S. 80IA Option of choosing initial assessment year – ITAT distinguishes special bench judgment in case of Gold Mine Shares

In the instant case, the assessee claimed deduction u/s.80IA(4) of the Act for all the years which were disallowed by the AO on the ground that as per provisions of section 80IA(5) of the Act the computation of deduction has to be done by setting off of brought forward losses and depreciation of eligible business against their respective eligible incomes. After doing so, deduction u/s.80IA(4) of the Act, allowable to the assessee works out to Rs. 1,42,20,515 in AY 2005-06. Accordingly, the AO disallowed the claim for deduction u/s.80IA of Rs.3,39,44,245/- to the assessee. Similarly, the AO disallowed u/s.80-IA(4) of the Act Rs.9,11,193/- (for AY 2006-07) & Rs.59,98,462/- (for AY 2007-08).

On appeal, the ld.CIT(A) confirmed the action of the AO on the very same reason. We find that the assessee had set up Udaipur Undertaking and Viramgam Undertaking in AY 2003-04. The assessee incurred losses from these two eligible Units for deduction u/s.80-IA and, therefore, no deduction was claimed in the said AY u/s.80-IA of the Act. In the AY 2005-06, the assessee earned profit from these projects and accordingly claimed deduction u/s.80-IA by treating the AY 2005-06 as initial assessment year. The AO while computing the deduction for AY 2005-06 u/s.80-IA reduced the deduction claimed by the assessee by adjusting the losses of previous assessment years 2003-04 & 2004-05 from the eligible profit from the undertakings. The ld.DR has relied on the decision of the Ahmedabad Special Bench of the Tribunal in the case of ACIT vs. Goldmine Shares & Finance (P) Ltd. reported at 302 ITR (AT) 208 and submitted that while computing the deduction allowable to the assessee u/s.80IA losses and depreciation of the earlier assessment years should be notionally brought forward and deducted from the eligible profit of the assessee from the said undertakings. On the other hand, the ld.AR of the assessee has relied on the judgement of Honorable Madras High Court in the case of Velayudhaswamy Spinning Mills (P.) Ltd. vs. ACIT (2012) 340 ITR 477 and the decision of Honorable Madras High Court in the case of CIT vs. Emerald Jewel Industry (P) Ltd. (2011) 53 DTR (Mad) 262. Regarding the Special Bench decision of the Tribunal in the case of Goldmine Shares & Finance (P) Ltd.(supra), the ld.AR submitted that this decision will not be applicable as the same was relevant for the provisions applicable in the assessment years 1996-97 and 1997-98, which was prior to the amendment brought in the Statute by the Finance Act, 1999.