DECIDED BY: ITAT CHENNAI BENCH `B’, IN THE CASE OF: Rangamma Steels & Malleables Vs. ACIT, APPEAL NO: ITA No. 1171/Mds/09, DECIDED ON November 13, 2009
2. The facts of the case, in brief, are that the assessee firm is engaged in the business of manufacture of automobile components and windmill power generation and filed its return of income for assessment year 2006-07 on 31.10.2006, declaring total income of Rs. 70,67.640/- after claiming deduction of Rs. 62,49,568/- u/s 80-IA of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short) The assessment order was passed on 23.12.2008 at a total income of Rs. 1.33,17.2107- as against the returned income of Rs.70,67,640/-. For arriving at the above figure, the Assessing Officer had disallowed deduction of Rs.62,49,568 on the reasoning that the requisite conditions of section 80-IA(5) are not fulfilled. In arriving at the above conclusion, it has been observed by the Assessing Officer that the deduction u/s 80-IA would be computed with reference to profits of the eligible unit unaffected by losses suffered in other units. That the loss suffered by the eligible unit would not be set off against profits of other units/other business/other incomes in the initial year of assessment or subsequent years and the losses of the eligible unit when remained to be adjusted against that very source it is to be carried forward to the subsequent year(s) and is to be set off in the succeeding year(s) and on the remaining profit alone the deduction would be available. It was also observed that when there was no loss(es) of the eligible unit, carried forward, in view of having been set off against profits of that very source, the losses of the earlier years, though already absorbed against other sources, are once again to be notionally brought forward and set off against profits of the eligible unit to compute eligible deduction and that this deduction is limited to gross total income He has treated each wind mill as a separate unit. After holding as above, the Assessing Officer has denied the assessee’s claim u/s 80-IA.of the Act and has added the same to its total income. The Id. CIT (A) has also taken almost similar lines of reasoning for dismissing assessee’s claim u/s 80-IA by relying on the decision of ACIT vs Goldmine Shares & Finance Pvt. Ltd, 302 TR (AT) 208 (Ahd)(SB) and ignoring the decision of Chennai Bench of the Tribunal in the case of Mohan Breweries & Distilleries Ltd vs ACIT order dated 31 10.2009 in ITANo.1077/Mds/07.
3. Before us, it was pleaded polemically that the decision of the Special Bench in the case of Goldmine Shares only spells out the law as laid down in section 80-A in conjunction with section 80-IA (5), but it has not touched the other important feature of this important claim of deduction which gives option to the assessee to claim this deduction for 10 years out of 15 years. It was argued that the Act nowhere defines the term Initial year’ of such a claim and that the ‘initial year’ will have very valid bearing on the entire computation to be made under these sections. It was submitted that the Chennai bench has clearly defined that the assessee has option to opt for that initial year and the deduction in question shall have relevance tot hat initial year only. Per contra the Id. DR has heavily relied on the orders of authorities below and the Special Bench decision referred to as above.
In nutshell, in computing the total income of the assessee, derived from profits and gains from an eligible business, which are detailed in sub-section (4). 100% deduction is allowed for ten consecutive assessment years Subsection (2) of section 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 providing , telecommunication , service or develops and industrial parks … etc. By way of a proviso, this fifteen years has been extended to 20 years in respect of certain business. Likewise subsection 2A restricts this deduction in respect of undertakings providing telecommunication services. Section 80-IA(3) imposes certain restrictions thereunder, 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 business subject to section 33B have been excluded, etc., etc with which we are not concerned for deciding the present appeal. But we are concerned mainly with section 80-IA(5). Sub-section (5) of section 80-IA qualifies deduction of sub-section 1 of section 80-IA with a non-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 subsequent assessment year up to and including the assessment year for which the determination is to be made.
8. There is no confusion or contradictions in so far as the ratio of the above decision is concerned. In the above decision, the actual issue involved in the appeal under reference was not touched at all. Whatever has been held by the Special Bench will apply ditto to the 10 consecutive years starting from the initial year in which the assessee had exercised his option to avail the benefit of section 80-IA, otherwise sub-section (2) of section 80-IA, would become otiose. The Chennai Bench has directly dealt with the question which is really involved in this appeal Hence sub-section (5) of section 80-IA would come into operation only from the year in which the appellant started claiming deduction u/s 80-IA i.e from the initial year, as we have described earlier, and the depredation relating to the years. prior to the initial assessment year cannot be brought back notionally to be adjusted against the income of the initial or subsequent assessment years. But for the 10 year lag opted by the assessee the ratio of Special Bench would apply verbatim m its betters and spirit Therefore, we allow this issue in favor of the assessee by following the Special Bench and the Chennai Bench decision.