Income Tax Appellate Tribunal - Ahmedabad
Dcit.Circle-8,, Ahmedabad vs Suzlon Towers & Structures Ltd. , ... on 22 November, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ ।
IN THE INCOME TAX APPELLATE TRIBUNAL,
"C" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA.No.2174/Ahd/2013
नधा रण वष / Asstt. Year: 2010-11
DCIT, Cir.8 Suzlon Towers & Structures Ltd.
Ahmedabad. Vs. 'Suzlon' 5, Shrimali Society
Nr. Shree Krishna Complex
Navrangpura
Ahmedabad.
PAN : AAECS 4967 P
(Applicant) (Responent)
Revenue by : Shri Prasoon Kabra, Sr.DR
Assessee by : Shri Tushar Hemani, AR
सन
ु वाई क तार ख/ Dateof Hearing : 21/11/2016
घोषणा क तार ख / Date of Pronouncement: 22/11/2016
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Revenue is in appeal before the Tribunal against the order of ld.CIT(A)-XIV, Ahmedabad dated 3.6.2013 passed for the Asstt.Year 2010-
11.
2. Revenue has taken three grounds of appeal, but its grievance revolves around a single issue viz. the ld.CIT(A) has erred in deleting disallowance of claim of Rs.85,71,651/- made under section 80IA(iv) of the Income Tax Act, 1961.
ITA No.2174/Ahd/2013 23. Brief facts of the case are that the assessee has filed its return of income on 15.9.2010 declaring total income at Rs.10,85,43,640/-. The assessee was engaged in manufacturing and trading of tubular tower and also generation of electricity through wind turbine generator. It has claimed deduction under section 80IA of the Act. The assessee has independent power generation undertaking at Maharashtra and Rajasthan. It has claimed deduction of Rs.1,74,64,075/- qua Maharashtra Unit and Rs.85,71,651/- qua Rajasthan undertaking. It emerges out from record that Maharashtra undertaking was established in the Asstt.Year 2002-03 and that of Rajasthan was established in the Asstt.Year 2003-04. As per section 80IA(ii) of the Act, assessee may opt 10 years out of block of first 15 years for claiming deduction. In this way, the assessee had claimed deduction qua Rajasthan Undertaking from the Asstt.Year 2008-09. The AO observed that since the assessee has loss in the initial year, therefore, those loss which were set off against other stream of income are to be brought forwarded notionally and to be set off against eligible income under section 80IA(iv). In this way, he did not allow deduction to the assessee under section 80IA(iv) of the Act.
4. On appeal, the ld.CIT(A) has allowed deduction by following decision of the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills P.Ltd. Vs. ACIT 38 DTR (Mad.) 57. The ld.CIT(A) has extensively reproduced the finding of the Hon'ble Madras High Court.
5. Before us, the ld.counsel for the assessee, at the very outset submitted that as far as selection of initial year out of the block of 15 years is concerned, it is the discretion of the assessee to opt any 10 years. Once the assessee has opted initial year, then it has to claim deduction under section 80IA consecutively for 10 years. Board has approved this interpretation vide ITA No.2174/Ahd/2013 3 Circular No.1/2016. He placed on record copy of the circular. He further contended that decision of Hon'ble Madras High Court has been upheld by the Hon'ble Supreme Court in SLP No.33475/2012 which has been dismissed by the Hon'ble Supreme Court. He placed on record copy of the decision dated 5.9.2016. The ld.DR, on the other hand, unable to controvert contention raised by the ld.counsel for the assessee.
6. We have duly considered rival contentions and gone through the record carefully. We find that the ld.CIT(A) has made a lucid analysis of the law as well as of facts on this issue. We deem it appropriate to take note of the finding recorded by the ld.CIT(A) as under:
"2.3 Decision:
I have carefully considered the facts of the case and the submissions made by made by the appellant.lt is uncontroverted fact that though Rajasthan Undertaking was established in A.Y.2003-04, the appellant has chosen A.Y.2008-09 as initial assessment year to claim deduction u/s 80IA(4)(iv) of the Act. The Assessing Officer has mainly relied upon the Special Bench order in the case of Goldmine (supra) and has held that the provisions of S.80IA(5) of the Act is applicable from the year of commencement of generation of power i.e A.Y.2003-04 and not from the initial year A.Y.2008-09, wherein the for the deduction u/s. 80IA(4)(iv) has been made for the first time. Accordingly, the Assessing Officer has nationally brought forward losses of the years prior to the initial year; nationally set-off the same against the current year's income and denied deduction of Rs.85,71,651/- as claimed by the Appellant u/s 80IA(4)(iv) of the Act.
The appellant has argued, that its case is squarely covered by the Madras High Court decision in the case of Velayudhaswamy (supra), wherein after taking into cognizance of the Special Bench decision of Goldmine (supra), it has been 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 assesse.ITA No.2174/Ahd/2013 4
Before giving finding, I would like to narrate the law of deduction as laid down in s. 80-IA in conjunction with s. 80-IA(5) of the Act. The scheme of the IT Act, 1961 as contained in its various chapters is that Chapter II details the basis of charge of income-tax. In Chapter III certain incomes are defined which do not form part of income. In Chapter IV elaborate method of computation of total income from different sources of income and the sources of income include-- incomes from salary, from house property, from profits and gains of business or profession, from capital gains and from other sources. In Chapter V, incomes of other persons, how and when is to be 'included in appellant's hands is described. Chapters VI and VI-A are important as they provide for the mode of aggregation of income and set off or carry forward of loss and provide for deduction to be made in computing total income. We are concerned with Chapter VI-A, especially its portion C, which deals with deduction in respect of certain incomes. Sec. 80-IA is the section which deals with deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. Sec. 80-IA as amended by the Finance Act, 1999 reads as under:
"80-IA Deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.--
(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-s. (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years."
(2) The deduction specified in sub-s. (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [or develops (***) a special economic zone referred to in cl. (in) of sub-s. (4)] or generates power or commences transmission or distribution of power or undertakes substantial renovation and modernisation of the existing transmission or distribution lines or lays and begins to operate a cross-country natural gas distribution network: Provided that where the assessee develops or operates and maintains or ITA No.2174/Ahd/2013 5 develops, operates and maintains any infrastructure facility referred to in cl. (a) or cl. (b) or cl. (c) of the Explanation to cl. (i) of sub-s. (4), the provisions of this sub-section shall have effect as if for the words 'fifteen years', the words 'twenty years' had been substituted.
(2A) Notwithstanding anything contained in sub-s. (1) or sub-s. (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in cl. (ii) of sub-s. (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-s. (2) and thereafter, thirty per cent of such profits and gains for further five assessment years.
(3) This section applies to an undertaking referred to in c/. (ii) or cl. (ii) or cl. (iv) of sub-s. (4) which fulfils all the following conditions, namely:
(i) it is not formed by splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of an undertaking which is formed as a result- of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in s.33B, in the circumstances and within the period specified in that section;
(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose :
Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board referred to in cl. (7) of s. 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or reconstruction or reorganization of the Board under Part XIII of that Act, Explanation ..............
Explanation 2.--
(4) This section applies to--
(i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (Hi) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely:ITA No.2174/Ahd/2013 6
(a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;
(b)it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for
(i) developing or (ii) operating and maintaining or (Hi) developing, operating and maintaining a new infrastructure facility;
(c)it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place.
Explanation..........
Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under sub-s. (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking:
Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words 31st day of March, 2006', the figures, letters and words '31st day of March, (2011)' had been substituted; (iv) an undertaking which,--ITA No.2174/Ahd/2013 7
(a)is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2011;
(b)starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2011 :
Provided that the deduction under this section to an undertaking under sub-cl. (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution;
(c)undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2011.
Explanation .............
(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-s. (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year Or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year upto and including the assessment year for which the determination is to be made."
