The DCIT.Circle-8, Ahmedabad V. Suzlon Towers & Structures Ltd., Ahmedabad

ITA 2174/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9853 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Source of fund; Unabsorbed depreciation
• Section: 80C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA.NO.2174/AHD/2013 / ASSTT. YEAR: 2010-11 DCIT, CIR.8 AHMEDABAD. VS. SUZLON TOWERS & STRUCTURES LTD. 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 / DATE OF HEARING : 21/11/2016 / DATE OF PRONOUNCEMENT: 22/11/2016 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST TH E 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 I TS 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 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S 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 TOW ER AND ALSO GENERATION OF ELECTRICITY THROUGH WIND TURBINE GENERATOR. IT HAS CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE HAS INDEPEND ENT POWER GENERATION UNDERTAKING AT MAHARASHTRA AND RAJASTHAN. IT HAS C LAIMED DEDUCTION OF RS.1,74,64,075/- QUA MAHARASHTRA UNIT AND RS.85,71, 651/- QUA RAJASTHAN UNDERTAKING. IT EMERGES OUT FROM RECORD THAT MAHAR ASHTRA UNDERTAKING WAS ESTABLISHED IN THE ASSTT.YEAR 2002-03 AND THAT OF R AJASTHAN 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 CLAIMIN G 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 T O BE SET OFF AGAINST ELIGIBLE INCOME UNDER SECTION 80IA(IV). IN THIS WA Y, 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 B Y FOLLOWING DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VEL AYUDHASWAMY SPINNING MILLS P.LTD. VS. ACIT 38 DTR (MAD.) 57. THE LD.CIT (A) HAS EXTENSIVELY REPRODUCED THE FINDING OF THE HONBLE MADRAS HIGH C OURT. 5. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE, AT T HE 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 THI S INTERPRETATION VIDE ITA NO.2174/AHD/2013 3 CIRCULAR NO.1/2016. HE PLACED ON RECORD COPY OF TH E CIRCULAR. HE FURTHER CONTENDED THAT DECISION OF HONBLE MADRAS HIGH COUR T HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN SLP NO.33475/2012 WHIC H HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. HE PLACED ON RECORD COPY OF THE DECISION DATED 5.9.2016. THE LD.DR, ON THE OTHER HAND, UNAB LE TO CONTROVERT CONTENTION RAISED BY THE LD.COUNSEL FOR THE ASSESSEE. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE LD.CIT(A) HAS MADE A L UCID ANALYSIS OF THE LAW AS WELL AS OF FACTS ON THIS ISSUE. WE DEEM IT APPROPR IATE 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 A ND THE SUBMISSIONS MADE BY MADE BY THE APPELLANT.LT IS UNCONTROVERTED FACT THAT THOUGH RAJASTHAN UNDERTAKING WAS ESTABLISHED IN A.Y.2003-0 4, THE APPELLANT HAS CHOSEN A.Y.2008-09 AS INITIAL ASSESSMENT YEAR T O CLAIM DEDUCTION U/S 80IA(4)(IV) OF THE ACT. THE ASSESSING OFFICER H AS MAINLY RELIED UPON THE SPECIAL BENCH ORDER IN THE CASE OF GOLDMIN E (SUPRA) AND HAS HELD THAT THE PROVISIONS OF S.80IA(5) OF THE AC T 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 FI RST TIME. ACCORDINGLY, THE ASSESSING OFFICER HAS NATIONALLY B ROUGHT FORWARD LOSSES OF THE YEARS PRIOR TO THE INITIAL YEAR; NATI ONALLY SET-OFF THE SAME AGAINST THE CURRENT YEAR'S INCOME AND DENIED DEDUCT ION 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 VELAYUDHA SWAMY (SUPRA), WHEREIN AFTER TAKING INTO COGNIZANCE OF THE SPECIAL BENCH DECISION OF GOLDMINE (SUPRA), IT HAS BEEN HELD THAT WHEN THE AS SESSEE 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 TH E 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 VARI OUS CHAPTERS IS THAT CHAPTER II DETAILS THE BASIS OF CHARGE OF INCOME-TA X. 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 INCO ME INCLUDE INCOMES FROM SALARY, FROM HOUSE PROPERTY, FROM PROF ITS AND GAINS OF BUSINESS OR PROFESSION, FROM CAPITAL GAINS AND FROM OTHER SOURCES. IN CHAPTER V, INCOMES OF OTHER PERSONS, HOW AND WHEN I S 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 INCO ME AND SET OFF OR CARRY FORWARD OF LOSS AND PROVIDE FOR DEDUCTION TO BE MADE IN COMPUTING TOTAL INCOME. WE ARE CONCERNED WITH CHAPT ER VI-A, ESPECIALLY ITS PORTION C, WHICH DEALS WITH DEDUCTIO N IN RESPECT OF CERTAIN INCOMES. SEC. 80-IA IS THE SECTION WHICH DE ALS WITH DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UND ERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT E TC. SEC. 80-IA AS AMENDED BY THE FINANCE ACT, 1999 READS AS UNDER: '80-IA DEDUCTION IN RESPECT OF PROFITS AND GAINS FR OM INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT, ETC. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-S. (4) (SUCH BUSINE SS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSEC UTIVE ASSESSMENT YEARS.' (2) THE DEDUCTION SPECIFIED IN SUB-S. (1) MAY, AT T HE 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 T O OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOM MUNICATION 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 NE TWORK: PROVIDED THAT WHERE THE ASSESSEE DEVELOPS OR OPERATES AND MA INTAINS 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 SHAL L HAVE EFFECT AS IF FOR THE WORDS 'FIFTEEN YEARS', THE WORDS 'TWENTY YE ARS' 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 G AINS 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 FOL LOWING CONDITIONS, NAMELY: (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONS TRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT- OF THE RE- ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS 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 BUSI NESS 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 MA CHINERY OR PLANT PREVIOUSLY USED BY A STATE ELECTRICITY BOARD REFERR ED 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 R ECONSTRUCTION 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, OPERA TING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFI LS 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 C ORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CEN TRAL OR STATE ACT; (B)IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRA L 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 FACI LITY; (C)IT HAS STARTED OR STARTS OPERATING AND MAINTAINI NG THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PR OVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRED O N OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH I NFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THI S SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OP ERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHA LF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GO VERNMENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPR ISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR T HE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE B EEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. EXPLANATION.......... PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELO PS AN INDUSTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL, 1999 OR A SP ECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL, 2001 AND TRANSFER S THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE, TO ANOTHER UNDERTAKING (HEREAFT ER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DED UCTION UNDER SUB-S. (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS I F THE OPERATION AND MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRAN SFEREE UNDERTAKING: PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKIN G 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 FIG URES, LETTERS AND WORDS '31ST DAY OF MARCH, (2011)' HAD BEEN SUBSTITU TED; (IV) AN UNDERTAKING WHICH, ITA NO.2174/AHD/2013 7 (A)IS SET UP IN ANY PART OF INDIA FOR THE GENERATIO N OR GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWE R 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 DURI NG 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 A N UNDERTAKING UNDER SUB-CL. (B) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSM ISSION OR DISTRIBUTION; (C)UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZAT ION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LI NES 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 PURPO SES 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 ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UPTO AND INCLUDING THE A SSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE.' IN NUTSHELL, IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE, DERIVED FROM PROFITS AND GAINS FROM AN ELIGIBLE BUSINESS, W HICH 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-I A GIVES OPTION TO THE ASSESSEE TO CHOOSE THE 10 CONSECUTIVE ASSESSMEN T YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDER TAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRA STRUCTURE FACILITY OR STARTS PROVIDING 1 TELECOMMUNICATION SERVICE OR .DEVELOPS AN INDUSTRI AL PARKS..... ETC. BY WAY OF A PROVISO, THIS FIFTEEN Y EARS HAS BEEN EXTENDED TO 20 YEARS IN RESPECT OF CERTAIN BUSINESS . LIKEWISE SUB-S. (2A) RESTRICTS THIS DEDUCTION IN RESPECT OF UNDERTA KINGS PROVIDING TELECOMMUNICATION SERVICES. SEC. 80-IA(3) IMPOSES C ERTAIN RESTRICTIONS WHERE-UNDER, THIS DEDUCTION IS NOT ALL OWED TO UNDERTAKINGS IF IT IS FORMED BY SPLITTING UP OR RECONSTRUCTION O F AN ALREADY EXISTING BUSINESS BUT RECONSTRUCTION, RE-ESTABLISHMENT OR RE VIVAL 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 APPEA L. 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 AN ON OBSTANTE CLAUSE AND OVERRIDES EVERY OTHER PROVISION IN THIS ACT PRO VIDING MECHANISM BY WAY OF ASSUMPTION THAT FOR DETERMINING THE QUANT UM 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 S OURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO T HE INITIAL ASSESSMENT YEAR AND TO EVERY ASSESSMENT YEAR UPTO A ND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. THE ABOVE PROVISIONS ARE VERY CLEAR, PLAIN AND DIR ECT IN MEANING. BUT ONLY DIFFICULTY IS CAST BY THE TERM 'I NITIAL 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 AS SESSEE 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 YEAR S HAVE IN CONTINUITY. HENCE, SUB-SECTION (5) OF S. 80-IA WOULD COME INTO OPERATION ONLY FROM THE YEAR IN WHICH THE APPELLANT STARTED CLAIMI NG DEDUCTION UNDER SECTION 80-IA I.E., FROM THE INITIAL YEAR AND THE D EPRECIATION RELATING TO THE YEARS PRIOR TO THE INITIAL ASSESSMENT YEAR CANN OT 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 D ECISION 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 RAI SED IN TAX APPEAL NO.909 OF 2009 AND 940 OF 2009 BEFORE THE MA DRAS 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 APPELL ANT IS NOT ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80-1A ? (B)WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT INITIAL AS SESSMENT YEAR IN SECTION 80-1 A(5) WOULD ONLY MEAN THE YEAR OF COMME NCEMENT 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 T AKEN INTO CONSIDERATION FOR COMPUTATION OF DEDUCTION UNDER SE CTION 80-1A ? (D)WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F 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 DECISI ON WAS RENDERED PRIOR TO THE AMENDMENT TO SECTION 80-1A BY THE FINA NCE 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 IDENT ICALLY 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 CO MPUTING TOTAL INCOME. THERE ARE TWO TAX INCENTIVES CONTEMPLATED I N , CHAPTER VI-A. ONE IS INVESTMENT INCENTIVE AND THE OTHER ONE IS PR OFIT-LINKED INVESTMENT. CHAPTER VI-A WAS INTRODUCED BY THE FINA NCE 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 W ITH '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 ALLO WED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING 'C-DEDUCTIONS IN RESPECT OF CERTAIN INCOMES' IN RESPECT OF ANY INCOM E OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAI NED IN THAT SECTION, FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COM PUTED 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 I NCOME.' 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, WHI CH 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 A CT SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WH ICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN T HE GROSS TOTAL INCOME. SECTION 80AB DEFINES 'GROSS TOTAL INCOME' W HICH MEANS THE TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE ACT BEFORE MAKING DEDUCTION UNDER THIS CHAPTER. HEADING 'B' DE ALS WITH 'DEDUCTIONS IN RESPECT OF CERTAIN PAYMENTS' WHICH C ONSISTS 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 CON SISTS OF SECTIONS 80U TO 80V. HEADING 'C' IS RELEVANT FOR CONSIDERING THE ISSUE IN THESE APPEALS. THE RELEVANT PROVISIONS THAT ARE TO BE CON SIDERED ARE SECTIONS 80-1, 80-1A AND 80-IB. IN THE CASE , OF LI BERTY 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 SEC TIONS 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-LINKE D INCENTIVES'. THEREFORE, WHEN SECTION 80-IA/80-IB REFERS TO PROFI TS 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 S UCH ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME OF THE ASSESS EE. - 16. SECTION 80-IA READS AS FOLLOWS : '80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUBSECTION (4) (SUCH BUSINE SS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) T HERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESS EE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT, OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT Y EARS. 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 T O OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOM MUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK OR DEVELOPS A SPECIAL E CONOMIC ZONE REFERRED TO IN CLAUSE (HI) OF SUB-SECTION (4) OR GE NERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OR POWER OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXI STING 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, OPER ATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFI LS 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 CEN TRAL OR STATE ACT); (B)IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRA L 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 FACI LITY; (C)IT HAS STARTED OR STARTS OPERATING AND MAINTAINI NG 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 I F SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR 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 INCLUDE S ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (4), I.E., REFERRED TO A S 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 TH E PROFITS AND GAINS ITA NO.2174/AHD/2013 12 DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSE SSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAM E IS DEFINED IN SUB-SECTION (4). SUBSECTION (2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YE ARS. OPTION HAS TO BE EXERCISED, IF IT IS NOT EXERCISED, THE ASSESS EE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE S AME 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 TH E SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO BE NOTED THA T 'INITIAL ASSESSMENT YEAR' EMPLOYED IN SUB-SECTION (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEAR' REFERRED TO IN SUB-SECTIO N (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 MEAN S 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 T HE INITIAL ASSESSMENT YEAR; (4)LT IS A DEEMING PROVISION ; : (5)FICTION CREATED THAT THE ELIGIBLE BUSINESS IS TH E ONLY SOURCE OF INCOME ; AND ; ; (6)DURING THE PREVIOUS YEAR RELEVANT TO THE INITI AL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR.' 18. FROM A READING OF THE ABOVE, IT IS DEAR THAT TH E ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEA RS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF T HE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGH T 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 YE ARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE R EVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLI ER YEARS AND BRING FORWARD NATIONALLY EVEN THOUGH THE SAME WERE SET OF F 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 CANNO T REWORK THE SET OFF AMOUNT AND BRING IT NATIONALLY. A FICTION CREATED I N SUB-SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NATIONALLY. TH E 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 13 19. 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 TA X CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009, THE ASSESSMENT YEAR WA S 2005-06 AND IN TAX CASE NO. 9/8 OF 2008 THE ASSESSMENT YEAR WAS 20 04-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRECIAT ION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABS ORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE YEAR. THE UNREPORTED JUDGMENT OF THIS COURT CITED SUPRA CONSIDERED THE S COPE OF SUB-SECTION (6) OF SECTION 80-1, WHICH IS THE CORRESPONDING PRO VISION OF SUB-SECTION (5) OF SECTION 80-IA. BOTH ARE SIMILARLY WORDED AND , THEREFORE, WE AGREE ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS C OURT 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 FO LLOWS (PAGE 314 OF 271 ITR) : 'HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW 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 ASSESSMEN T YEAR 1984- 85, THE RECOMPUTATION OF INCOME FROM THE NEW INDUST RIAL UNDERTAKING BY SETTING OFF THE CARRY FORWARD OF UNA BSORBED DEPRECIATION OR DEPRECIATION ALLOWANCE FROM PREVIOU S 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 O F 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 REQUIRE D TO BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IT IS NOT A T ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE R EOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER SECTI ON 80-1 FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THER EUNDER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRI BUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFICATION PO SSIBLE UNDER SECTION 80-1 IN THE PRESENT CASE, ALBEIT, FOR REASO NS SOMEWHAT DIFFERENT FROM THOSE WHICH PREVAILED WITH THE TRIBU NAL. THERE BEING NO CARRY FORWARD OF ALLOWABLE DEDUCTIONS UNDE R 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 COMPUTIN G PERMISSIBLE DEDUCTION UNDER SECTION 80-1 FOR THE NE W INDUSTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMIS SED 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 DEDUCTI ONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREV IOUS YEAR SHOULD BE REOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME UNDER SECTION 80-1 FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCT IONS THEREUNDER. WE ALSO AGREE WITH THE SAME. WE SEE NO REASON TO TA KE A DIFFERENT VIEW. 21. THE STANDING COUNSEL APPEARING FOR THE REVENUE IS UNABLE TO BRING TO OUR NOTICE ANY RELEVANT MATERIAL OR ANY CO MPELLING REASON OR ANY CONTRA JUDGMENT OF OTHER COURTS T O FAKE A DIFFERENT VIEW. HE ONLY RELIED HEAVILY ON THE MEMORANDUM EXPLAINING THE PR OVISIONS 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 H OLIDAY' PROFITS IN ALL CASES, TAXABLE INCOME DERIVED FROM THE NEW INDU STRIAL UNITS, ETC., WILL BE DETERMINED AS IF SUCH UNITS WERE AN I NDEPENDENT UNIT OWNED BY A TAXPAYER WHO DOES NOT HAVE ANY OTHER SOU RCE OF INCOME. IN THE RESULT, THE LOSSES, DEPRECIATION AND INVESTMENT ALLOWANCE OF EARLIER YEARS IN RESPECT OF THE NEW IN DUSTRIAL UNDERTAKING, SHIP OR APPROVED HOTEL WILL BE TAKEN I NTO ACCOUNT IN DETERMINING THE QUANTUM OF DEDUCTION ADMISSIBLE UND ER 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 RE VENUE. WE ARE, THEREFORE, OF THE VIEW THAT LOSS IN THE YEAR EARLIE R TO THE INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NATIONALLY BROUGHT FORWARD AND SET OFF AG AINST 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 ORD ER OF THE TRIBUNAL AND ANSWER ALL THE QUESTIONS IN FAVOUR OF THE APPEL LANT/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 15 HAVING REGARD TO ABOVE DISCUSSION AND RESPECTFULLY FOLLOWING THE DECISION OF MADRAS HIGH COURT IN THE CASE OF VELAYU DHASWAMY (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 B E DELETED. THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. 7. A PERUSAL OF THE ABOVE FINDING WOULD INDICATE T HAT IT IS BASED PRIMARILY ON THE DECISION OF THE HONBLE MADRAS HIGH COURT AN D THAT DECISION HAS BEEN UPHELD BY THE HONBLE SUPREME COURT ALSO. AS FAR A S 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 SE LECTED FROM THE YEAR OF MANUFACTURING, WAS NOT APPROVED BY THE BOARD. CONS IDERING 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 DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER