vs. Shri. Anil H. Lad 102 DTR 241 and dismiss the departmental appeal. In the result, the departmental appeal is dismissed.
ITR No. 1052/Bang/2015 for the assessment year 2011-12.
The claim requested by the Assessee for deduction under section 80IA is to be allowed, as the claim is for the second year under the provisions of section 80IA. Therefore, the departmental appeal is dismissed.
In the result, the departmental appeal for both years are dismissed.
Pronounced in the open court on this 19th day of October, 2016.