In nutshell, in computing the total income of the assessee, derived from profits and gains from an eligible business, which are detailed in sub-s. (4) of section 80IA, 100 per cent deduction is allowed for ten consecutive assessment years. Sub-s. (2) of s. 80-IA gives option to the assessee to choose the 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing1 telecommunication service or .develops an industrial parks..... etc. By way of a proviso, this fifteen years has been extended to 20 years in respect of certain business. Likewise sub-s. (2A) restricts this deduction in respect of undertakings providing telecommunication services. Sec. 80-IA(3) imposes certain restrictions where-under, this deduction is not allowed to undertakings if it is formed by splitting up or reconstruction of an already existing business but reconstruction, re-establishment or revival of the ITA No.2174/Ahd/2013 8 business subject to s. 33B have been excluded, etc., etc. with which we are not concerned for deciding the present appeal. But we are concerned mainly with s. 80-IA(5). Sub-section (5.) of s. 80-1A qualifies deduction of sub-s. (1) of s. 80A with anon obstante clause and overrides every other provision in this Act providing mechanism by way of assumption that for determining the quantum of deduction for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, it would be deemed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every assessment year upto and including the assessment year for which the determination is to be made.
The above provisions are very clear, plain and direct in meaning. But only difficulty is cast by the term 'initial year' which has nowhere been defined in the Act, yet by sub-section (2) it is obvious that it is referring to the option vested in the assessee to choose any 10 years out of 15 or 20 years, period provided, as the case may be. The year from which option has been exercised is to be treated as the initial assessment year, but after that the 10 years have in continuity. Hence, sub-section (5) of s. 80-IA would come into operation only from the year in which the appellant started claiming deduction under section 80-IA i.e., from the initial year and the depreciation relating to the years prior to the initial assessment year cannot be brought back nationally to be adjusted against the income of the initial or subsequent assessment years.
The facts of the case are squarely covered by the decision of The Madras High Court in Ve/ayudhaswamy (suprajand the Special Bench decision of Goldmine (supra) relied by AO has been taken into account by the Madras High Court. The questions raised in Tax Appeal No.909 of 2009 and 940 of 2009 before the Madras High Court were as under:
"(a)Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the appellant is not entitled to claim deduction under section 80-1A ?
(b)Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that initial assessment year in section 80-1 A(5) would only mean the year of commencement and not the year of claim ITA No.2174/Ahd/2013 9
(c)Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in saying that unabsorbed depreciation of earlier years before the first year of claim, which has already been absorbed, could be nationally carried forward and taken into consideration for computation of deduction under section 80-1A ?
(d)Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in following the decision of the Special Bench in the case of Goldmine Shares .._..„_. and Finance (P) Ltd. [2008] 302 ITR (AT) 208 (Ahd.) when admittedly the said decision was rendered prior to the amendment to section 80-1A by the Finance Act, 1999 It is seen that after considering various arguments of counsels of both the sides, their Lordship has held as under:
14. ................... In the present case, we are concerned with the provision of section 80-IA. The said provision was introduced by the Finance Act, 1999, with effect from April ], 2000. The provisions of sections 80-1 and 80-IA are also more or less identically worded.
Sections 80-1 and 80-IA come in Chapter VI-A of the Income-tax Act. Chapter VI-A deals with deductions to be made in computing total income. There are two tax incentives contemplated in , Chapter VI-A. One is investment incentive and the other one is profit-linked investment. Chapter VI-A was introduced by the Finance Act, 1965, with effect from April 1, 1965, and it consists of four headings. They are A, B, C and D. Heading "A" ;s general and it also contains definition. It consists of sections 80A, 80AA, 80AB, 80AC and 808. Section 80AB deals with "Deductions to be made with reference to the income included in the gross total income", which reads as follows:
"Where any deduction is required to be made or allowed under any section included in this Chapter under the heading 'C-Deductions in respect of certain incomes' in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income."ITA No.2174/Ahd/2013 10
15. A mere reading of the above provision makes it clear that any income of the nature specified in that section, which is included in the gross total income of the assessee for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provision of this Act shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in the gross total income. Section 80AB defines "gross total income" which means the total income has to be computed in accordance with the Act before making deduction under this Chapter. Heading "B" deals with "deductions in respect of certain payments" which consists of sections 80C to 80GGC. Heading "C" deals with "deductions in respect of certain incomes", which consists of sections 80H to 8017. The last heading "D" deals with "other deductions" which consists of sections 80U to 80V. Heading "C" is relevant for considering the issue in these appeals. The relevant provisions that are to be considered are sections 80-1, 80-1A and 80-IB. In the case , of Liberty India v. C IT [2009] 317 ITR 218 (SC) ; [2009] 225 CTR (SC) 233; [2009] 28 DTR (SC) 73, the apex court considered the scope of sections 80-1, 80-IA and also section 80-IB of the Act, wherein, it has been held that Chapter VI-A provides for incentives in the form of tax deductions essentially belong to the category of "profit-linked incentives". Therefore, when section 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives. Further, it has been held that sections 80- IB/80-IA are the code by themselves as they contain both substantive as well as procedural provisions. The Supreme Court further observed in the said judgment that sub-section (5) of section 80-IA provides for manner of computation of profits of an eligible business. Accordingly such profits are to be computed as if such eligible business is the only source of income of the assessee. -
16. Section 80-IA reads as follows :
"80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (4) (such business being hereinafter referred to as the eligible business) there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of an amount equal to hundred per cent, of the profits and gains derived from such business for ten consecutive assessment years.ITA No.2174/Ahd/2013 11
(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or develops a special economic zone referred to in clause (Hi) of sub-section (4) or generates power or commences transmission or distribution or power or undertakes substantial renovation and modernization of the existing transmission or distribution lines.
(4) This section applies to-
(i) any enterprise carrying on the business of (i) developing, or (ii) operating and maintaining, or (Hi) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :-
(a) it is owned by a company registered in India or by a consortium of such companies (or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act);
(b)it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for
(i) developing, or (ii) operating and maintaining, or (Hi)developing, operating and maintaining a new infrastructure facility;
(c)it has started or starts operating and maintaining the infrastructure facility on or after the 1st April, 1995.
(5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made."
17. From a reading of sub-section (1), it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), i.e., referred to as the eligible business, there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent, of the profits and gains ITA No.2174/Ahd/2013 12 derived from such business for ten consecutive assessment years. Deduction is given to eligible business and the same is defined in sub-section (4). Subsection (2) provides option to the assessee to choose 10 consecutive assessment years out of 15 years. Option has to be exercised, if it is not exercised, the assessee will not be getting the benefit. Fifteen years is outer limit and the same is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity, etc. Sub-section (5) deals with quantum of deduction for an eligible business. The words "initial assessment year" are used in sub-section (5) and the same is not defined under the provisions. It is to be noted that "initial assessment year" employed in sub-section (5) is different from the words "beginning from the year" referred to in sub-section (2). The important factors are to be noted in sub-section (5) and they are as under:
"(l)lt starts with a non obstante clause which means it overrides all the provisions of the Act and other provisions are to be ignored;
(2)lt is for the purpose of determining the quantum of deduction; (3)For the assessment year immediately succeeding the initial assessment year;
(4)lt is a deeming provision ; :
(5)Fiction created that the eligible business is the only source of income ; and ; ;
(6)During the previous year relevant to the initial assessment year and every subsequent assessment year."
18. From a reading of the above, it is dear that the eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. 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. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward nationally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. 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 nationally. A fiction created in sub-section does not contemplates to bring set off amount nationally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created.
ITA No.2174/Ahd/2013 1319. In the present cases, there is no dispute that losses incurred by the assessee were already set off and adjusted against the profits of the earlier years. During the relevant assessment year, the assessee exercised the option under section 80-1 A(2). In Tax Case Nos. 909 of 2009 as well as 940 of 2009, the assessment year was 2005-06 and in Tax Case No. 9/8 of 2008 the assessment year was 2004-05. During the relevant period, there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the year. The unreported judgment of this court cited supra considered the scope of sub-section (6) of section 80-1, which is the corresponding provision of sub-section (5) of section 80-IA. Both are similarly worded and, therefore, we agree entirely with the Division Bench judgment of this court cited supra. In the case of CIT v. Mewar Oil and General Mills Ltd. (No. 1) [2004] 271 ITR 311 (Raj) ; [2004] 186 CTR (Raj) 141, the Rajasthan High Court also considered the scope of section 80-1 and held as follows (page 314 of 271 ITR) :
"Having considered the rival contentions which follow on the line noticed above, we are of the opinion that on finding the fact that there was no carry forward losses of 1983-84, which could be set off against the income of the current assessment year 1984- 85, the recomputation of income from the new industrial undertaking by setting off the carry forward of unabsorbed depreciation or depreciation allowance from previous year did not simply arise and on the finding of fact noticed by the Commissioner of Income-tax (Appeals), which has not been disturbed by the Tribunal and challenged before us, there was no error much less any error apparent on the face of the record which could be rectified. That question would have been germane only if there would have been carry forward of unabsorbed depreciation and unabsorbed development rebate or any other unabsorbed losses of the previous year arising out of the priority industry and whether it was required to be set off against the income of the current year. It is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder.
In view thereof, we are of the opinion that the Tribunal has not erred in holding that there was no rectification possible under section 80-1 in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head ITA No.2174/Ahd/2013 14 depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-1 for the new industrial undertaking was not required in the present case.
Accordingly, this appeal fails and is hereby dismissed with no order as to costs."
20. From a reading of the above, the Rajasthan High Court held that it is not at all required that losses or other deductions which have already been set off against the income of the previous year should be reopened again for computation of current income under section 80-1 for the purpose of computing admissible deductions thereunder. We also agree with the same. We see no reason to take a different view.
21. The standing counsel appearing for the Revenue is unable to bring to our notice any relevant material or any compelling reason or any contra judgment of other courts to fake a different view. He only relied heavily on the Memorandum explaining the provisions in the Finance (No. ; : 2) Bill, 1980, 11980] 123 ITR (St.) 154 to support this case and the same reads as follows ;
"Clause 30(iii). In computing the quantum of 'tax holiday' profits in all cases, taxable income derived from the new industrial units, etc., will be determined as if such units were an independent unit owned by a taxpayer who does not have any other source of income. In the result, the losses, depreciation and investment allowance of earlier years in respect of the new industrial undertaking, ship or approved hotel will be taken into account in determining the quantum of deduction admissible under the new section 80-1 even though they may have been set off against the profits of the taxpayer from other sources."
22. We are not agreeing with the counsel for the Revenue. We are, therefore, of the view that loss in the year earlier to the initial assessment year already absorbed against the profit of other business cannot be nationally brought forward and set off against the profits of the eligible business as no such mandate is provided in section 80-IA(5).
23. Under these circumstances, we set aside the order of the Tribunal and answer all the questions in favour of the appellant/assessee and against the Revenue in Tax Case Nos. 909 and 940 of 2009 respectively. Accordingly, tax cases are allowed."
ITA No.2174/Ahd/2013 15Having regard to above discussion and respectfully following the decision of Madras High Court in the case of Velayudhaswamy (supra), I hereby allow the claim of the Appellant u/s 80IA(4)(iv) of the Act and addition as made by the AO is directed to be deleted. These grounds of appeal are accordingly allowed."
7. A perusal of the above finding would indicate that it is based primarily on the decision of the Hon'ble Madras High Court and that decision has been upheld by the Hon'ble Supreme Court also. As far as selection of initial year is concerned, the Board has already clarified this issue in Circular no.1/2016. This discretion is with the assessee to select any initial year. The approach of the AO to construe that initial year ought to be selected from the year of manufacturing, was not approved by the Board. Considering all these aspects, we do not see any reason to interfere in the order of the ld.CIT(A). Accordingly, the appeal of the Revenue is dismissed.
8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 22nd November, 2016 at Ahmedabad.
Sd/- Sd/- (MANISH BORAD) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER