DCIT 8(3), MUMBAI V. SUN-N-SAND HOTEL (SHIRDI) P. LTD, MUMBAI

ITA 3063/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4002 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K NAYAK
• Keywords: Depreciation; Question of law; Capital receipt; Unabsorbed depreciation
• Section: 143(3); 260A

Judgement Text

1 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI , , BEFORE SHRI B R BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER ITA NO. 2388 /MUM/201 4 (ASSESSMENT YEAR 200 6 - 07 ) ITA NO. 2 389 /MUM/201 4 (ASSESSMENT YEAR 2007 - 08 ) ( ) SUN - N - SAND HOTEL ( SHIRDI ) PVT LTD , 39, JUHU BEACH, MUMBAI - 400 049 PAN: AABCS 3521 J VS DCIT CIR. 8(3), 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI A K NAYAK ITA NO. 3063/MUM/2014 (ASSESSMENT YEAR 2007 - 08 ) DCIT CIR. 8(3), 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400 020 VS ( ) SUN - N - SAND HOTEL ( SHIRDI ) PVT L TD , 39, JUHU BEACH, MUMBAI - 400 049 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A K NAYAK RESPONDENT BY : SHRI PRAKASH JOTWANI /DATE OF HEARING : 13 - 04 - 201 6 /DATE OF PRONOUNCEMENT : 13 - 04 - 2016 ORDER , . : - PER AMIT SHUKLA, J. M. : T HE AFORESAID APPEAL S HA VE BEEN FILED BY THE ASSESSEE AGAINST COMMON ORDER DATED 21 ST APRIL , 2013 PASSED BY CIT(A) - 18, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 2 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 143(3) . IN BOTH THE APPEALS, S IMILAR GROUNDS HAVE BEEN RAISED. A CCORDINGLY, FOR THE SAKE OF READY REFERENCE GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2006 - 07 ARE REPRODUCED HEREIN BELOW: - TAXING OF SALES TAX BENEFIT RECEIVED UNDER POWER POLICY IN RESPECT OF WIND MILLS: ( A ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) (CIT(A)) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF TREATING THE SALES TAX SUBSIDY BEING SALES TAX BENEFIT OF RS.74,67,780/ - AS REVENUE RECEIPT LIABLE TO TAX WHICH WAS RECEIVED BY THE APPELLANT UNDER POWER POLICY OF THE STATE GOVERNMENT AS INCENTIVE FOR SETTING UP WINDMILLS IN THE MAHAR ASHTRA STATE. HE FURTHER ERRED IN NOT ACCEPTING THE CONTENTIONS OF THE APPELLANT THAT THE SAID RECEIPT WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. ( B ) THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE SAID LIABILITY WAS FOR THE PURPOSE OF GIVING AN INC ENTIVE TO SET UP THE INFRASTRUCTURE IN THE FORM OF WINDMILL TO GENERATE POWER IN THE STATE AND NOT TO MEET THE COST OF THE WINDMILL OR TO AUGMENT THE PROFIT OF THE APPELLANT AND AS SUCH APPLYING THE PURPOSE TEST AS DEFINED BY THE SUPREME COURT IN THE CAS E OF CIT VERSUS PONNI SUGARS & CHEMICALS LTD {[2008] 306 ITR 392 (SC)}, THE SAME WAS IN THE NATURE OF CAPITAL SUBSIDY NOT LIABLE TO TAX. 2. AT THE OUTSET, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT, THIS ISSUE STANDS DECIDED AGAINST THE ASSESSEE AND MATTER IS SUB JUDICE BEFORE THE HONBLE HIGH COURT. A COPY OF DECLARATION UNDER SECTION 158(1) FOR THE ASSESSMENT YEAR 2006 - 07, 2007 - 08 AND 2008 - 09 HAVE BEEN SUBMITTED BY THE ASSESSEE BEFORE THE TRIBUNAL. ON SUCH A N APPLICATION, A REPORT FROM DEPARTMEN T UNDER SECTION 158A(2) DATED 11.04.2016 HAS ALSO BEEN PUT ON RECORD. ON THE PERUSAL OF THE REPORT, WE FIND THAT THE ISSUE INVOLVED IN ASSESSEES APPEAL BOTH FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 ARE IDENTICAL TO THE ISSUE INVOLVED IN THE APP EAL OF THE ASSESSEE WHICH IS S UB JUDICE BEFORE THE HONBLE HIGH COURT FOR THE ASSESSMENT YEAR 2005 - 06. THE RELEVANT REPORT OF THE REVENUE FILED BEFORE US READS AS UNDER: - 3 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 THE COPIES OF DECLARATION UNDER SECTION 158A(1) FOR AYS 2006 - 07, 2007 - 08 & 2008 - 09 SUBMITTED BY THE ASSESSEE BEFORE THE ITAT AND APPEAL FILED BY THE ASSESSEE UNDER SECTION 260A FOR AY 2005 - 06 VIDE ITA NO.1167 OF 2014, HAVE BEEN PERUSED. THE ASSESSEES CONTENTION IS THAT ITS GROUND OF APPEAL AGAINST THE CIT(A) CONFIRMING THE ADDITIONS MA DE BY TREATING SALES TAX BENEFIT AS REVENUE RECEIPT IN AY 2005 - 06, 2006 - 07 & 2008 - 09 RESPECTIVELY, IS IDENTICAL TO THE QUESTION OF LAW INVOLVED IN ITS APPEAL FILED U/S 260A BEFORE THE HONBLE BOMBAY HIGH COURT, FOR AY 2005 - 06, WHICH IS PENDING AS ON DATE. THE YEAR - WISE ADDITIONS MADE IN RESPECT OF SALES - TAX SUBSIDY ARE AS UNDER: AY 2006 - 07 RS.74,67,780/ - AY 2007 - 08 RS.58,08,273/ - AY 2008 - 09 RS.56,00,835/ - 3. ON PERUSAL OF THE CASE RECORDS, IT IS NOTICED THAT IN THE RETURN OF INCOME FOR AY 2005 - 06, THE SALES TAX BENEFIT OF RS.65,55,051/ - RELATED TO THE ASSESSEES WIND FARM PROJECT IN MAHARASHTRA, WAS TREATED BY THE ASSESSEE AS A CAPITAL RECEIPT. THE SAID RECEIPT WAS ON ACCOUNT OF TRANSFER OF SALES TAX BENEFIT/ ENTITLEMENT TO M/S TATA MOTORS LTD. UNDER THE AGREEMENT FOR TRANSFER OF SALES TAX INCENTIVE AVAILABLE FROM WIND FARM PROJECT. IN THE ASSESSMENT ORDER, THE SAID AMOUNT WAS TAXED AS REVENUE RECEIPT. THE CIT(A) AND THE ITAT CONFIRMED THE TAXING OF THE SAID BENEFIT AS REVENUE RECEIPT. 4. S IMILARLY IN AYS 2006 - 07, 2007 - 08 & 2008 - 09, THE SALE TAX BENEFIT OF RS.74,67,780/ - , RS.58,08,273/ - & RS.56,00,835/ - RESPECTIVELY, HAS BEEN CLAIMED TO BE CAPITAL RECEIPT BY THE ASSESSEE, WHICH HAS BEEN TAXED AS REVENUE RECEIPT IN THE ASSESSMENT ORDER. HENCE , THE AGREEMENT FOR TRANSFER OF SALES TAX INCENTIVE WAS WITH ANOTHER CONCERNS, M/S JEWEL OF INDIA, 4 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 M/S PADMASHREE DR. V V PATIL SAHAKARI SAKHAR KARKHANA LTD AND CROMPTON GREAVES LTD. THE CIT(A) HAS CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE AND THE ASSES SEE IS IN APPEAL BEFORE THE ITAT. 5. IN THE LIGHT OF THE ABOVE FACTS, THE ASSESSEES CONTENTION THAT THE ISSUE INVOLVED IN THE GROUND OF APPEAL IN ASSESSEES APPEAL NOS. 2388 TO 2396/M/2012 BEFORE THE ITAT FOR AYS 2006 - 07 TO 2008 - 09 RESPECTIVELY (COPIES OF GROUNDS OF APPEAL FOR THE THREE ASSESSMENT YEARS ARE ENCLOSED), IS FOUND TO BE IDENTICAL TO THE ISSUE INVOLVED IN ITS PENDING APPEAL U/S 260A BEFORE THE HIGH COURT IN APPEAL NO.ITXA/1167/2014 FOR AY 2005 - 06 (COPIES OF STATEMENT OF FACTS AND QUESTION OF LAW ARE ENCLOSED). THE ONLY DIFFERENCE IN THE TWO APPEALS, AS POINTED IN PARA NO.7, IS IN THE NAME OF THE PURCHASER OF SALES TAX BENEFIT AND THE AMOUNTS. 3. THUS, WE HOLD THAT, WHATEVER WOULD BE THE DECISION OF HONBLE HIGH COURT O N THE ISSUES INVOLVED IN THE APPEAL FOR AY 2005 - 06 WHICH IS PENDING, THE SAME SHALL BE APPLIED FOR THE APPEAL S UNDER CONSIDERATION. ACCORDINGLY, THE ASSESSEE SHALL NOT BE ENTITLED TO FURTHER RAISE THIS QUESTION IN APPEAL BEFORE THE HONBLE HIGH COURT IN THIS YEAR. WITH THIS OBS ERVATION, WE HOLD THAT AS OF NOW, THE ISSUE STANDS DECIDED AGAINST THE ASSESSEE I N VIEW OF THE EARLIER DECISION OF THE TRIBUNAL . T HUS, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS DISMISSED IN BOTH THE APPEALS. ACCORDINGLY , GROUNDS RAISED BY THE ASSES SEE FOR AY 2006 - 07 AND AY 2007 - 08 STANDS DISMISSED . 4. NOW, WE WILL TAKE - UP REVENUES APPEAL BEING ITA NO.3063/MUM/20 14, VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED: 5 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 ( I ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.84,94,041/ - MADE U/S 40IA(4)(IV) OF THE ACT FOR AY 2007 - 08 HOLDING THAT THE PROVISIONS OF SECTION 80IA(5) WERE NOT APPLICABLE FOR THE LOSS AND UNABSORBED DEPRECIATION FOR THE YEARS PRIO R TO THE INITIAL YEAR OF CLAIM. ( II ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PVT LTD [2012] (340 ITR 477)(MAD.), JUDGMENT OF CHENNAI TRIBUNAL IN THE CASE OF MOHAN BREWERIES & DISTILLERIES LTD [2009] (311 ITR (AT) 346) (CHENNAI). ( III ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THESE JUDICIAL PRONOUNCEMENTS WERE RENDERED WITHOUT HAVING BEEN INFORMED ABOUT CERTAIN STATUTORY PROVISIONS (SUCH AS THE NON - OBSTANTE CLAUSE OF SECTION 80IA) THAT ARE DIRECTLY RELEVANT. ( IV ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN IGNORING THE RATIO L AID DOWN BY DECISIONS IN THE CASES OF ACIT VS GOLD MINE SHARES & FINANCE (P) LTD. [112 ITD 209 (SB)(AHD)] AND M/S. HYDERABAD CHEMICALS SUPPLIES LTD VS ACIT (ITAT HYDERABAD) IN ITA NO.352/HYD/2005 DATED 21.01.2011, WHEREIN IT IS HELD THAT DESPITE ABSORPTION IN EARLIER YEARS, LOSS OF ELIGIBLE UNITS WAS TO BE SET OFF AGAINST THE PROFITS BEFORE COMPUTING DEDUCTION U/S 80IA(4). ( V ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW, THE LD. CIT(A) ERRED IN IGNORING THE DECISION OF JURISDICTIONAL ITAT, MUMBAI IN THE CASE OF HERCULES HOISTS LTD. VS ACIT [ITA NOS. 7944, 7946, 2255 & 7943/MUM/2011] WHEREIN THE TRIBUNAL HAD ALSO HELD THAT THE UNABSORBED DEPRECIATION / BUSINESS LOSS IS TO BE NOTIONALLY CARRIED FORWARD AND SET OFF AGAINST THE PROFITS OF ELIGIBLE UNI TS U/S 80IA(5) FOR THE PURPOSE OF DEDUCTION U/S 80IA OF THE INCOME - TAX ACT, 1961. 5 . BRIEF FACTS QUA THE ISSUE S INVOLVED ARE THAT ASSESSEE COMPANY IS INTER ALIA ENGAGED IN THE BUSINESS OF POWER GENERATION FROM WINDMILL, WHICH IS SET UP IN SUPA, MAHARASHTRA. THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.24,15,697/ - U/S 80IA(4)(IV) IN 6 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 RESPECT OF PROFITS AND GAINS DERIVED FROM THE ABOVE WIND MILL UNDERTAKING IN THE RET URN OF INCOME FOR AY 2007 - 08. IN THE COMPUTATION OF INCOME, DEDUCTION U/S 80IA AT RS.24,15,697/ - WAS MADE AFTER NOTIONALLY SETTING OFF THE BROUGHT FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSS OF THE SAID WINDMILL UNDERTAKING FROM THE EARLIER YEARS. LA TER ON, ASSESSEE MADE A REVISED CLAIM DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO THAT SUCH A NOTIONAL SET OFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSS I S NOT CORRECT IN VIEW OF A RECENT DECISION OF THE CHENNAI TRIBUNAL IN THE CASE OF MOHAN BREWERI ES & DISTILLERIES LTD. REPORTED IN [2009] 116 ITD 241 (CHENNAI) WHICH HAS FOLLOWED THE DECISION AND THE RATIO OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P LTD VS ACIT, REPORTED IN [2012] 340 ITR 477 (MAD) . THERE ARE OTHER TRIBUNAL DECISIONS ALLOWING THE SAID CLAIM. THE REVISED DEDUCTION U NDER S ECTION 80IA WAS CLAIMED AT RS.34,26,380/ - INSTEAD OF RS.24,15,697/ - , THAT IS, WITHOUT SETTING OFF THE LOSS AND DEPRECIATION WHICH WAS ALREADY SET OFF AGAINST INCOME FROM OTHER BUSIN ESS IN EARLIER YEARS. 6 . THE LD. AO DENIED THE ASSESSEES REVISED CLAIM OF DEDUCTION U/S 80IA AND HELD THAT ASSESSEE IS ONLY ELIGIBLE FOR THE CLAIM AS MADE IN THE RETURN OF INCOME. 7 . IN THE FIRST APPEAL, THE LD. CIT(A) HELD THAT THE ASSES S EES REVISED CLAIM IS SQUARELY COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P LTD ( SUPRA ) AND ACCORDINGLY, HE GRANTED THE RELIEF TO THE ASSESSEE BY ALLOWING THE REVISED CLAIM OF DEDUCTION. 8. BEFORE US, LD. DR STRO NGLY RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT, SUCH A CLAIM IS NOT SUSTAINABLE, BECAUSE THE ASSESSEE ITSELF HAS MADE A CLAIM OF DEDUCTION OF RS.24,15,697/ - AND IT CANNOT REVISE ITS CLAIM LATER ON. 7 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 9 . BEFORE US, THE LD. COUNSEL SUBMITTED THAT, TH E CLAIM OF THE ASSESSEE IS IN LINE WITH THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P LTD ( SUPRA ) AND ALSO IN CONSONANCE OF THE ITAT MUMBAI BENCH IN THE CASE OF SHEVIE EXPORTS VS JCIT, REPORTED IN [2013] 33 TAXMA NN.COM 446. NOW, THE CBDT HAS ISSUED A CIRCULAR NO.1 OF 2016 DATED 15.02.2016 CLARIFYING THAT INITIAL ASSESSMENT YEAR MEANS, THE YEAR IN WHICH THE ASSESSEE OPTS TO CLAIM DEDUCTION U/S 80IA FOR THE FIRST TIME AND NOT THE YEAR WHEN THE ELIGIBLE ACTIVIT Y IS S TARTED. THE FICTION IN SECTION 80IA (5) OF THE ACT OPERATES ONLY FROM YEAR SUBSEQUENT TO THE INITIAL ASSESSMENT YEAR. ON THE MERITS, HE SUBMITTED THAT, THE ASSESSEE HAD INITIALLY CLAIMED A DEDUCTION U/S 80IA(4)(IV) AT RS.24,15,697/ - AFTER SETTING OFF OF BUS INESS LOSS AND UNABSORBED DEPRECIATION OF RS.84,94,041/ - ON A NOTIONAL BASIS, THOUGH ACTUAL AMOUNT OF CARRIED FORWARD OF LOSS AND DEPRECIATION ALLOWANCE WAS ONLY RS.74,83,358/ - . T HE WORKING OF CLAIM OF RS.24,15,697/ - ORIGINALLY WAS MADE IN THE FOLLOWING MA NNER: - ASST YEAR PARTICULARS AMOUNT RS. AMOUNT RS. 2002 - 03 NET INCOME FROM WINDMILL UNIT 1,10,298 LESS: IT DEPRECIATION ON WINDMILL (2,45,00,000) UNABSORBED DEPRECATION FOR THE YEAR C/F (2,43,89,702) 2003 - 04 NET INCOME FROM WINDMILL 1,03,89,856 LESS: IT DEPRECIATION ON WINDMILL FOR THE YEAR (1,96,00,000) LOSS FOR THE YEAR C/F (92,10,144) TOTAL UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (3,35,99,846) 2004 - 05 NET INCOME FROM WINDMILL 90,61,231 LESS: IT DEPRECIATION ON WINDMILL FOR THE YEAR (39,20,000) PROFIT FOR THE YEAR 51,41,231 51,41,231 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (2,84,58,615) 2005 - 06 NET INCOME FROM WINDMILL 93,10,819 LESS: IT DEPRECIATION ON WINDMILL FOR THE YEAR (7,84,000) PROFIT FOR THE YEAR 85,26,819 85,26,819 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (1,99,31,796) 8 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 ASST YEAR PARTICULARS AMOUNT RS. AMOUNT RS. 2006 - 07 NET INCOME FROM WINDMILL UNIT 1,15,94,555 LESS: IT DEPRECIATION ON WINDMILL FOR THE YEAR (1,56,800) PROFIT FOR THE YEAR 1,14,37,755 1,14,37,755 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (84,94,041) 2007 - 08 NET INCOME FROM WINDMILL 1,09,41,098 LESS: IT DEPRECIATION ON WINDMILL FOR THE YEAR (31,360) PROFIT FOR THE YEAR 1,09,09,738 1,09,09,738 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD NIL DEDUCTION CLAIMED U/S 80IA 24,15,697 LATER ON, THE ASSESSEE BEFORE THE AO CLAIMED THAT, DEDUCTION UNDER SECTION 80IA SHOULD BE ALLOWED WITHOUT SETTING OFF THE BROUGHT FORWARD LOSS AND DEPRECIATION ON NOTIONAL BASIS BUT ON ACTUAL BASIS. HE SUBMITTED THAT, A PART OF THE DEPRECIATION ALLOWANCE FROM AY 2002 - 03 HAS BEEN ADJUSTED AGAINST OTHER INCOME BY THE COMPANY AND ACTUAL UNABSORBED DEPRECIATION AFTER SUCH SET OFF OF AT THE BEGINNING OF AY 2007 - 08 WAS RS.74,83,358/ - WHICH WORKED OUT IN THE FO LLOWING MANNER: - ASST YEAR PARTICULARS AMOUNT RS. AMOUNT RS. 2002 - 03 UNABSORBED DEPRECIATION OF WINDMILL UNDERTAKING FOR THE YEAR (2,43,89,702) LESS: INCOME FROM OTHER BUSINESS, CAPITAL GAIN 7,88,965 BALANCE DEPRECIATION FOR THE YEAR C/F (2,36,00,737) 2003 - 04 UNABSORBED DEPRECIATION OF WINDMILL UNDERTAKING FOR THE YEAR (92,10,144) LESS: NET INCOME FROM OTHER BUSINESS, CAPITAL GAIN AND OTHER SOURCES FOR THE YEAR 54,817 NET LOSS FOR THE YEAR (91,55,327) 2004 - 05 NET INCOME FROM WINDMILL BUSINESS 51,41,231 NET LOSS FROM OTHER BUSINESS AND OTHER INCOME (2,39,266) NET INCOME FOR THE YEAR BEFORE SET OFF 49,01,965 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (2,78,54,099) 2005 - 06 NET INCOME FROM WINDMILL UNDERTAKING 85,26,819 INCOME FROM OTHER BUSINESS 3,38,265 GROSS TOTAL INCOME BEFORE SET OFF 88,65,064 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (1,89,89,035) 9 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 ASST YEAR PARTICULARS AMOUNT RS. AMOUNT RS. 2006 - 07 NET INCOME FROM WINDMILL UNDERTAKING 1,14,37,755 INCOME FROM OTHER BUSINESS 67,925 GROSS TOTAL INCOME BEFORE SET OFF 1,15,05,680 BALANCE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD (78,83,355) 2007 - 08 NET INCOME FROM WINDMILL UNDERTAKING 1,09,09,738 INCOME FROM OTHER BUSINESS, CAPITAL GAIN ETC. 1,35,398 GROSS TOTAL INCOME AFTER SET OFF 35,61,778 DEDUCTION AVAILABLE U/S 80IA 1,09,09,738 BUT RESTRICTED TO GROSS TOTAL INCOME AFTER SET OFF IN VIEW OF PROVISIONS OF SECTION 80 - A(2) (74,83,355) 34,26383 HE FURTHER SUBMITTED THAT, NOW IN VIEW OF THE CBDT CIRCULAR NO.1 OF 2016 THE COMPANY IS NOW ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA IS RS.34,26,385/ - WHICH IS BASED ON SET OFF OF ACTUAL DEPRECATION AT THE BEGINNING OF THE ASSESSMENT YEAR 2007 - 08. THUS, THE DIFFERENCE BETWEEN THE CORRECT AMOUNT OF DEDUCTION UNDER SECTION 80IA AS PER THE CIRCULAR SHOULD BE RS.34,26,383/ - OUT OF WHICH DEDUCTION ALREADY ALLOWED BY THE AO IS AT RS.24,15,697/ - WILL COME TO RS.10,10,681/ - . 10 . AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE LD. COUNSEL AND ALSO ON THE PERUSAL OF THE RELEVANT FINDING GIVEN IN T HE IMPUGNED ORDERS, WE FIND THAT CBDT VIDE ITS CIRCULAR NO.1 OF 2016 ( SUPRA ) HA S CLARIFIED THE CONCEPT OF INITIAL ASSESSMENT YEAR IN THE FOLLOWING MANNER: SECTION 80IA OF THE INCOME TAX ACT, 1961 [ACT], AS SUBMITTED BY THE FINANCE ACT,1999 WITH EFFECT F ROM 01.04.2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FORM THE ELIGIBLE BUSINESS [AS REFERRED TO IN SUB - SECTION (4) OF THAT SECTION) IN ACCORDANCE WITH THE PRESCRIBED PROVISIONS. SUB - SECTION (2) OF SECTION 80IA FURTHER PROVIDES THAT THE AFORESAID DEDUCTION CAN BE CLAIMED BY THE ASSESSEE, AT HIS OPTION, FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS (TWENTY YEARS IN CERTAIN CASES) BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING COMMENCES OPERATION, BEGINS DEVELOPMENT OR STARTS PROVIDING SERVICES ETC. AS STIPULATED THEREIN. SUB - SECTION (5) OF SECTION 80IA FURTHER PROVIDES AS UNDER 10 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 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 YEA R OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH 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. IN THE ABOVE SUB - SECTION, WHICH PRESCRIBES THE MANNER OF DETERMINING THE QUANTUM OF DEDUCTION, A REFERENCE HAS BEEN MADE TO THE TERM INITIAL ASSESSMENT YEAR. IT HAS BEEN REPRESENTED THAT SOME ASSESSING OFFICERS ARE INTERPRETING THE TERM INITIAL ASSESSMENT YEAR AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/MANUFACTURING ACTIVITY HAD COMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATION ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLEAR MANDATE PROVIDED UNDER SUB - SECTION 92) WHICH ALLOWS A CHOICE TO THE ASSESS EE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION OUT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS ABUNDANTLY CLEAR FROM SUB - SECTION (2) THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONS ECUTIVE YEARS, OUT OF SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB - SECTION. IT IS HEREBY CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U/S 80IA FOR TEN CONSEC UTIVE YEARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM INITIAL ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIM ING DEDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DEDUCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED CONTINUITY. THE ASSESSING OFFICERS ARE, TH EREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTER BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULAR CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U/S 80IA SH ALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INTERPRETING INITIAL 11 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 ASSESSMENT YEAR AS MENTIONED IN SUB - SECTION (5) OF THAT SECTION FOR WHICH THE STANDING COUNSELS/DRS BE SUITABLY INSTRUCTED. THIS CIRCULAR IS IN LINE WITH THE DECISION OF MA DRAS HIGH COURT AND THE ITAT MUMBAI BENCH DECISION IN THE CASE OF SHEVIE EXPORTS ( SUPRA ). 11. THUS, WHEN THE INITIAL ASSESSMENT YEAR IS CHOSEN BY THE ASSESSEE, FROM THEN ONLY HE IS ENTITLED TO CLAIM DEDUCTION U/S 80IA FOR THE 10 CONSECUTIVE YEARS BEGINNIN G FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH AN OPTION SUBJECT TO THE FULFILLMENT OF CONDITION PRESCRIBED IN THE SECTION. NOW, AS ADMITTED BY THE LD. COUNSEL THE ASSESSEE HAS CHOSEN AY 2007 - 08 AS THE INITIAL ASSESSMENT YEAR AND HAS ALSO FILED THE WORKING OF DEDUCTION AS GIVEN ABOVE FROM THE WORKING THE ASSESSEE COMPANY WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA AT RS.34,26,383/ - BASED ON SET OFF OF ACTUAL UNABSORBED DEPRECIATION AT THE BEGINNING OF AY 2007 - 08 . H ENCE, THE CORRECT AMOUNT OF DEDUCTION FOR WHICH THE ASSESSEE IS ENTITLED TO IN ACCORDANCE WITH THE CBDT CIRCULAR NO.1 OF 2016 WOULD BE RS.34,26,383/ - . THE AO IS THUS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80IA TO RS.34,26,383/ - , TO W HICH IT IS ENTITLED TO AS PER LAW. ACCORDINGLY REVENUES APPEAL IS DISMISSED. 1 2 . IN THE RESULT, APPEAL OF THE REVENUE STANDS DISMISSED. TO SUM - UP: APPEAL OF THE ASSESSEE FOR AY 2006 - 07 AND 2007 - 08 AS WELL AS REVENUES APPEAL FOR AY 2007 - 08 STANDS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2016. SD/ - SD/ - ( ) ( ) (B R B ASKARAN ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER 12 ( ) SUN - N - SAND HOTEL (SHIRDI) PVT LTD ITA NO. 2388/MUM/2014 ITA NO. 2389/MUM/2014 ITA NO. 3063/MUM/2014 MUMBAI, DATE: 13 TH APRIL, 2016 /COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT(A) - 18 , MUMBAI. 4 ) THE COMMISSIONER OF INCOME TAX - 8 , MUMBAI. 5 ) , , / THE D.R. E BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS