ACIT 20(3), MUMBAI vs. RELISHAH EXPORTS, MUMBAI

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ITA 4278/MUM/2015Status: DisposedITAT Mumbai24 March 2017AY 2011-124 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that losses incurred prior to the initial assessment year chosen for claiming deduction under Section 80IA are not required to be notionally carried forward and adjusted. The Special Bench decision relied upon by the AO was not applicable due to amendments in Section 80IA.

What were the facts?

The assessee claimed a deduction under Section 80IA for its wind power undertaking, opting to commence the claim from AY 2010-11, even though operations began earlier. The Assessing Officer denied the deduction, citing a Special Bench decision requiring notional carry forward of prior losses.

What were the issues?

Whether notional losses incurred before the chosen initial assessment year for Section 80IA deduction need to be set off against current profits. Whether the amendment to Section 80IA affects the treatment of prior year losses.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCHES “D” MUMBAI

Before: SHRI JOGINDER SINGH & SHRI N.K. PRADHAN

For Appellant: Shri A. N. Shah, AR
For Respondent: Shri Purushottam Kumar, DR, Shri A. N. Shah, AR
Hearing: 22/03/2017Pronounced: 24/03/2017

ORDER

PER N.K. PRADHAN, AM

1.

This is an appeal filed by the revenue. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner (Appeals) – 33, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).

2.

The grounds of appeal filed by the revenue read as under:-

i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) – 33, Mumbai erred in holding that the notional losses incurred by the assessee cannot be carried forward in respect of the Wind Mill Unit and set off against the profits of the initial assessment year before allowing the deduction u/s 80IA. ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) – 33, Mumbai erred in allowing the assessee’s claim of Rs. 32,52,730/- u/s 80IA notwithstanding the decision of the Hon'ble Ahmedabad Tribunal in the case of ACIT vs. Goldmine Shares and Finance P. Ltd. 133 ITD 209 (Ahd) (SB).

3.

Briefly stated, the facts are that the assessee claimed a deduction of Rs. 32,52,730/- u/s 80IA of the Act. The details on the above were filed before the Assessing Officer (AO). The assessee commenced the operation / activity of the wind power undertaking during the previous year ended 31.03.2007 i.e. A.Y. 2007-08. However, the assessee opted to claim the deduction u/s 80IA w.e.f. A.Y. 2010-11. After the amendment in section 80IA by the Finance Act 1999, an assessee has an option for selecting the initial assessment year. The AO was convinced with the allowablity of deduction u/s 80IA as conditions laid down there were fulfilled by the assessee. But the AO denied the deduction u/s 80IA by relying on the decision in ACIT vs. Goldmine Shares & Finance (P) Ltd. 113 ITD 209 (Ahd) (SB), wherein the losses of the earlier years have to be brought forward notionally for set off against the income of the current year for determining the quantum of deduction u/s 80IA of the Act. In view of the above, the AO made a disallowance of Rs. 32,52,730/- u/s 80IA of the Act.

4.

The assessee filed an appeal against the order of the AO before the learned CIT(A). We find the learned CIT(A) relying on the decision in Shevie Exports vs. JCIT, taxmann.com 446 (Mum.-Trib), and Anil H Lad vs. CIT [TS-140-High Court-2014 (Kar)] deleted the addition of Rs. 32,52,730/- made by the AO.

5.

Before us, the learned DR relies on the order of the AO. On the other hand the learned counsel of the assessee supports the order passed by the learned CIT(A).

6.

We have heard the rival submissions and perused the relevant material on record. We find after the amendment in section 80IA by the Finance Act 1999, an assessee has an option for selecting the initial assessment year. The losses prior to the initial assessment year which has already been set off cannot be brought forward and adjusted into the period of 10 years from the initial assessment year as chosen by the assessee. It is only when the loss has been incurred from the initial assessment year, then the assessee has to adjust loss in subsequent years and it has to be computed as if eligible business is the only source of income and then only deductions u/s 80IA can be determined.

6.1 The Special Bench decision relied on by the A.O. is not applicable since the same pertains to A.Y. 1996-97 and 1997-98 i.e. prior to the amendment. Moreover, the assessee has clearly shown in the instant appeal that the initial year of assessment for claiming of deduction is A.Y. 2010-11.

6.2 In the case of Shevie Exports (supra), it has been held that in terms of provision of section 80IA (5), loss incurred prior to initial assessment year of claiming deduction is not required to be notionally carried forward and adjusted against eligible profit so as to disallow a part of deduction claimed. In the case of Devi Seafoods Ltd. vs. JCIT [2016] 70 taxmann.com 57 (Visakhapatnam-Trib.), it has been held that in order to claim deduction u/s 80IA, the initial assessment year would mean 1st year adopted by the assessee for claiming deduction and not the year in which eligible business was commenced. The same is reiterated in M/s. Hyderabad Chemical Products Pvt. Ltd. vs. ACIT (ITA No. 1033/Hyd/2015) by the ITAT “B” Bench Hyderabad for the A.Y. 2008-09.

6.3 In view of the reasons narrated para 6 to 6.2 here-in-above, we uphold the order passed by the learned CIT(A).

7.

In the result, the appeal filed by the revenue is dismissed.

Order pronounced in the open court on 24/03/2017

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