Case Law Details
CASE LAWS DETAILS
DECIDED BY: ITAT, NEW DELHI, BENCH `H’0
IN THE CASE OF: Tata Communication Internet Services Ltd. Vs. ITO, APPEAL NO: ITA No. 4214/Del/2010, DECIDED ON February 26, 2010
RELEVANT PARAGRAPH
5.1 A perusal of the provisions of Section 80IA(3) clearly shows that the term “clause (ii)” was inserted by the Finance No.2 Act of 2004 w.e.f. 01.04.2005, this insertion is not with retrospective effect, as it is not so specified in the Act. The circular issued by the CBDT explaining the provisions relating to Direct Taxes Finance No.2 Act of 2004 also shows that the insertion is to take effect from 01.04.2005 and is to apply in relation to the Assessment Year 2005-06 and subsequent years. The 1st year of claim of the assessee for deduction u/s 80IA undisputedly is the Assessment Year 2004-05. The business of fax mail has been started by the assessee in 1997 and the business of providing internet services during the year 2000 being 17l October 2000 relevant to Assessment Year 2001-02. Therefore, what is to be seen is whether there has been any violation of the provisions for the claim of deduction u/s 80IA(4)(ii) for the Assessment Year 2001-02 or at the maximum in the 1st year of claim of deduction u/s 80IA being the Assessment Year 2004-05. This is because once it is held that the assessee is entitled to the deduction u/s 80IA and this finding has become final, the deduction u/s 80IA can at best be varied on account of the additions or dis allowances but it cannot under any circumstances be denied as once the deduction u/s 80IA is granted it is accepted that the business of the undertaking is not hit by any of the violation or bar as provided in Section 80IA itself. Here, it is noticed that the assessee has been granted the deduction u/s 80IA in the course of assessment for the Assessment Year 2004-05. Now, it is not possible for the revenue to pick up an Assessment Year subsequent to the granting of the claim holding that there was violation of the provisions of Section 80IA(3) of the Act in so far as the business was formed by splitting up and reconstruction of business already in existence that it was formed by the transfer to the new business, plant & machinery previously used for any purpose. This bar as provided in Section 80IA(3) is to be considered only for the 1st year of claim of deduction u/s 80IA. Once the assessee has been shown to have used new plant & machinery which was not previously used for any purpose and once it is shown that the undertaking is not formed by splitting up or reconstruction of a business already in existence and the assessee becomes entitled to the deduction u/s 80IA, in the subsequent years, it is well available to the assessee to acquire fresh machinery and plant whether new or previously used for any purpose. As the deduction is available on the income of the undertaking and the bar provided u/s 80IA(3) is in relation to the formation of undertaking, once the formation is complete the development of undertaking cannot be put under restrain of Section 80IA(3) of the Act. Right from the Assessment Year 2004-05, the assessee has been granted the claim of deduction u/s 80IA consequently for the relevant Assessment Year being the Assessment Year 2006-07 being a subsequent assessment year it cannot be denied. The eligibility for the claim of deduction u/s 80IA by applying the restraints of Sec. 80IA(3) cannot be considered for every year of the claim of deduction u/s 80IA but can be considered only in the year of formation of the business.
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