THE TATA POWER CO. LTD, MUMBAI V. ITO RG 2(1)(1), MUMBAI

ITA 3078/MUM/2009

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3681 (ITAT-MUMBAI)
• Duration Of Justice: 7 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 12-02-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 11-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: DINESH VYAS
• Keywords: Business income; Depreciation; Audit objection; Source of fund; Additional evidence; Tangible material; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 80C; 143(3); 142(1); 148; 154

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 3078 /MUM/2009 ( / ASSESSMENT YEAR : 2002-03) THE TATA POWER CO. LTD, CORPORATE CENTER, BLOCK B, 5 TH FLOOR, 34, SANT TUKARAM ROAD, CARNAC BUNDER, MUMBAI 400 009. / V. THE ASST. COMMISSIONER OF INCOME TAX- CIRCLE 2(3),AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI 400 020. ./ PAN : AAACT0054A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI DINESH VYAS REVENUE BY : SHRI MANJUNATHA SWAMY, CIT DR / DATE OF HEARING : 23-2-2016 / DATE OF PRONOUNCEMENT : 19-05-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE COMPANY, BEING ITA NO. 3078/MUM/2009, IS DIRECTED AGAINST THE APPELLATE OR DER DATED 27-2-2009 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)- XXX, MUMBAI (HEREINAFTER CALLED THE CIT(A) ), FOR THE ASSESSM ENT YEAR 2002-03, THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) ARISING FRO M THE ASSESSMENT ORDER DATED 25 TH OCTOBER, 2006 PASSED BY THE LEARNED ASSESSING OFFI CER (HEREINAFTER ITA 3078/MUM/2009 2 CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOM E TAX ACT,1961(HEREINAFTER CALLED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE COM PANY IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READS AS UNDER:- THE APPELLANT OBJECTS TO THE ORDER DATED 27TH FEBRUAR Y, 2009 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) XXX, MUM BAI (HEREINAFTER REFERRED TO AS THE CIT(A)) FOR THE AFORESAID ASSESSME NT YEAR ON THE FOLLOWING GROUNDS :- 1. THE LEARNED CIT(A) ERRED IN REOPENING THE ASSESSM ENT UNDER SECTION 147 OF THE ACT. THE APPELLANT SUBMITS THAT THE REASSESSMENT HAS BEEN D ONE MERELY ON THE BASIS OF CHANGE OF OPINION. 2.THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE F ACT THAT DEDUCTION UNDER SECTION 80IA HAS BEEN CORRECTLY ALLOWED IN THE ASSESSMENT ORDER WITH REFERENCE TO THE PROFITS OF 67.5 MW UNIT WITHOUT CONSIDERING THE UNABSORBED DEPRECIATION OF THAT UNIT FOR EARLIER ASSES SMENT YEARS, SINCE SUCH UNABSORBED DEPRECIATION HAS BEEN SET OFF AGAINST OTHER INCOME IN EARLIER YEARS. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT DESPITE SECTION 80IA(5), THE REQUIREMENT TO TREAT THE UNDERTAK ING AS THE ONLY BUSINESS OF THE ASSESSEE IS FROM THE 'INITIAL ASSESS MENT YEAR' AND NOT FROM THE YEAR OF COMMENCEMENT OF GENERATION/DISTRIBU TION OF POWER. 4. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WITHOU T PREJUDICE TO THE OTHER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME ON 30 TH OCTOBER, 2002 , WHICH WAS REVISED BY THE ASSESSEE COMPANY ON 31 ST MARCH, 2004. THE RETURN WAS FIRSTLY PROCESSED U/S 143(1) OF THE ACT AND THERE-AFTER ASSESSMENT WAS ORIGINALLY COMPLETED BY THE AO U/S 143(3) OF THE ACT ON 24/02/2005. ITA 3078/MUM/2009 3 4. THEREAFTER, IT WAS NOTICED BY THE AO FROM THE RE CORDS THAT THE ASSESSEE COMPANY HAD CLAIMED AND BEEN ALLOWED DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF JOJOBERA 67.5 MW UNIT TREATING THE IMPUG NED ASSESSMENT YEAR 2002-03 AS THE INITIAL ASSESSMENT YEAR, ALTHOUGH THE PLANT WAS INSTALLED IN THE ASSESSMENT YEAR 1997-98. AS PER THE PROVISIONS OF SECTION 80IA(5) THE PROFITS AND GAINS OF SUB-SECTION (1) SHALL FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION U/S. 80IA FOR THE ASSESSMENT Y EAR IMMEDIATELY SUCCEEDING INITIAL ASSESSMENT YEAR OR ANY SUBSEQUEN T ASSESSMENT YEAR BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE TAX-PAYER DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEARS. THUS AS PER THE AO, IN VIEW OF THE ABOVE PROVISIONS OF LAW , THE BROUGHT FORWARD U NABSORBED DEPRECIATION/LOSSES OF THE UNIT JOJOBERA 67.5MW PER TAINING TO EARLIER YEARS SHOULD HAVE BEEN SET OFF AGAINST THE PROFIT OF THE CURRENT YEAR TO COMPUTE DEDUCTION U/S 80IA OF THE ACT. SINCE , THERE WAS O MISSION TO SET OFF THE BROUGHT FORWARD LOSSES WHILE COMPUTING DEDUCTION U/ S 80IA OF THE ACT, THE CASE WAS REOPENED U/S 147 OF THE ACT BY ISSUE OF NO TICE U/S 148 OF THE ACT AND THE ASSESSEE COMPANY RESPONDED VIDE LETTER DATE D 22 ND JUNE, 2005 ASKING FOR THE REASONS FOR REOPENING WHICH WAS PROV IDED TO THE ASSESSEE COMPANY ON 27 TH JULY, 2006 AS CLAIMED BY THE REVENUE. ( WE WILL SE E LATER IN THIS ORDER THAT THIS FINDINGS RECORDED IN THE ASSES SMENT ORDER BY THE REVENUE HAS BEEN CHALLENGED BY THE ASSESSEE COMPANY . )THE ASSESSEE COMPANY VIDE LETTER DATED 7 TH AUGUST, 2006 HAS SUBMITTED THAT THE ORIGINAL RETUR N OF INCOME FILED BY THE ASSESSEE COMPANY MAY BE TREATED AS RET URN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. THEREAFTER, NOTICE U/S 143(2) R.W.S. 142(1) OF THE ACT WAS ISSUED AND SERVED UPON THE AS SESSEE COMPANY FROM TIME TO TIME. THE ASSESSEE COMPANY VIDE LETTER DAT ED 15 TH SEPTEMBER, 2006 SUBMITTED AS UNDER:- ITA 3078/MUM/2009 4 AT THE OUTSET, WE SUBMIT THAT DEDUCTION U/S. 80IA HAS BEEN CORRECTLY ALLOWED IN THE ASSESSMENT ORDER WITH REFERENCE TO THE PROFITS OF 67.5 MW UNIT WITHOUT CONSIDERING THE UNABSORBED DEPRECIATIO N OF THAT UNIT FOR EARLIER ASSESSMENT YEARS, SINCE SUCH UNABSORBED DEPRECIATION HAS BEEN SET OFF AGAINST OTHER INCOME IN EARLIER YEARS. OUR DETAILED SUBMISSIONS ARE AS UNDER: AS PER THE PROVISIONS OF SUB-SECTIONS(L) AND (2) OF SECTION 80LA, AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF 100% OF THE PROFITS AND GAINS FROM THE SPECIFIED BUSINESS FOR TEN CONSECUTIVE ASSES SMENT YEARS. THE DEDUCTION MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIME D BY HIM FOR ANY 10 CONSECUTIVE YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING GENERATES POWER. THE GUIDELINES FOR COMPUTING THE PROFITS OF THE ELIGIB LE UNDERTAKING ARE LAID DOWN IN SEC. 80IA(5) WHICH SPECIFIES THAT THE QU ANTUM OF DEDUCTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE I NITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED A S 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 UPTO AND INCLUDING THE ASSE SSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE IMMEDIATELY. THE REQUIREMENT OF SEC.80IA(5) MAKES IT IMPERATIVE TO D ETERMINE THE INITIAL ASSESSMENT YEAR AND THE PROFITS OF THE UNDERTA KING IN THAT ASSESSMENT YEAR ON A STANDALONE BASIS. IT IS PERTINENT TO NOTE THAT THE UNDERTAKING IS TO BE TREAT ED AS THE ONLY SOURCE OF INCOME FROM THE 'INITIAL ASSESSMENT YEAR'. THE TERM 'INITIAL ASSESSMENT YEAR' HAS NOT BEEN DEFINED IN SEC.80IA. HOWEVER, A SIMILAR PROVISION FOR DEDUCTION IN ANY T EN CONSECUTIVE ASSESSMENT YEARS OUT OF TWELVE/TWENTY YEARS WAS AVAI LABLE IN RESPECT OF OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILITY UNDER THE EARLIER SECTION 80IA. THE 'INITIAL ASSESSMENT YEAR' IN SUCH A CASE WAS DEFINED TO MEAN THE ASSESSMENT YEAR SPECIFIED AT THE OPTION OF THE ASSESSEE TO BE THE INITIAL YEAR, NOT FALLING BEYOND THE TWELFTH ASS ESSMENT YEAR STARTING FROM THE PREVIOUS YEAR IN WHICH THE ENTERPRIS E BEGINS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. ON THE SAME ANALOGY, THE 'INITIAL ASSESSMENT YEAR' UNDE R THE NEW SEC.80IA FOR AN UNDERTAKING ENGAGED IN GENERATION/DI STRIBUTION OF POWER WOULD BE THE ASSESSMENT YEAR SPECIFIED AT THE OPTION OF THE ITA 3078/MUM/2009 5 ASSESSEE TO BE THE INITIAL YEAR, NOT FALLING BEYOND T HE FIFTEENTH ASSESSMENT YEAR STARTING FROM THE PREVIOUS YEAR IN WHI CH THE ENTERPRISE BEGINS TO GENERATE / DISTRIBUTE POWER. THIS VIEW IS FURTHER SUPPORTED BY PARAS 8 AND 9 OF FORM 10CCB WHICH IS THE FORM OF AUDIT REPORT FOR CLAIMING DEDUCTION U/S .80IA WHICH SPECIFIES THE DATE OF COMMENCEMENT OF OPERATION BY T HE UNDERTAKING AND INITIAL ASSESSMENT YEAR FROM WHEN DEDUCTION IS BE ING CLAIMED. IT WAS SUBMITTED BY THE ASSESSEE COMPANY THAT FROM PERUSAL OF THE ABOVE SUBMISSIONS OF THE ASSESSEE COMPANY INDICATES THAT THE INITIAL ASSESSMENT YEAR IS DISTINCT FROM THE PREVIOUS YEAR RELATING T O THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING COMMENCES ITS OPERATIONS AND THE INITIAL ASSESSMENT YEAR CAN BE SPECIFIED AT THE OPTION OF THE ASSESSE E COMPANY. ACCORDINGLY, IT WAS SUBMITTED THAT ONLY FROM THE INITIAL ASSESSMEN T YEAR SPECIFIED BY THE ASSESSEE COMPANY , THE UNDERTAKING WOULD BE TREATED AS IF IT WERE THE ONLY SOURCE OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF THE SUB SECTION (5) OF THE SECTION 80IA OF THE ACT AS SUBMITTED HERE-UNDER BY THE ASSESSEE COMPANY:- TATA POWER HAS SELECTED A. Y.2002-03 AS THE INITIAL ASSESSMENT YEAR IN RESPECT OF JOJOBERA 67.5 MW UNIT. FOR A. Y.2002-03, TH E COMPANY AS A WHOLE HAS NO BROUGHT FORWARD ABSORBED DEPRECIATION. HENCE, WHILST CALCULATING THE PROFITS ATTRIBUTABLE TO JOJOBERA 67.5 M W UNIT, WHICH FORMS PART OF THE TOTAL PROFITS OF THE COMPANY, THE Q UESTION OF SETTING OFF UNABSORBED DEPRECIATION OF EARLIER YEARS DOES N OT ARISE, SINCE SUCH DEPRECIATION HAS ALREADY BEEN SET OFF AGAINST THE PRO FIT OF THE OTHER UNDERTAKINGS OF THE COMPANY IN EARLIER YEARS. IN THIS CONNECTION, WE RELY ON THE FOLLOWING DECISION S: 1. RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MEWAR OIL AND GENERAL MILLS LTD.(186 CTR 141) (COPY ENCLOSED- ANNEX. 1) 2. SUPREME COURT IN THE CASE OF CIT VS. PATIALA FLOUR MILLS CO. P. LTD. (115 ITR 640) ITA 3078/MUM/2009 6 3. SUPREME COURT IN THE CASE OF RAJAPALAYAM MILLS LT D. VS. CIT (115 ITR 777). THE ASSESSEE COMPANY SUBMITTED THAT THE TREATMENT O F THE UNDERTAKING AS THE ONLY BUSINESS OF THE ASSESSEE COMPANY IS FROM THE INITIAL ASSESSMENT YEAR , WOULD BE THE ASSESSMENT YEAR SPECIFIED BY TH E ASSESSEE COMPANY AT ITS OPTION. THEREAFTER, AGAIN THE ASSESSEE COMPANY WAS SHOW CAU SED BY THE AO AS TO WHY THE DEDUCTION U/S 80IA OF THE ACT SHOULD NOT BE COMPUTED AFTER CONSIDERING UNABSORBED DEPRECIATION OF EARLIER YEAR S. THE ASSESSEE COMPANY VIDE ITS LETTER DATED 29 TH SEPTEMBER, 2006 SUBMITTED THAT THE ASSESSMENT YEAR 2002-03 HAS BEEN SELECTED FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT REGARDING JOJOBERA 67.5 MW UNIT AS THE INITIAL ASSESSMENT YEAR. THE ASSESSEE COMPANY SUBMITTED T HAT THERE IS NO BROUGHT FORWARD LOSS/UNABSORBED DEPRECIATION SET OFF AGAINS T THE TOTAL INCOME TO ARRIVE AT THE TOTAL INCOME AS THE SAME HAS ALREADY BEEN SET OFF IN THE EARLIER YEARS AGAINST THE OTHER BUSINESS INCOME OF THE ASSE SSEE COMAPNY. THE ASSESSEE COMPANY SUBMITTED THAT THE TOTAL TAXABLE I NCOME OF THE ASSESSEE COMPANY INCLUDES JOJOBERA 67.5 MW TAXABLE INCOME OF RS.20,70,84,187/- WHICH AMOUNT HAS BEEN CLAIMED BY THE ASSESSEE COMPA NY AS DEDUCTION U/S. 80IA OF THE ACT AND SINCE THERE IS NO BROUGHT FORWA RD LOSS/UNABSORBED DEPRECIATION SET OFF AGAINST THE TOTAL INCOME , TO ARRIVE AT FINAL TAXABLE TOTAL INCOME, NO ADJUSTMENT HAS BEEN MADE TO THE CLAIM U/ S 80IA OF THE ACT FOR THE JOJOBERA 67.5MW POWER UNDERTAKINGS TAXABLE INCOME. THE CONTENTION OF THE ASSESSEE COMPANY WAS REJECTED BY THE A.O. AS IN THE OPINION OF THE A.O. , SECTION 80IA(5) OF THE ACT CL EARLY STIPULATES THE QUANTUM OF DEDUCTION U/S 80IA FOR THE ASSESSMENT YEAR IMMED IATELY SUCCEEDING THE ITA 3078/MUM/2009 7 INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSM ENT YEAR , THE PROFIT AND GAINS FROM THE ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASS ESSEE COMPANY DURING THE FINANCIAL YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP-TO AND INCLUDING THE ASSESSMENT YEAR UP-TO WHICH THE DETERMINATION IS MADE. IT WAS OBSERVED BY THE A.O. THAT THE ASSESSEE COMPANY HAS STARTED ITS JOJOBERA 67.5 MW UNIT POWER GENERATING UNDERTAKING IN THE ASSESSMENT YEAR 1997-98 BUT THE ASSESSEE COMPANY HAS NOT CLAIMED DEDUCTION U/S 80IA OF THE ACT IN ANY OF THESE YEARS AND THE ASSESSEE COMPANY HAS TREATED THE ASSESSMENT YEAR 20 02-03 AS THE INITIAL ASSESSMENT YEAR AND CLAIMED DEDUCTION U/S 80IA OF THE ACT FROM THIS YEAR ONLY. THE A.O. OBSERVED FROM THE VERIFICATION OF T HE RECORD THAT FOR THE EARLIER YEARS , THE ASSESSEE COMPANY WAS HAVING ONLY 50% SH ARE IN TATA ELECTRIC (AOP) UPTO THE ASSESSMENT YEAR 2000-01 OF WHICH THE BALANCE SHARES WAS HELD BY TATA HYDRO 20% AND ANDHRA VALLEY 30%, THERE FORE, UPTO THE ASSESSMENT YEAR 2000-01 THE THREE COMPANIES WERE CO LLECTIVELY CALLED TATA ELECTRIC (AOP) WITH THEIR SHARES DETERMINED AS ABOV E. HOWEVER, FROM THE ASSESSMENT YEAR 2001-02 ALL THE COMPANIES WERE MERG ED UNDER THE ASSESSEE COMPANY WITH 100% SHARE. IN VIEW OF THE ABOVE, WHI LE COMPUTING DEDUCTION U/S 80IA OF THE ACT FOR CONSIDERING THE LOSSES OR I NCOME IN RESPECT OF JOJOBERA 67.5 MW POWER GENERATING UNIT FOR EARLIER YEARS INC OME/LOSSES OF TATA ELECTRIC (AOP) IS TAKEN FROM ASSESSMENT YEARS 1997- 98 TO 2000-01 INSTEAD OF THE INCOME/LOSSES OF THE ASSESSEE COMPANY FOR THE A BOVE ASSESSMENT YEARS. IN THE RELEVANT ASSESSMENT YEARS I.E. 1997-98 TO 20 00-01, THE ASSESSEE COMPANY WAS HOLDING ONLY 50% SHARE IN THE AOP. THER EFORE, INCOME/LOSS IN RESPECT OF JOJOBERA 67.5 MW UNIT ALSO WOULD BE ATTR IBUTABLE TO THE ASSESSEE COMPANY TO THE EXTENT OF 50% ONLY FOR THE ABOVE YEA RS. THUS, THE AO HELD THAT IT WOULD BE FAIR AND RIGHT TO CONSIDER THE LOS SES OF TATA ELECTRIC (AOP) WHICH IS 100% WHILE COMPUTING THE DEDUCTION U/S 80I A OF THE ACT FOR THE INITIAL ASSESSMENT YEAR CONSIDERED BY THE ASSESSE E COMPANY I.E. THE ITA 3078/MUM/2009 8 ASSESSMENT YEAR 2002-03. THUS, THE BROUGHT FORWARD LOSSES WHICH REPRESENTS UNABSORBED DEPRECIATION IN ALL THE YEARS FROM THE ASSESSMENT YEAR 1997-98 OF TATA ELECTRIC (AOP) FOR JOJOBERA 67.5 MW POWER GENERATING UNIT WAS AS UNDER:- B/F LOSS OF A.Y. 1997-98 (-)59,24,89,134 B/F LOSS OF A.Y. 1998-99 (-)39,90,49,303 TOTAL (-)99,15,38,437 A.Y. 1999-2000 13,04,09,597 SET OFF OF B/F LOSSES (-)99,15,38,437 (-)86,11,28,840 A.Y. 2000-01 27,36,07,641 B/F LOSSES (-)86,11,28,840 (-)58,75,21,199 A.Y. 2001-02 (TATA POWER) 15,37,29,761 B/F LOSSES (-)58,75,21,199 (-)43,37,91,438 INCOME FROM JOJOBERA 67.5 MW UNIT FOR A.Y. 2002-03 20,70,84,187 BALANCE LOSS (-)22,67,07,251 THUS IT WAS OBSERVED BY THE AO, IT CAN BE SEEN FROM THE ABOVE THAT FROM THE ASSESSMENT YEAR 1997-98 ONWARDS THE ASSESSEE COMPAN Y HAD UNABSORBED DEPRECIATION IN RESPECT OF JOJOBERA 67.5 MW POWER G ENERATING UNIT FOR THE ASSESSMENT YEAR 1997-98 AND 1998-99. HOWEVER, AFTER SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINST THE INCOME OF THE ASSESSMENT YEARS 1999-00 TO 2001-02, THERE IS STILL UNABSORBED DEPRE CIATION OF RS. ITA 3078/MUM/2009 9 43,37,91,438/- WHICH HAS TO BE SET OFF AGAINST THE INCOME FOR THE ASSESSMENT YEAR 2002-03 FOR WORKING OUT THE DEDUCTION U/S 80IA OF THE ACT. SINCE THERE IS NO ELIGIBLE PROFIT, THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR ANY DEDUCTION U/S 80IA OF THE ACT ALTHOUGH THE IMPUGNED ASSESSMEN T YEAR 2002-03 HAS BEEN CONSIDERED AS THE INITIAL ASSESSMENT YEAR FO R DEDUCTION U/S 80IA OF THE ACT, UNABSORBED DEPRECIATION OF THE EARLIER YEARS H AVE TO BE SET OFF AGAINST THE INCOME OF THIS INITIAL ASSESSMENT YEAR IN RESPECT OF THIS JEJOBERA 67.5MW POWER GENERATING UNIT. IT WAS HELD BY THE AO THAT IN VIEW OF THE PROVISIONS OF SECTION 80IA(5) OF THE ACT WHICH LAYS DOWN THAT THE PROFITS AND GAINS OF ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF SUCH BUSI NESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE COMPANY DURING THE PREVIO US YEAR RELEVANT TO THE ASSESSMENT YEAR. IN VIEW OF THE ABOVE, IT WAS HELD BY THE A.O. THAT THE ASSESSEE COMPANY IS NOT ELIGIBLE TO DEDUCTION U/S 8 0IA OF THE ACT IN THE ASSESSMENT YEAR 2002-03 AS THE ASSESSEE COMPANY ITS ELF HAS VIDE ABOVE FIGURES IN THE CHART HAS INDICATED AND CONFIRMED TH AT THERE WERE LOSSES IN SOME OF THE YEARS WHICH AFTER SETTING OFF AGAINST T HE INCOME IN THE ASSESSMENT YEAR 1999-2000 TO 2001-02 LEAVE BEHIND A NET LOSS O F RS.43,37,91,438/- , VIDE ASSESSMENT ORDERS DATED 25.10.2006 PASSED BY T HE AO U/S 143(3) READ WITH SECTION 147 OF THE ACT. 5. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 25.10.2 006 PASSED BY THE A.O. U/S. 143(3) READ WITH SECTION 147 OF THE ACT, THE A SSESSEE COMPANY FILED ITS FIRST APPEAL BEFORE THE LD. CIT(A). 6. BEFORE THE LD. CIT(A), THE ASSESSEE COMPANY CHAL LENGED THE VALIDITY OF THE REOPENING U/S 147 OF THE ACT AND SUBMITTED THAT THE ASSESSEE COMPANY HAD CLAIMED DEDUCTION OF RS. 20,70,84,187/- U/S 80I A OF THE ACT IN RESPECT OF JOJOBERA 67.5 MW POWER GENERATING UNIT IN THE RETUR N OF INCOME FILED WITH THE REVENUE FOR THE ASSESSMENT YEAR 2002-03. UNDER CL AUSE 26 OF THE TAX AUDIT ITA 3078/MUM/2009 10 REPORT FOR THE ASSESSMENT YEAR 2002-03, THE TAX AUD ITORS HAVE MADE THE FOLLOWING DISCLOSURE: THE CLAIM IS IN RESPECT OF JOJOBERA 67.5 MW UNIT F OR WHICH THE COMPANY HAS EXERCISED THE OPTION THAT THE CLAIM UNDER SECTI ON 80IA WILL BE FOR TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH A.Y. 20 02-03 AND ACCORDINGLY, NO ADJUSTMENT HAS BEEN MADE FOR THE UN ABSORBED DEPRECIATION RELATING TO EARLIER ASSESSMENT YEARS, WHICH HAS BEEN SET OFF AGAINST THE OTHER BUSINESS INCOME OF THE ASSESSEE I N EARLIER YEARS IT WAS SUBMITTED THAT DESPITE THE ABOVE DISCLOSURE, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND DEDUCTION OF RS . 68,25,97,659/- WAS GRANTED U/S 80IA OF THE ACT , WHICH INCLUDED A DEDU CTION OF RS. 20,39,98,805/- U/S 80IA OF THE ACT IN RESPECT OF JO JOBERA 67.5 MW POWER GENERATING UNIT. THE DIFFERENCE BETWEEN THE AMOUNT OF DEDUCTION CLAIMED IN RESPECT OF JOJOBERA 67.5 MW POWER GENERATING UNDERT AKING I.E. RS. 20,70,84,187/- AND THE AMOUNT ALLOWED AT THE TIME O F ASSESSMENT U/S 143(3) OF THE ACT I.E. RS. 20,39,98,905/- WAS ON ACCOUNT O F OTHER INCOME OF RS. 30,85,382/-, WHICH IN THE OPINION OF THE A.O. WAS N OT ALLOWABLE U/S 80IA OF THE ACT. NO OTHER ADJUSTMENT WAS MADE DESPITE THE D ISCLOSURE IN THE TAX AUDIT REPORT. THE A.O. REOPENED THE ASSESSMENT AND PASSE D REASSESSMENT ORDER DATED 25 TH OCTOBER, 2006 U/S 143(3) R.WS. 147 OF THE ACT AND THE DEDUCTION GRANTED EARLIER U/S 80IA OF THE ACT IN RESPECT OF JOJOBERA 67.5 MW POWER GENERATING UNIT HAD BEEN NULLIFIED BY RE-COMPUTING THE TAXABLE INCOME OF THE SAID UNIT AS A SEPARATE ENTITY RIGHT FROM THE DATE OF COMMENCEMENT OF POWER GENERATION BY THE JEJOBERA 67.5MW UNIT . ACCORDINGL Y THE BROUGHT FORWARD DEPRECIATION OF THE UNIT ON A STANDALONE BASIS FROM THE DATE OF ITS COMMENCEMENT HAS BEEN SET OFF TO ARRIVE AT THE TAX ABLE INCOME OF THAT UNIT QUALIFYING FOR DEDUCTION U/S 80IA OF THE ACT BY THE AO IN RE-ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED THAT NO ADJUSTMENT H AS BEEN MADE BY THE ASSESSEE FOR THE UNABSORBED DEPRECIATION RELATING TO EARLIER ASSESSMENT YEARS ITA 3078/MUM/2009 11 WHICH HAS BEEN SET OFF AGAINST THE OTHER BUSINESS I NCOME OF THE ASSESSEE COMPANY IN EARLIER YEARS, HAS BEEN INDICATED IN THE TAX AUDIT REPORT. DESPITE THIS DISCLOSURE, NO ADJUSTMENT WAS MADE FOR BROUGHT FORWARD UNABSORBED DEPRECIATION FOR DETERMINING DEDUCTION U/S 80IA OF THE ACT AT THE TIME OF ASSESSMENT U/S 143(3) OF THE ACT. HENCE, IT WAS SU BMITTED THAT REASSESSMENT U/S 147 OF THE ACT AND THE ADJUSTMENT MADE THEREOF FOR BROUGHT FORWARD UNABSORBED DEPRECIATION FOR DETERMINING THE DEDUCTI ON U/S 80IA OF THE ACT IS MERELY BASED ON CHANGE OF OPINION. IT WAS SUBMITTED THAT DESPITE AMENDMENT TO SECTION 147 OF THE ACT, A MERE CHANGE OF OPINION WILL NOT WARRANT A REOPENING U/S 147 OF THE ACT FOR INITIATING REASSES SMENT PROCEEDINGS. THE ASSESSEE COMPANY RELIED UPON FOLLOWING CASE LAWS TO SUPPORT ITS CONTENTIONS: I) CIT V. FORAMER FRANCE , 264 ITR 566(SC) II) IPCA LABORATORIES LIMITED V. DCIT, 251 ITR 416(BOM. ) III) PARSHURAM POTTERY WORKS CO. LTD. V. ITO ,106 ITR 1( SC) IV) ADDL. CIT V. SHANKERDAS B. PAHLJANI IN ITA NO. 5085 /MUM/ 2001(MUM TRIB.) V) CIT V. KELVINATOR OF INDIA LIMITED 256 ITR 1(DEL.)( FB) VI) WYETH INDIA PRIVATE LIMITED V. IAC 137 ITR 20(BOM.) VII) GARDEN SILK MILLS PRIVATE LIMITED V. DCIT 237 ITR 6 68(GUJ.) VIII) JINDAL PHOTO MILLS LIMITED V. DCIT 234 ITR 170(DEL) IX) INDIA STEAMSHIP CO. LIMITED V. JCIT 194 CTR 386(CAL .) X) TRANSWORLD INTERNATIONAL INC. 192 CTR 97(DEL) IT WAS ALSO SUBMITTED THAT REASSESSMENT HAS BEEN MA DE MAINLY BASED ON THE AUDIT OBSERVATION WHICH IS NOT PERMITTED IN LAW. T HE ASSESSE COMPANY ALSO RELIED UPON FOLLOWING CASE LAWS TO SUPPORT ITS CONT ENTIONS : I) SIEMENS INFORMATION SYSTEMS LIMITED V. ACIT 295 ITR 333(BOM.) II) IL&FS INVESTMENT MANAGERS LIMITED V. ITO 209 CTR 1 ITA 3078/MUM/2009 12 III) EASTERN NEWSPAPER SOCIETY V. CIT 119 ITR 996(BOM.) IV) CGT V. NABE SHAH 279 ITR 383(ALL.) V) CIT V. AMBIKA GWAR GUM MILLS 266 ITR 446(RAJ.) THE LD. CIT(A) AFTER PERUSING THE SUBMISSION OF TH E ASSESSEE COMPANY HELD THAT IF THE A.O. HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, SUBJECT TO PROVISIONS OF SECTIONS 148 TO 153 OF THE ACT , THE AO CAN ASSESS OR REASSE SS SUCH INCOME. THE A.O. CLEARLY HAD REASONS TO BELIEVE THAT INCOME HAS ESC APED ASSESSMENT AND THE SAME CAN BE REOPENED UNDER THE PROVISIONS OF SECTIO N 147 OF THE ACT. THE LD. CIT(A) HELD THAT IN THE INSTANT CASE SINCE THE ASSESSMENT HAS BEEN REOPENED WITHIN FOUR YEARS FROM THE END OF THE ASSE SSMENT YEAR, THE PROVISO TO SECTION 147 OF THE ACT HAS NO APPLICATION, THUS, THE CONTENTION OF THE ASSESSEE COMPANY THAT IT HAS DISCLOSED FULLY AND TR ULY ALL THE MATERIAL FACT NECESSARY FOR THE ASSESSMENT IS OF NO HELP TO THE A SSESSEE COMPANY AND THE RELIANCE PLACED BY THE ASSESSEE COMPANY ON VARIOUS CASE LAWS HAS BEEN MISPLACED. IT WAS ALSO OBSERVED BY THE LD. CIT(A) THAT THE ISSUE OF APPLICATION OF 80IA(5) OF THE ACT HAS NEVER BEEN EXAMINED BY TH E A.O. THOUGH THERE IS DISCLOSURE ON THE PART OF THE ASSESSEE COMPANY, THE REFORE, THE FACT OF THE PRESENT CASE ARE DIFFERENT THAN THE CASE RELIED UPO N BY THE ASSESSEE COMPANY, THEREFORE RELIANCE PLACED BY THE ASSESSEE COMPANY I S MISPLACED AND NOT APPLICABLE IN THE PRESENT CASE. IT WAS HELD BY THE LD. CIT(A) THAT IN THE REASONS RECORDED, SATISFACTION OF THE A.O. HAS BEEN ARRIVED. IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT, A COPY OF THE SAME HAS ALSO BEEN SUPPLIED TO THE ASSESSEE COMPANY , THEREFORE, REOPE NING OF ASSESSMENT WAS HELD TO BE VALID BY THE LD. CIT(A). ON MERIT, THE ASSESSEE COMPANY SUBMITTED BEFORE TH E LD. CIT(A) THAT THE A.O. HAS REOPENED THE ASSESSMENT U/S 147 OF THE ACT AND ALLOWED DEDUCTION U/S 80IA OF THE ACT ON THE TAXABLE INCOME AFTER SETTING OFF THE BROUGHT FORWARD ITA 3078/MUM/2009 13 DEPRECIATION OF THE UNITS ELIGIBLE FOR DEDUCTION U/ S 80IA OF THE ACT. IT WAS SUBMITTED THAT THE A.O. ERRED IN NOT APPRECIATING T HE FACT THAT SUCH DEPRECIATION HAS ALREADY BEEN SET OFF AGAINST THE I NCOME OF THE ASSESSEE COMPANY AS A WHOLE IN THE EARLIER ASSESSMENT YEARS. THE ASSESSEE COMPANY SUBMITTED THAT AS PER SECTION 80IA(1) AND (2) OF TH E ACT, THE ASSESSEE COMPANY IS ENTITLED TO CLAIM DEDUCTION OF 100% OF T HE PROFITS AND GAINS FROM THE SPECIFIED BUSINESS FOR TEN CONSECUTIVE ASSESSME NT YEARS AND THE DEDUCTION MAY, AT THE OPTION OF THE ASSESSEE COMPAN Y, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING START GENERATING POWER. THE ASSESSE E COMPANY SUBMITTED THAT THE QUANTUM OF DEDUCTION FOR THE ASSESSMENT YE AR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE COMPANY 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 B E MADE. THUS, AS PER SECTION 80IA(5) OF THE ACT IT IS IMPERATIVE TO DETE RMINE THE INITIAL ASSESSMENT YEAR AND THE PROFITS OF THE UNDERTAKING IN THAT AS SESSMENT YEAR ON A STANDALONE BASIS. IT WAS SUBMITTED THAT THE UNDERT AKING IS TO BE TREATED AS THE ONLY SOURCE OF INCOME FROM THE INITIAL ASSESSM ENT YEAR. A SIMILAR PROVISION FOR DEDUCTION IN ANY TEN CONSECUTIVE ASSE SSMENT YEARS OUT OF 12/20 YEARS WAS AVAILABLE IN RESPECT OF OPERATION AND MAI NTENANCE OF INFRASTRUCTURE FACILITY UNDER THE EARLIER SECTION 80IA OF THE ACT. THUS THE INITIAL ASSESSMENT YEAR IN SUCH A CASE WAS DEFINED TO MEAN THE ASSESS MENT YEAR SPECIFIED AT THE OPTION OF THE ASSESSEE COMPANY TO BE THE INITIAL Y EAR , NOT FALLING BEYOND THE 12 TH ASSESSMENT YEAR STARTING FROM THE PREVIOUS YEAR IN WHICH THE ENTERPRISE BEGINS OPERATION AND MAINTAINING THE INFRASTRUCTURE FACILITY. THUS, ON THE SAME ANALOGY FOR THE INITIAL ASSESSMENT YEAR UNDE R THE NEW SECTION 80IA FOR AN UNDERTAKING ENGAGED IN GENERATION/DISTRIBUTION O F POWER IS TO BE APPLIED FOR. THE ASSESSEE COMPANY ALSO SUBMITTED THAT THE ABOVE VIEW IS SUPPORTED ITA 3078/MUM/2009 14 BY PARA 8 & 9 OF FORM NO. 10CCB WHICH IS THE FORM O F AUDIT REPORT FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT, TO CONTEND THAT THE INITIAL ASSESSMENT YEAR IS DISTINCT FROM THE PREVIOUS YEAR RELATING TO THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING COMMENCES ITS OPERATI ONS AND THE INITIAL ASSESSMENT YEAR CAN BE SPECIFIED AT THE OPTION OF T HE ASSESSEE COMPANY. THE ASSESSEE COMPANY RELIED UPON THE DECISION OF HONBL E RAJASTHAN HIGH COURT IN THE CASE OF CIT V. MEWAR OIL AND GENERAL MILLS L TD., (2004)186 CTR 141(RAJ.) TO CONTENT THAT THE HONBLE RAJASTHAN HIG H COURT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHI CH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE R EOPENED AGAIN FOR COMPUTATION OF CURRENT INCOME U/S 80-I FOR THE PURP OSE OF COMPUTING ADMISSIBLE DEDUCTIONS THERE UNDER. THE ASSESSEE CO MPANY RELIED UPON THE DECISION OF CHENNAI TRIBUNAL IN THE CASE OF MOHAN B REWERIES & DISTILLERIES LIMITED V. ACIT IN ITA NO. 1077 OF 2007, WHEREBY TH E CHENNAI TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 80IA(5) OF THE ACT T REATING THE UNDERTAKING AS A SOLE SOURCE OF INCOME COULD NOT BE APPLIED TO A YEA R PRIOR TO THE YEAR IN WHICH THE TAX-PAYER OPTED TO CLAIM RELIEF U/S 80IA OF THE ACT FOR THE FIRST TIME. FURTHER , THE DEPRECIATION AND CARRY FORWARD LOSSES OF THE UNIT CANNOT NOTIONALLY BE CARRIED FORWARD AND SET OFF AGAINST T HE INCOME FROM THE YEAR IN WHICH THE TAX-PAYER STARTED CLAIMING DEDUCTION U/S 80IA OF THE ACT. THE LD. CIT(A) HELD THAT THE UNIT HAD INCURRED LOSS ES AMOUNTING TO RS. 43,37,91,438/- IN THE EARLIER YEARS WHILE THE UNIT HAS EARNED PROFIT OF RS. 20,70,84,187/- DURING THE INSTANT ASSESSMENT YEAR 2 002-03 AND CLAIMED DEDUCTION U/S 80IA OF THE ACT, HENCE, THERE WILL NO T BE ANY AMOUNT REMAINING ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT, RATHER THERE IS A CARRIED FORWARD LOSSES OF RS. 22,67,07,251/-. THE LD. CIT(A) REFERR ED TO SECTION 80IA(5) OF THE ACT AND HELD THAT THE SECTION STARTS WITH NOTWITHST ANDING CLAUSE, THEREFORE, IT SUPERSEDES ALL OTHER PROVISIONS OF THE ACT. IT WAS ALSO HELD THAT THE DEDUCTION SHALL BE COMPUTED AS IF ELIGIBLE INDUSTRIAL UNDERTA KING WAS ONLY SOURCE OF ITA 3078/MUM/2009 15 INCOME OF THE ASSESSEE COMPANY DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT A SSESSMENT YEAR. THUS, THE CASE OF THE ASSESSEE COMPANY IS COVERED BY THE ABOV E PROVISIONS. THUS, THE LD. CIT(A) HELD THAT THE RELIANCE ON VARIOUS CASE L AWS BY THE ASSESSEE COMPANY IS NOT CORRECT. THE DECISION OF HONBLE RAJ ASTHAN HIGH COURT IN CIT V. MEWAR OIL & GENERAL MILLS(SUPRA) WAS WITH RESPEC T TO INVOCATION OF PROVISIONS OF SECTION 154 OF THE ACT WITH RESPECT T O APPLICABILITY OF SECTION 80IA(5) FOR WHICH COURT HELD THAT AS THE MATTER IS DEBATABLE , PROVISIONS OF SECTION 154 CANNOT BE INVOKED. THE CIT(A) HELD THAT IT BECOMES CRYSTAL CLEAR THAT THE PROFIT FOR THE UNIT IS TO BE COMPUTED U/S 80IA(5) OF THE ACT AND AFTER REDUCING THE LOSSES INCURRED BY THE SAME UNIT IN TH E EARLIER YEARS EVEN THOUGH THE SAME HAS BEEN SET OFF AGAINST INCOME OF THE EARLIER YEARS , ONLY THEN DEDUCTION U/S 80IA OF THE ACT NEEDS TO BE ALLO WED. IN THIS CASE, THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF PROFIT EARNED ON THE JOJOBERA 67.5 MW UNIT. THE REFORE, THE ASSESSEE COMPANY IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF T HE ACT IN RESPECT OF JOJOBERA UNIT 67.5 MW OF RS. 20,70,84,187/- AND THE A.O. HAS RIGHTLY DISALLOWED THE SAME, VIDE ORDERS DATED 27-02-2009. THE CIT(A) ALSO RELIED UPON DECISION IN THE CASE OF ITO V. KANCHAN OIL IND USTRIES LIMITED (2005) 92 TTJ 739(KOL. TRIB.) AND KHINVASARA INVESTMENT PRIVA TE LIMITED V. JCIT (2007) 109 TTJ 341(PUNE. TRIB) 7.AGGRIEVED BY THE ORDERS DATED 27-02-2009 OF THE L D. CIT(A), THE ASSESSEE COMPANY IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 8. THE LD. SENIOR COUNSEL FOR THE ASSESSEE COMPANY SUBMITTED AT THE OUTSET THAT THE ISSUE IS NOW SQUARELY COVERED BY T HE CIRCULAR NO. 1 OF 2016 DATED 15 TH FEBRUARY, 2016 ISSUED BY CBDT WHICH IS BINDING ON REVENUE WHICH IS REPRODUCED BELOW: ITA 3078/MUM/2009 16 CIRCULAR NO. 1 /2016 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK, NEW DELHI, THE 15TH FEBRUARY, 2016 SUBJECT: CLARIFICATION OF THE TERM 'INITIAL ASSESSM ENT YEAR' IN SECTION 80LA (5) OF THE INCOME-TAX ACT, 1961. SECTION 80IA OF THE INCOME-TAX ACT, 1961 ('ACT'), A S SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 01.04.2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FROM AN ELIGIBLE BUSIN ESS (AS REFERRED TO IN SUB-SECTION (4) OF THAT SECTION) IN ACCORDANCE WIT H 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 P ROVIDING SERVICES ETC. AS STIPULATED THEREIN. SUB-SECTION (5) OF SECT ION 80IA FURTHER PROVIDES AS UNDER - 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION 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 INIT IAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASS ESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH T HE DETERMINATION IS TO BE MADE'. ITA 3078/MUM/2009 17 IN THE ABOVE SUB-SECTION, WHICH PRESCRIBES THE MANN ER 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 C OMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATI ON ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLE AR MANDATE PROVIDED UNDER SUB-SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION O UT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY CLEAR FROM SUB-SECTION (2) THAT ASSESSEE WHO IS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/FIRST YEAR FRO M WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT O F A SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB-SECTION . IT IS HEREBY CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPT ED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U /S 80IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPEC T OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM 'INITIAL ASSESSMENT YE AR' WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING D EDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DED UCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTE R BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULA R CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DE DUCTION U S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INT ERPRETING 'INITIAL ASSESSMENT YEAR' AS MENTIONED IN SUB-SECTION (5) OF THAT SECTION FOR WHICH THE STANDING COUNSELS/D.R.S BE SUITABLY INSTR UCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED. SD/- (DEEPSHIKHA SHARMA) DIRECTOR TO THE GOVERNMENT OF INDIA (F.NO.200/31/2015-ITA-I) ITA 3078/MUM/2009 18 COPY TO: 1. CHAIRMAN AND ALL MEMBERS OF CBDT 2. PS/OSD TO SECRETARY (REVENUE) 3. O/O PR. DIRECTOR GENERAL OF INCOME TAX(SYSTEMS) WITH REQUEST FOR UPLOADING ON OFFICIAL WEBSITE IN PUBLIC DOMAIN 4. ALL PR. CHIEF-COMMISSIONERS/DIRECTORS-GENERAL OF INCOME-TAX 5. ALL OFFICERS AND TECHNICAL SECTIONS OF CBDT 6. ITCC DIVISION OF CBDT (3 COPIES) 7. ADDL./JT. CIT DATABASE CELL FOR UPLOADING ON IRS OFFICERS WEBSITE 8. ADG(PR,PP & OL) WITH REQUEST TO POST A TWEET ON OFFICIAL HANDLE OF THE DEPARTMENT. 9. GUARD FILE (DEEPSHIKHA SHARMA) DIRECTOR TO THE GOVERNMENT OF INDIA THE LD. SENIOR COUNSEL FOR THE ASSESSEE COMPANY SUB MITTED THAT THE REVENUE HAS REOPENED THE ASSESSMENT U/S 147/148 OF THE ACT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. HE DREW OUR ATTENT ION TO THE ORDERS OF THE LD. CIT(A) AND SUBMITTED THAT THERE WAS A COMPLETE DISC LOSURE IN THE CLAUSE 26 OF THE TAX AUDIT REPORT ABOUT THE CLAIM OF THE ASSESSE E COMPANY U/S 80IA WITH RESPECT TO THE JOJOBERA 67.5 MW POWER GENERATING UN IT FOR WHICH THE ASSESSEE COMPANY HAS EXERCISED THE OPTION TO CLAIM DEDUCTION U/S 80IA OF THE ACT BEGINNING FROM ASSESSMENT YEAR 2002-03 AND NO ADJUS TMENT IS MADE FOR NOTIONAL UNABSORBED DEPRECIATION RELATING TO THE EA RLIER ASSESSMENT YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER BU SINESS INCOME IN THE EARLIER YEARS. THE LD. SENIOR COUNSEL SUBMITTED THA T THE ASSESSEE COMPANY HAS OPTED THE ASSESSMENT YEAR 2002-03 AS THE INITI AL ASSESSMENT YEAR ALTHOUGH THE UNIT COMMENCED GENERATION OF POWER W.E .F. ASSESSMENT YEAR 1997-98. IT IS SUBMITTED THAT THE UNIT IS AN INDEPE NDENT SOURCE AND THE ITA 3078/MUM/2009 19 EARLIER YEARS LOSSES ARE NOT TO BE SET OFF AS THEY WERE ALREADY SET OFF AGAINST THE OTHER BUSINESS INCOME IN THE EARLIER YEARS AND ALLOWED BY THE REVENUE WHICH IS AN UNDISPUTED POSITION BETWEEN THE RIVAL P ARTIES. THE LD SENIOR COUNSEL SUBMITTED THAT THE REVENUE HAS FRAMED THE O RIGINAL ASSESSMENT ORDER DATED 24 TH FEBRUARY 2005 U/S 143(3) OF THE ACT AFTER CONSIDER ING THE TAX AUDIT REPORT WHEREBY COMPLETE DISCLOSURE WAS MADE W ITH RESPECT TO THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT WITH RESPECT TO TH E JOJOBERA 67.5 MW POWER GENERATING UNIT . IT WAS SUBMITTED THAT THE TAX A UDIT REPORT IS A STATUTORY DOCUMENT WHICH IS ISSUED UNDER THE PROVISIONS OF 44 AB OF THE ACT AND IT CANNOT BE CONTENDED BY THE REVENUE THAT THEY HAVE N OT GONE THROUGH THE TAX AUDIT REPORT WHILE FRAMING THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT, AS THE TAX AUDIT REPORT WHICH IS CERTIFIED BY A CHARTE RED ACCOUNTANT IS MEANT FOR THE BENEFIT OF THE REVENUE CONTAINING ALL THE SPECI FIED DETAILS WHICH MAY HAVE BEARING ON THE ASSESSMENT. THE LD. SENIOR COUNSEL S UBMITTED THAT IN THE ORIGINAL ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, THE AO HAS TAKEN CORRECT VIEW WHEREBY THE CLAIM OF THE ASSESSEE COMP ANY U/S 80IA OF THE ACT WITH RESPECT TO JOJOBERA 67.5 MW POWER GENERATION U NIT WAS ALLOWED TO THE TUNE OF RS.20,39,98,805/- AS AGAINST THE CLAIM OF THE ASSESSEE COMPANY TO THE TUNE OF RS.20,70,84,187/- FILED IN THE RETURN O F INCOME FILED WITH THE REVENUE. THE LD SENIOR COUNSEL SUBMITTED THAT THER E WAS CHANGE OF OPINION OF THE A.O. AS NO NEW TANGIBLE MATERIAL HAS COME IN TO THE POSSESSION OF THE AO WHICH COULD HAVE LIVE LINK AND NEXUS WITH THE FO RMATION OF AN BELIEF OF THE AO THAT THE INCOME HAS ESCAPED ASSESSMENT , AND TH E REOPENING HAS BEEN DONE MERELY ON THE BASIS OF AUDIT OBJECTION WHILE I N THE ORIGINAL ASSESSMENT THE A.O. HAS APPLIED HIS MIND WHILE PASSING THE ORD ER U/S 143(3) OF THE ACT AND IT IS CLEARLY A CASE OF CHANGE OF OPINION. IT WAS ALSO CONTENDED THAT NOW THE CBDT HAS COME WITH A CIRCULAR NO. 1 OF 2016 WHE REBY THE CBDT HAS CLARIFIED THAT THE ASSESSEE COMPANY HAS OPTION TO C HOOSE THE INITIAL ASSESSMENT YEAR. THE ASSESSEE COMPANY HAS COMMENC ED GENERATION OF POWER IN THE ASSESSMENT YEAR 1997-98, WHILE THE ASS ESSEE COMPANY HAS ITA 3078/MUM/2009 20 CHOSEN THE IMPUGNED ASSESSMENT YEAR 2002-03 AS THE INITIAL ASSESSMENT YEAR FOR CLAIMING THE DEDUCTION U/S 80IA OF THE AC T. THE LD. SENIOR COUNSEL SUBMITTED THAT THE UNIT JOJOBERA 67.5 MW POWER GENE RATING UNIT IS THE INDEPENDENT SOURCE OF INCOME OF THE ASSESSEE COMPAN Y. THERE IS NO UNABSORBED DEPRECIATION/BUSINESS LOSS WITH RESPECT TO THIS UNIT AS THE SAID UNABSORBED LOSSES/DEPRECIATION WERE ALREADY SET OFF AGAINST THE OTHER BUSINESS INCOME OF THE ASSESSEE COMPANY IN THE EARL IER YEARS. THE ASSESSEE COMPANY HAS CHOSEN THE CURRENT ASSESSMENT YEAR 2002 -03 AS THE INITIAL ASSESSMENT YEAR AND THE PROFIT OF RS. 20,39,98,805/ - IS ELIGIBLE TO BE ALLOWED AS DEDUCTION U/S 80IA OF THE ACT . THE ASSESSEE CO MPANY HAS CHOSEN THE INITIAL ASSESSMENT YEAR AS 2002-03 FROM WHICH RELIE F U/S 80IA OF THE ACT WILL BE AVAILABLE FOR A PERIOD OF TEN CONSECUTIVE ASSES SMENT YEARS OF THE FIFTEEN ASSESSMENT YEARS FROM THE YEAR OF COMMENCEMENT OF G ENERATION OF POWER, ALTHOUGH THE GENERATION OF POWER HAS COMMENCED IN T HE ASSESSMENT YEAR 1997-98. THE LD. SENIOR COUNSEL FOR THE ASSESSEE COMPANY SUBMITTED THAT THE ASSESSEE COMPANY IS FULLY COVERED BY THE CIRCUL AR NO. 1/2016. THE LD. SENIOR COUNSEL SUBMITTED THAT THE REASONS WHICH WER E RECORDED BY THE REVENUE WHILE REOPENING THE ASSESSMENT HAS NOT BEEN FURNISHED TO THE ASSESSEE COMPANY TILL THE COMPLETION OF THE ASSESSM ENT U/S 143(3) READ WITH SECTION 147 OF THE ACT WHICH CULMINATED INTO AN ASS ESSMENT ORDER DATED 25- 10-2006. IT IS ONLY ON THE DIRECTION OF THE TRIBUNA L IN SECOND APPEAL FILED BY THE ASSESSEE COMPANY , THE REVENUE GAVE REASONS FOR RE-OPENING TO THE ASSESSEE COMPANY ON THE DIRECTIONS OF THE TRIBUNAL. THE ASSESSEE COMPANY ASKED FOR THE REASONS FOR REOPENING WHEN THE NOTICE U/S 147 OF THE ACT WAS RECEIVED DURING THE COURSE OF ASSESSMENT PROCEEDING S U/S 143(3) READ WITH SECTION 147 OF THE ACT, BUT THE SAME WERE NOT FURNI SHED TO THE ASSESSEE COMPANY . THE LD COUNSEL FOR THE ASSESSEE COMPANY STATED BEFORE US THAT THE A.O. ERRONEOUSLY STATED IN THE ASSESSMENT ORDER DAT ED 25.10.2006 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT THAT TH E REASONS FOR REOPENING WERE GIVEN, WHILE NO REASONS FOR REOPENING WERE PRO VIDED TO THE ASSESSEE ITA 3078/MUM/2009 21 COMPANY TILL AS PER THE DIRECTIONS OF THE TRIBUNAL. THE TRIBUNAL DIRECTED THE ASSESSEE COMPANY TO FILE THE AFFIDAVIT TO THAT EFFE CT THAT THE REASONS FOR RE- OPENING WERE NOT GIVEN TO THE ASSESSEE COMPANY DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SECTION 147 EVEN TILL THE FRAMING OF THE ASSESSMENT ORDER DATED 25.10.2006 U / 147 READ WITH SECTION 143(3) OF THE ACT AND THE FINDING IN THE ASSESSMENT ORDER DATED 25.10.2006 THAT THE REASONS WERE DULY GIVEN WAS ERRONEOUS , TH E AFFIDAVITS TO THAT EFFECT WERE DULY FILED BY THE ASSESSEE COMPANY VIDE AFFIDA VIT DATED 19-11-2014 OF MR P D SUVARNA, EMPLOYEE OF THE ASSESSEE COMPANY WHO A PPEARED BEFORE THE AO FOR REPRESENTING THE ASSESSEE COMPANY DURING THE RE -ASSESSMENT PROCEEDINGS AND THE AFFIDAVIT DATED 10-02-2015 OF SH. ANIL SARD ANA , MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND BOTH THE AFFIDAVITS ARE FI LED BEFORE THE TRIBUNAL WHICH ARE PLACED IN THE FILE . THE LD. SENIOR COUNS EL SUBMITTED THAT NO NEW TANGIBLE MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SUBSTANTIATE THAT ANY INCOME HAS ESCAPED ASSESSMENT. THE ASSESS EE COMPANY CHALLENGED THE CHANGE OF OPINION BEFORE THE LD. CIT(A) BUT THE SPECIFIC ISSUE OF NON SUPPLYING OF THE REASONS FOR THE RE-OPENING OF THE ASSESSMENT WAS NOT RAISED BEFORE THE LD CIT(A). THE ASSESSEE COMPANY RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF TATA COMMUNICATIONS LTD. V. ADDL. CIT IN ITA NO. 3417/M/2009 FOR THE ASSESSMENT YEAR 2001-02 ORDER D ATED 29.1.2016. THE ASSESSEE COMPANY ALSO RELIED ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. VIDESH SANCHAR NIGAM LTD. [20 12] 340 ITR 66 (BOM) TO CONTEND THAT IT IS NOT SUFFICIENT ON THE PART OF TH E REVENUE TO GIVE REASONS ALONG WITH ASSESSMENT ORDER OR AFTER THE ASSESSMENT ORDER. THE LD. SENIOR COUNSEL ALSO RELIED UPON THE DECISION OF CIT V. TRE ND ELECTRONICS , (2015) 94 CCH 0049(BOM) . THE. LD. SENIOR COUNSEL SUBMITTED T HAT THE REASONS FOR RE- OPENING IN THE INSTANT APPEAL HAS BEEN GIVEN TO THE ASSESSEE COMPANY DURING THE CURRENT PROCEEDINGS BEFORE THE TRIBUNAL, AND ON LY WHEN THE TRIBUNAL DIRECTED THE REVENUE TO GIVE REASONS FOR RE-OPENING . THUS IT WAS SUBMITTED THAT NO NEW TANGIBLE MATERIAL HAS COME INTO THE POS SESSION OF A.O. WHICH HAS ITA 3078/MUM/2009 22 A LIVE NEXUS WITH THE FORMATION OF BELIEF BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THERE IS CLEARLY A CHANGE OF OPINION O N THE PART OF THE A.O. BASED ON THE AUDIT OBJECTION RECEIVED BY THE AO, TH US THERE IS NO QUESTION OF REOPENING OF THE ASSESSMENT AND THE ENTIRE PROCEEDI NGS U/S 147/148 OF THE ACT ARE BAD IN LAW LIABLE TO BE QUASHED. THE ASSES SEE COMPANY ALSO RELIED UPON SEVERAL CASE LAWS WHICH ARE GIVEN IN COMPILATI ON IN THE FORM OF PAPER BOOK FILED WITH THE TRIBUNAL TO SUPPORT THE PROPOSI TIONS OF THE LD. SENIOR COUNSEL FOR THE ASSESSEE COMPANY AS SET OUT ABOVE, WHICH ARE PLACED IN THE FILE. 9. THE LD. D.R., ON THE OTHER HAND, AFTER VERIFICAT ION OF THE CASE RECORDS SUBMITTED THAT FROM THE RECORD IT IS NOT COMING OUT WHETHER THE REASONS FOR REOPENING WERE SUPPLIED TO THE ASSESSEE COMPANY OR NOT BEFORE THE CONCLUSION OF RE-ASSESSMENT PROCEEDINGS. NOTICE DA TED 25.09.2006 U/S. 148 WAS ISSUED TO THE ASSESSEE COMPANY BUT IT IS NOT RE CORDED IN THE FILE THAT REASONS RECORDED WERE SUPPLIED TO THE ASSESSEE COMP ANY OR NOT. IT WAS SUBMITTED THAT THERE IS NO CHANGE OF OPINION ON THE PART OF A.O. WHICH HAS BEEN DISCUSSED BY THE LD. CIT(A) IN HIS ORDER IN DE TAILS. THE REOPENING HAS BEEN DONE WITHIN A PERIOD FOUR YEARS FROM THE END O F THE ASSESSMENT YEAR. THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT(A) AND RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. RAJ ESH JHAVERI STOCK BROKERS PRIVATE LIMITED (2007) 161 TAXMAN 316(SC). HOWEVER, THE LD. DR SUBMITTED AND ACCEPTED THAT THE CIRCULAR NO 1/2016 ISSUED BY THE CBDT IS BINDING ON THE REVENUE. 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND ALSO CAREFULLY GONE THROUGH THE CASE LAWS RELIE D UPON BY BOTH THE PARTIES. THE POWER PROJECT GENERATING UNDERTAKING JOJOBERA 67.5 MW UNIT COMMENCED GENERATION OF POWER IN THE ASSESSMENT YEA R 1997-98. THE SAID UNDERTAKING WENT INTO LOSSES TILL THE ASSESSMENT YE AR 2001-02 AND THE ITA 3078/MUM/2009 23 LOSSES/DEPRECIATION OF THE SAID UNDERTAKING WERE AD JUSTED AND SET OFF AGAINST THE OTHER BUSINESS INCOME IN THE EARLIER YEARS , WH ICH SET OFF WAS ALLOWED BY THE REVENUE. THUS, IN NUTSHELL, THERE WAS NO CARRY FORWARD OF UNABSORBED LOSSES/DEPRECIATION OF THE 67.5 MW JOJOBERA POWER P ROJECT UNDERTAKING. WITH EFFECT FROM THE ASSESSMENT YEAR 2001-02, THE S AID 67.5 MW JOJOBERA POWER PROJECT UNDERTAKING IS DIRECTLY OWNED AND MAN AGED BY THE ASSESSEE COMPANY AS EARLIER IT WAS OWNED BY TATA ELECTRIC(AO P) WHEREBY THE ASSESSEE COMPANY HAD 50% SHARES, WHILE REST OF THE SHARES WE RE HELD BY ANDHRA VALLEY(30%) AND TATA HYDRO(20%). SECTION 80IA OF T HE ACT PROVIDES THAT FOR TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YE ARS BEGINNING FROM THE YEAR IN WHICH GENERATION OF POWER COMMENCED, DEDUCTION U /S 80IA IS AVAILABLE ON THE 100% PROFIT OF THE UNDERTAKING DERIVED FROM GEN ERATION OF POWER. THE ASSESSEE COMPANY HAS CHOSEN THE ASSESSMENT YEAR 200 2-03 AS THE INITIAL ASSESSMENT YEAR FOR THE PURPOSES OF CLAIMING DEDUC TION U/S 80IA OF THE ACT ALTHOUGH THE 67.5 MW JOJOBERA POWER GENERATION UNDE RTAKING COMMENCED GENERATING POWER IN THE ASSESSMENT YEAR 1997-98. UN DISPUTEDLY THE ASSESSEE COMPANY 67.5 MW JOJOBERA POWER GENERATING UNDERTAKI NG HAS NO UNABSORBED BUSINESS LOSSES/DEPRECIATION OF THE EARL IER ASSESSMENT YEARS AS THEY HAD ALREADY BEEN SET OFF AND ADJUSTED AGAINST THE INCOME FROM OTHER BUSINESSES IN THE EARLIER YEARS AND SET-OFF WAS ALL OWED BY THE REVENUE. THE ASSESSEE COMPANY HAS THE OPTION TO CHOOSE THE INIT IAL ASSESSMENT YEAR AND THEREAFTER DEDUCTION OF 100% OF THE PROFIT FROM GEN ERATION OF POWER IS ELIGIBLE FOR DEDUCTION U/S.80IA OF THE ACT FOR TEN CONSEQUEN T ASSESSMENT YEARS OUT OF THE FIFTEEN YEARS BEGINNING FROM THE COMMENCEMENT O F GENERATION OF POWER . THE CBDT HAS NOW COME WITH CIRCULAR NO. 1/2016[F. N O. 200/31/2015-ITA- I] DATED 15- 2-2016 WHICH IS BINDING ON THE REVENUE , WHEREBY THE BOARD HAS CLARIFIED THE TERM INITIAL ASSESSMENT YEAR IN SEC TION 80-IA(5) OF THE ACT WHEREIN IT HAS BEEN CATEGORICALLY MENTIONED THAT TH E MATTER HAS BEEN EXAMINED BY THE BOARD AND IT IS ABUNDANTLY CLEAR FR OM SUB-SECTION (2) OF SECTION 80IA OF THE ACT THAT AN TAX-PAYER WHO IS EL IGIBLE TO CLAIM DEDUCTION ITA 3078/MUM/2009 24 U/S 80-IA OF THE ACT HAS THE OPTION TO CHOOSE THE I NITIAL/FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSEC UTIVE YEARS, OUT OF A SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB-SECTION. IT HAS BEEN CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY THE TAX-PAYER, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U/S 80IA OF THE ACT FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPEC T OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, IT WAS CLARIFIED BY THE CBDT THAT T HE TERM 'INITIAL ASSESSMENT YEAR' WOULD MEAN THE FIRST YEAR OPTED FOR BY THE TA X-PAYER FOR CLAIMING DEDUCTION U/S 80-1A OF THE ACT. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DEDUCTION SHOULD NOT TRANSGRESS THE PRESCR IBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THUS, THE CBDT DIRECTED ALL THE ASSESSI NG OFFICERS CONCERNED TO ALLOW DEDUCTION U/S. 80-IA OF THE ACT IN ACCORDANCE WITH THIS CLARIFICATION AND AFTER BEING SATISFIED THAT ALL THE PRESCRIBED CONDI TIONS APPLICABLE IN A PARTICULAR CASE ARE DULY SATISFIED. PENDING LITIGAT ION ON ALLOWABILITY OF DEDUCTION U/S. 80IA OF THE ACT SHALL ALSO NOT BE PU RSUED TO THE EXTENT IT RELATES TO INTERPRETING 'INITIAL ASSESSMENT YEAR' A S MENTIONED IN SUB-SECTION (5) OF THAT SECTION. IN VIEW OF THE SAID CIRCULAR, THE CLAIM OF THE REVENUE IS NOW NOT SUSTAINABLE AS THE CIRCULAR IS BINDING ON REVEN UE. THE RELEVANT CBDT CIRCULAR NO 1/2016 (F.NO.200/31/2015-ITA-1)DATED 15 -2-2006 IS REPRODUCED BELOW CIRCULAR NO. 1/2016 ISSUED BY THE CBDT IS BIN DING ON THE REVENUE AND THE SAME IS REPRODUCED BELOW : CIRCULAR NO. 1 /2016 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES ITA 3078/MUM/2009 25 NORTH BLOCK, NEW DELHI, THE 15TH FEBRUARY, 2016 SECTION 80IA OF THE INCOME-TAX ACT, 1961 ('ACT'), A S SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 01.04.2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FROM AN ELIGIBLE BUSIN ESS (AS REFERRED TO IN SUB-SECTION (4) OF THAT SECTION) IN ACCORDANCE WIT H 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 P ROVIDING SERVICES ETC. AS STIPULATED THEREIN. SUB-SECTION (5) OF SECT ION 80IA FURTHER PROVIDES AS UNDER - 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION 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 INIT IAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASS ESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH T HE DETERMINATION IS TO BE MADE'. IN THE ABOVE SUB-SECTION, WHICH PRESCRIBES THE MANN ER 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 C OMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATI ON ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLE AR MANDATE PROVIDED UNDER SUB-SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION O UT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. ITA 3078/MUM/2009 26 THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY CLEAR FROM SUB-SECTION (2) THAT ASSESSEE WHO IS ELIGIBLE TO CL AIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/FIRST YEAR FRO M WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT O F A SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB-SECTION . IT IS HEREBY CLARIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPT ED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U /S 80IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPEC T OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM 'INITIAL ASSESSMENT YE AR' WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING D EDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DED UCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTE R BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULA R CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DE DUCTION U S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INT ERPRETING 'INITIAL ASSESSMENT YEAR' AS MENTIONED IN SUB-SECTION (5) OF THAT SECTION FOR WHICH THE STANDING COUNSELS/D.R.S BE SUITABLY INSTR UCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED. SD/- (DEEPSHIKHA SHARMA) DIRECTOR TO THE GOVERNMENT OF INDIA (F.NO.200/31/2015-ITA-I) COPY TO: 1. CHAIRMAN AND ALL MEMBERS OF CBDT 2. PS/OSD TO SECRETARY (REVENUE) 3. O/O PR. DIRECTOR GENERAL OF INCOME TAX(SYSTEMS) WITH REQUEST FOR UPLOADING ON OFFICIAL WEBSITE IN PUBLIC DOMAIN 4. ALL PR. CHIEF-COMMISSIONERS/DIRECTORS-GENERAL OF INCOME-TAX 5. ALL OFFICERS AND TECHNICAL SECTIONS OF CBDT ITA 3078/MUM/2009 27 6. ITCC DIVISION OF CBDT (3 COPIES) 7. ADDL./JT. CIT DATABASE CELL FOR UPLOADING ON IRS OFFICERS WEBSITE 8. ADG(PR,PP & OL) WITH REQUEST TO POST A TWEET ON OFFICIAL HANDLE OF THE DEPARTMENT. 9. GUARD FILE (DEEPSHIKHA SHARMA) DIRECTOR TO THE GOVERNMENT OF INDIA THE WORD INITIAL ASSESSMENT YEAR HAS BEEN REFERRE D IN SECTION 80IA(5) OF THE ACT BEING THE YEAR AT THE OPTION OF THE TAX-PAYER C HOSEN TO BE THE YEAR FROM WHICH THE DEDUCTION U/S 80IA OF THE ACT IS TO BE AV AILABLE FOR TEN CONSECUTIVE ASSESSMENT YEAR OUT OF FIFTEEN ASSESSMENT YEARS COM MENCING FORM THE YEAR WHEN THE POWER UNDERTAKING START GENERATING POWER, AND THEREAFTER FOR THE SUCCEEDING ASSESSMENT YEARS ONWARD IT WILL BE CONSI DERED THAT THIS UNDERTAKING IS THE ONLY SOURCE OF INCOME OF THE ASS ESSEE COMPANY AS PER SECTION 80IA OF THE ACT. THUS, IN OUR CONSIDERED V IEW , THE ASSESSEE COMPANY IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT FROM THE ASSESSMENT YEAR 2002- 03 WHICH HAS BEEN CHOSEN BY THE ASSESSEE COMPANY AS THE INITIAL ASSESSMENT YEAR WITHOUT ADJUSTING THE NOTIONALLY BROUGHT FORW ARD UNABSORBED BUSINESS LOSSES/DEPRECIATION OF THE EARLIER YEARS WHICH ARE STATED TO BE ALREADY ADJUSTED AGAINST THE BUSINESS INCOME OF THE EARLIER YEARS AND THE SAID SET OFF WAS ALSO ALLOWED BY THE REVENUE IN THE PRECEDING YE ARS . OUR VIEW IS CONSISTENT WITH THE VIEW RECENTLY TAKEN BY HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. G.R.T.JEWELLERS (INDIA) IN TCA NO. 1 76 OF 2016 VIDE JUDGMENT DATED 01-03-2016 AS UNDER: THE REVENUE HAS COME UP WITH THE ABOVE APPEAL RAIS ING THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW : ITA 3078/MUM/2009 28 '(1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80I A WITHOUT SETTING OFF THE LOSSES/UNABSORBED DEPRECIATION PERT AINING TO THE WINDMILL, WHICH WERE SET OFF IN THE EARLIER YEAR AG AINST OTHER BUSINESS INCOME OF THE ASSESSEE FOLLOWING THE DECIS ION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S.VELAYU DHASWAMY SPINNING MILLS (340 ITR 477), WHEN THE SAME IS PEND ING APPEAL BEFORE THE SUPREME COURT IN SLP.CIVIL NO.33475 OF 2 012 ? (2) WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDIN G THAT THE INITIAL ASSESSMENT YEAR IN SECTION 80IA(5) WOULD ON LY MEAN THE YEAR OF CLAIM OF DEDUCTION UNDER SECTION 80IA AND N OT THE YEAR OF COMMENCEMENT OF ELIGIBLE BUSINESS ? AND (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE HAS THE OPTION TO CHOOSE THE FIRST/INITIAL ASSESSMENT YEAR OF CLAIM F OR DEDUCTION UNDER SECTION 80IA ?' 2. HEARD MR.T.R.SENTHILKUMAR, LEARNED STANDING COUN SEL FOR THE DEPARTMENT. MR.M.P.SENTHILKUMAR, LEARNED COUNSEL TAKES NOTICE F OR THE RESPONDENT. 3. EVEN ACCORDING TO THE LEARNED STANDING COUNSEL F OR THE DEPARTMENT, THIS COURT HAS CONSISTENTLY FOLLOWED THE DECISION IN M/S .VELAYUDHASWAMY SPINNING MILLS (340 ITR 477), DESPITE THE HONOURABLE SUPREME COURT ORDERING NOTICE. 4. INTERESTINGLY, ON THE BASIS OF THE DECISION IN V ELAYUDHASWAMY SPINNING MILLS, THE CENTRAL BOARD OF DIRECT TAXES HAS ISSUED CIRCULAR NO.1/ 2016 DATED ITA 3078/MUM/2009 29 15.2.2016. IT WILL BE USEFUL TO EXTRACT THE CIRCULA R IN ENTIRETY, WHICH IS AS FOLLOWS: 'CIRCULAR NO. 1 /2016 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK, NEW DELHI, THE 15TH FEBRUARY, 2016 SUBJECT: CLARIFICATION OF THE TERM INITIAL ASSESSM ENT YEAR' IN SECTION 80IA(5) OF THE INCOME TAX ACT, 1961 SECTION 801A OF THE INCOME-TAX ACT, 1961 (ACT), A S SUBSTITUTED BY FINANCE ACT, 1999 WITH EFFECT FROM 1.4.2000, PROVIDES FOR DEDUCT ION OF AN AMOUNT EQUAL TO 100% OF THE PROFITS AND GAINS DERIVED BY AN UNDERTA KING OR ENTERPRISE FROM AN ELIGIBLE BUSINESS (AS REFERRED TO IN SUB-SECTION (4 ) OF THAT SECTION) IN ACCORDANCE WITH THE PRESCRIBED PROVISIONS. SUB-SECTION (2) OF SECTION 801A 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 S ERVICES ETC. AS STIPULATED THEREIN. SUB-SECTION (5) OF SECTION 801A FURTHER PR OVIDES AS UNDER : NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WH ICH THE PROVISIONS OF SUB SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DE TERMINING THE QUANTUM ITA 3078/MUM/2009 30 OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSM ENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMI NATION IS TO BE MADE. IN THE ABOVE SUB-SECTION, WHICH PRESCRIBES THE MANN ER 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 CO MMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATI ON ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLE AR MANDATE PROVIDED UNDER SUB-SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION O UT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS. THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY 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 YEA R FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE Y EARS, OUT OF A 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 801A FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RE SPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM INITIAL ASSESSMENT YE AR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING D EDUCTION U/S 801A. ITA 3078/MUM/2009 31 HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DED UCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 801A IN ACCORDANCE WITH THIS CLARIFICATION AND AFTE R BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTI CULAR CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DE DUCTION U/S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INT ERPRETING INITIAL ASSESSMENT YEAR AS MENTIONED IN SUBSECTION (5) OF THAT SECTION FOR WHICH THE STANDING COUNSEL/DRS BE SUITABLY INSTRUCTED. ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFF ICERS CONCERNED.' 5. THEREFORE, ADMITTEDLY, QUESTIONS OF LAW 2 AND 3 ARE ALSO COVERED BY THE ABOVE CIRCULAR. HENCE, THE APPEAL DESERVES TO BE DI SMISSED. 6. ACCORDINGLY, THE ABOVE TAX CASE APPEAL IS DISMIS SED. NO COSTS. 7. BUT, WE CANNOT RESIST OUR TEMPTATION TO RECORD O NE MORE FACT. IF AN ISSUE IS COVERED BY THE JUDGMENT OF THE HIGH COURT, IT IS AL WAYS OPEN TO THE DEPARTMENT TO TAKE IT ON APPEAL TO THE SUPREME COURT AND GET T HE LAW SETTLED ONCE AND FOR ALL. BUT, ONCE A DECISION IS TAKEN AT THE LEVEL OF THE BOARD, WE DO NOT KNOW WHY REPEATED APPEALS SHOULD BE FILED, ONLY TO MEET WITH THE SAME FATE AS THAT OF A DECISION, ON WHICH, A CIRCULAR HAS BEEN ISSUED. THE DEPARTMENT SHALL TAKE NOTE OF THIS FOR FUTURE GUIDANCE. THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYU DHASWAMY SPINNING MILLS PRIVATE LIMITED V. ACIT(2012) 340 ITR477(MAD.) HAS EARLIER HELD THAT THERE WILL BE NO ADJUSTMENT OF BROUGHT FORWARD NOTIONAL BUSINESS LOSSES/DEPRECIATION WHICH HAS ITA 3078/MUM/2009 32 ALREADY BEEN SET OFF AGAINST OTHER INCOME OF EARLIE R YEARS AGAINST THE PROFIT OF THE UNDERTAKING OF THE INITIAL YEAR CHOSEN BY THE TAX-P AYER FOR COMPUTING DEDUCTION U/S 80IA OF THE ACT, WHILE GRANTING DEDUCTION U/S 80IA OF THE ACT AS UNDER: 8. HEARD THE COUNSEL APPEARING FOR THE PARTIES AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. 9. ON A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER , IT IS SEEN THAT THE ELIGIBLE INCOME FOR DEDUCTION UNDER SECTION 80-IA IS WORKED OUT IN ALL THE CASES AS FOLLOWS : RS. TAX CASE (APPEAL) NO. 909 OF 2009 : NET INCOME FROM WINDMILL DIVISION 1 (2002-03) 1,70,76,945 )UNABSORBED DEPRECIATION ALLOWANCE ASSESSMENT YEAR 2003-04 8,26,84,110 )INCOME FROM WINDMILL DIVISION 1 (2002 -03) ASSESSMENT YEAR 2004-05 71,16,270 BALANCE OF UNABSORBED DEPRECIATION ALLOWANCE 7,55,67,840 UNABSORBED DEPRECIATION ALLOWANCE BALANCE (-) 5,84,90,895 TAX CASE (APPEAL) NO. 940 OF 2009 : NET INCOME FROM WINDMILL DIVISION 2,82,67,370 : UNABSORBED DEPRECIATION ALLOWANCE (INITIAL ASSESSMENT YEAR) ASSESSMENT 12,11,01,360 ITA 3078/MUM/2009 33 YEAR 2003-04 -DO- ASSESSMENT YEAR 2004-05 1,59,85,972 13,70,87,332 BALANCE (-) 10,88,19,962 TAX CASE (APPEAL) NO. 918 OF 2008 : TOTAL LOSS + DEPRECIATION OF THE UNITS CLAIMING DEPRECIATION FOR ALL EARLIER YEARS (-) 24,63,50,426 LESS : CURRENT YEARS INCOME FROM THE UNIT 10,63,74,164 BALANCE INCOME AVAILABLE FOR DEDUCTION UNDER SECTION 80-IA (-) 13,99,76,362 10. THUS, THE ASSESSEE HAS BEEN SETTING OFF THE LOSS AG AINST THE INCOME OF THE COMPANY FOR THE EARLIER YEARS. DURING THE ASSESSMEN T YEAR, THE ASSESSEE EXERCISED THE OPTION CLAIM OF DEDUCTION UNDER SECTI ON 80-IA OF THE ACT. BUT THE ASSESSING OFFICER DENIED THE EXEMPTION ON THE FIN DING THAT LOSS OR DEPRECIATION ALREADY ALLOWED AND SET OFF AGAINST OTHER SOURCES O F THE INCOME OF THE ASSESSEE HAS TO BE NOTIONALLY CARRIED FORWARD AND SET OFF AG AINST THE CURRENT YEARS INCOME FROM THE UNITS FOR WHICH THE ASSESSEE IS CLA IMING DEDUCTION UNDER SECTION 80-IA. THERE IS NO DISPUTE THAT DURING THE YEAR, THERE IS A PROFIT. THEREFORE, THE ASSESSEE CLAIMED DEDUCTION UNDER SEC TION 80-IA AND THE REVENUE HAS NO AUTHORITY TO NOTIONALLY BRING FORWAR D THE UNABSORBED DEPRECIATION AND LOSS OF THE EARLIER YEAR WHICH HAS BEEN ALREADY SET OFF AS AGAINST THE CURRENT YEAR PROFIT FROM THE UNIT. ITA 3078/MUM/2009 34 11. IT IS PERTINENT TO NOTE THAT THE LEARNED SENIOR CO UNSEL APPEARING FOR THE ASSESSEE INVITED THE ATTENTION OF THIS COURT TO AN UNREPORTED JUDGMENT OF THIS COURT DATED DECEMBER 23, 2009, IN TAX CASE (APPEAL) NO. 298 OF 2004 WHEREIN, THIS COURT CONSIDERED THE SIMILAR SUBSTANTIAL QUEST ION OF LAW, WHICH READS AS FOLLOWS : 'WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT FOR THE PURPOSE OF ALLOWING DEDUCTION UNDER SECTION 80-I, THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION, ETC., OF THE NEW INDUSTRIA L UNDERTAKING NEED NOT BE TAKEN INTO CONSIDERATION, ONCE THEY HAVE BEEN SE T OFF AGAINST OTHER SOURCES OF INCOME, ESPECIALLY IN VIEW OF THE CLEAR PROVISIONS OF SUB-SECTION (6) OF SECTION 80-I, THE APPLICATION OF WHICH IS MA NDATORY ?' 12. BY FOLLOWING THE VARIOUS DECISIONS OF THE APEX COUR T, THIS COURT, IN PARAGRAPH 15 OF THE SAID JUDGMENT, HAS HELD AS FOLL OWS : 'THE CUMULATIVE CONSIDERATION OF THE PRINCIPLES SET OUT IN THE ABOVE REFERRED TO DECISIONS AND THE OTHER FACTORS INVOLVE D IN THIS CASE, WHEREIN ADMITTEDLY THE ENTIRE DEPRECIATION ALLOWANCE AND D EVELOPMENT REBATE FOR THE PAST ASSESSMENT YEARS WERE FULLY SET OFF AGAINS T THE TOTAL INCOME OF THE ASSESSEE FOR THOSE ASSESSMENT YEARS AND NO FURT HER DEPRECIATION ALLOWANCE OR DEVELOPMENT REBATE REMAIN UNABSORBED A ND NOTHING COULD BE DEDUCTED IN RESPECT OF THE SET OFF WHILE DETERMI NING THE DEDUCTION UNDER SECTION 80-I OF THE ACT.' 13. THE ABOVE UNREPORTED JUDGMENT CONSIDERED SECTION 80 -I AND HAD TAKEN THE VIEW THAT THE ENTIRE DEPRECIATION ALLOWANCE AND DEV ELOPMENT REBATE FOR THE PAST ASSESSMENT YEARS WERE FULLY SET OFF AGAINST THE TOT AL INCOME OF THE ASSESSEE FOR THOSE ASSESSMENT YEARS AND NO FURTHER DEPRECIATION ALLOWANCE OR DEVELOPMENT ITA 3078/MUM/2009 35 REBATE REMAINED UNABSORBED AND, THEREFORE, NOTHING COULD BE DEDUCTED IN RESPECT OF THE SET OFF WHILE DETERMINING THE DEDUCT ION UNDER SECTION 80-I OF THE ACT. SECTION 80-I WAS INTRODUCED BY THE FINANCE (NO . 2) ACT, 1980, WITH EFFECT FROM APRIL 1, 1981. THE SAID SUB-SECTION DEALS WITH DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS AFTE R A CERTAIN DATE. SECTION 80-I READS AS FOLLOWS : '80-I. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE INCLUDES ANY PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERT AKING OR A SHIP OR THE BUSINESS OF A HOTEL OR THE BUSINESS OF REPAIRS TO O CEAN-GOING VESSELS OR OTHER POWERED CRAFT, TO WHICH THIS SECTION APPLIES, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DE DUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO TWENTY PER CENT. THEREOF : . . . (5) THE DEDUCTION SPECIFIED IN SUB-SECTION (1) SHAL L BE ALLOWED IN COMPUTING THE TOTAL INCOME IN RESPECT OF THE ASSESS MENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE INDUSTRIAL UNDERTAKI NG BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR TO OP ERATE ITS COLD STORAGE PLANT OR PLANTS OR THE SHIP IS FIRST BROUGHT INTO U SE OR THE BUSINESS OF THE HOTEL STARTS FUNCTIONING OR THE COMPANY COMMENCES W ORK BY WAY OF REPAIRS TO OCEAN-GOING VESSELS OR OTHER POWERED CRA FT (SUCH ASSESSMENT YEAR BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE INITIAL ASSESSMENT YEAR) AND EACH OF THE SEVEN ASSESSMENT YEARS IMMEDI ATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR : . . . ITA 3078/MUM/2009 36 (6) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN INDUSTRIAL UNDERTAKING OR A SHIP OR THE BUSINESS OF A HOTEL OR THE BUSINESS OF REPAIRS TO O CEAN-GOING VESSELS OR OTHER POWERED CRAFT TO WHICH THE PROVISIONS OF SUB- SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDU CTION UNDER SUB- SECTION (1) FOR THE ASSESSMENT YEAR IMMEDIATELY SUC CEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH INDUSTRIAL UNDERTAKING OR SHIP OR THE BUSINESS OF THE HOTEL OR THE BUSINESS OF REPAIRS TO OCEAN-GOING VESSELS OR OTHER POWERED CRAFT WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING TH E PREVIOUS YEARS RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVER Y SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE.' 14. FROM A READING OF THE ABOVE, IT IS CLEAR THAT THE B ENEFIT IS GIVEN TO THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF THE HOTEL OR THE BUSINESS OF REPAIRS TO OCEAN-GOING VESSELS OR OTHER POWERED CRAFT. THE DED UCTION IS ALLOWED TO THE EXTENT OF 20 PER CENT FROM THE PROFITS AND GAINS OF THE ASSESSEE. SUB-SECTION (5) GIVES DEDUCTION FOR THE PERIOD OF SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR. SUB-SECTION (6) DEALS WITH COMPUTING THE DEDUCTION UNDER SUB-SECTION (1) AND IT STARTS W ITH NON OBSTANTE CLAUSE AND ALSO IT IS A DEEMING PROVISION. THE FICTION CREATED BY THE UNDERTAKING WAS THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR INIT IALLY AND SUBSEQUENT ASSESSMENT YEARS. SUB-SECTION (6) WAS THE SUBJECT-M ATTER BEFORE THIS COURT IN THE ABOVE-MENTIONED UNREPORTED JUDGMENT, WHEREIN TH IS COURT HAD HELD THAT WHILE INTERPRETING THE ABOVE PROVISION, FOR THE PUR POSE OF ALLOWING DEDUCTION UNDER SECTION 80-I BROUGHT FORWARD LOSSES AND UNABS ORBED DEPRECIATION OF THE NEW INDUSTRY NEED NOT BE TAKEN INTO CONSIDERATION O NCE THEY HAVE BEEN SET OFF FROM OTHER SOURCES OF INCOME EARLIER. IN THE PRESEN T CASE, WE ARE CONCERNED WITH ITA 3078/MUM/2009 37 THE PROVISION OF SECTION 80-IA. THE SAID PROVISION WAS INTRODUCED BY THE FINANCE ACT, 1999, WITH EFFECT FROM APRIL 1, 2000. THE PROVISIONS OF SECTIONS 80- I AND 80-IA ARE ALSO MORE OR LESS IDENTICALLY WORDE D. SECTIONS 80-I AND 80-IA COME IN CHAPTER VI-A OF THE INCOME-TAX ACT. CHAPTER VI-A DEALS WITH DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME. THERE ARE TWO TAX INCENTIVES CONTEMPLATED IN CHAPTER VI-A. ONE IS INVESTMENT INC ENTIVE AND THE OTHER ONE IS PROFIT-LINKED INVESTMENT. CHAPTER VI-A WAS INTRODUC ED BY THE FINANCE ACT, 1965, WITH EFFECT FROM APRIL 1, 1965, AND IT CONSIS TS OF FOUR HEADINGS. THEY ARE A, B, C AND D. HEADING 'A' IS GENERAL AND IT ALSO C ONTAINS DEFINITION. IT CONSISTS OF SECTIONS 80A, 80AA, 80AB, 80AC AND 80B. SECTION 80AB DEALS WITH '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 CONTAINED IN THAT SECTION, FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT S ECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CH APTER) 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 H IS GROSS TOTAL INCOME.' 15. A MERE READING OF THE ABOVE PROVISION MAKES IT CLEA R THAT ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION, WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE DEDUC TION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCO RDANCE WITH THE PROVISION OF THIS ACT SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE ITA 3078/MUM/2009 38 WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WH ICH IS INCLUDED IN THE GROSS TOTAL INCOME. SECTION 80AB DEFINES 'GROSS TOTAL INC OME' WHICH MEANS THE TOTAL INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE AC T BEFORE MAKING DEDUCTION UNDER THIS CHAPTER. HEADING 'B' DEALS WITH 'DEDUCTI ONS IN RESPECT OF CERTAIN PAYMENTS' WHICH CONSISTS OF SECTIONS 80C TO 80GGC. HEADING 'C' DEALS WITH 'DEDUCTIONS IN RESPECT OF CERTAIN INCOMES', WHICH C ONSISTS OF SECTIONS 80H TO 80TT. THE LAST HEADING 'D' DEALS WITH 'OTHER DEDUCT IONS' WHICH CONSISTS OF SECTIONS 80U TO 80V. HEADING 'C' IS RELEVANT FOR CO NSIDERING THE ISSUE IN THESE APPEALS. THE RELEVANT PROVISIONS THAT ARE TO BE CON SIDERED ARE SECTIONS 80-I, 80- IA AND 80-IB. IN THE CASE OF LIBERTY INDIA V. CIT [ 2009] 317 ITR 218 (SC) ; [2009] 225 CTR (SC) 233 ; [2009] 28 DTR (SC) 73, THE APEX COURT CONSIDERED THE SCOPE OF SECTIONS 80-I, 80-IA AND ALSO SECTION 80-I B 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 'P ROFIT-LINKED 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 PROCEDU RAL 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 COMPUT ED AS IF SUCH 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 ENTERPRIS E FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS) THERE SHALL, IN ACCORDANCE W ITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ITA 3078/MUM/2009 39 ASSESSEE, 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-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 TO OPERATE ANY INFRASTRUCTURE F ACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB-SE CTION (4) OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OR POWER OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSM ISSION OR DISTRIBUTION LINES. (4) THIS SECTION APPLIES TO- (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, OR (II) OPERATING AND MAINTAINING, OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLO WING 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 ( III)DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY ; (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 WH ICH THE PROVISIONS OF SUB- SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERM INING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY ITA 3078/MUM/2009 40 SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE O NLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO T HE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE.' 17. FROM A READING OF SUB-SECTION (1), IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROF ITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (4), I.E., REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPU TING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSE SSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SAME IS DEFINED IN SUB-SECTION (4). SUB-SECTION (2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CO NSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED, IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTER PRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY, ETC. SUB-SECTI ON (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INIT IAL ASSESSMENT YEAR' ARE USED IN SUB-SECTION (5) AND THE SAME IS NOT DEFINED UNDE R THE PROVISIONS. IT IS TO BE NOTED THAT 'INITIAL ASSESSMENT YEAR' EMPLOYED IN SU B-SECTION (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEAR' REFERRED TO IN SUB-SECTION (2). THE IMPORTANT FACTORS ARE TO BE NOTED IN SUB-SECTION (5) AND THEY ARE AS UNDER : '(1)IT STARTS WITH A NON OBSTANTE CLAUSE WHICH MEAN S IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO B E IGNORED ; (2)IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION ; (3)FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING T HE INITIAL ASSESSMENT YEAR; (4)IT IS A DEEMING PROVISION ; ITA 3078/MUM/2009 41 (5)FICTION CREATED THAT THE ELIGIBLE BUSINESS IS TH E ONLY SOURCE OF INCOME ; AND (6)DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEAR.' 18. FROM A READING OF THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME, DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSE E EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASS ESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHIC H WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS 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 EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSES SEE AND THE SET OFF AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. ONCE THE S ET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVEN UE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. A FICTION CREATED I N SUB-SECTION DOES NOT CONTEMPLATES TO BRING SET OFF AMOUNT NOTIONALLY. THE FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 19. IN THE PRESENT CASES, THERE IS NO DISPUTE THAT LOSS ES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED AGAINST THE PROFI TS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISED TH E OPTION UNDER SECTION 80-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009 , THE ASSESSMENT YEAR WAS 2005-06 AND IN TAX CASE NO. 918 OF 2008 THE ASSESSM ENT YEAR WAS 2004-05. DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRE CIATION OR LOSS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A POSITIVE PROFIT DURING THE YEAR. THE UNREPORTED JUD GMENT OF THIS COURT CITED SUPRA CONSIDERED THE SCOPE OF SUB-SECTION (6) OF SECTION 80-I, WHICH IS THE CORRESPONDING PROVISION OF SUB-SECTION (5) OF SECTION 80-IA. BOTH ARE SIMILARLY WORDED AND, THEREFORE, WE AGREE ENTIRELY WITH THE DIVISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE ITA 3078/MUM/2009 42 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 SCOP E OF SECTION 80-I AND HELD AS FOLLOWS (PAGE 314 OF 271 I TR) : 'HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW ON THE LINE NOTICED ABOVE, WE ARE OF THE OPINION THAT ON FINDING THE FACT THAT TH ERE WAS NO CARRY FORWARD LOSSES OF 1983-84, WHICH COULD BE SET OFF AGAINST THE INCOME OF THE CURRENT ASSESSMENT YEAR 1984-85, THE RECOMPUTATION OF INCOME FROM THE NEW I NDUSTRIAL UNDERTAKING BY SETTING OFF THE CARRY FORWARD OF UNABSORBED DEPRECI ATION OR DEPRECIATION ALLOWANCE FROM PREVIOUS 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 ERR OR MUCH LESS ANY ERROR APPARENT ON THE FACE OF THE RECORD WHICH COULD BE R ECTIFIED. THAT QUESTION WOULD HAVE BEEN GERMANE ONLY IF THERE WOULD HAVE BEEN CAR RY FORWARD OF UNABSORBED DEPRECIATION AND UNABSORBED DEVELOPMENT REBATE OR A NY OTHER UNABSORBED LOSSES OF THE PREVIOUS YEAR ARISING OUT OF THE PRIORITY IN DUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE CU RRENT YEAR. IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAIN FOR C OMPUTATION OF CURRENT INCOME UNDER SECTION 80-I FOR THE PURPOSE OF COMPUTING ADM ISSIBLE DEDUCTIONS THEREUNDER. IN VIEW THEREOF, WE ARE OF THE OPINION THAT THE TRI BUNAL HAS NOT ERRED IN HOLDING THAT THERE WAS NO RECTIFICATION POSSIBLE UNDER SECT ION 80-I IN THE PRESENT CASE, ALBEIT, FOR REASONS SOMEWHAT DIFFERENT FROM THOSE W HICH PREVAILED WITH THE TRIBUNAL. THERE BEING NO CARRY FORWARD OF ALLOWABLE DEDUCTIONS UNDER THE HEAD DEPRECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAINST THE INCOME OF THE CURRENT YEAR AND, THEREFORE, RECOMPUT ATION OF INCOME FOR THE PURPOSE OF COMPUTING PERMISSIBLE DEDUCTION UNDER SECTION 80 -I FOR THE NEW INDUSTRIAL UNDERTAKING WAS NOT REQUIRED IN THE PRESENT CASE. ACCORDINGLY, THIS APPEAL FAILS AND IS HEREBY DISMIS SED WITH NO ORDER AS TO COSTS.' ITA 3078/MUM/2009 43 20. FROM A READING OF THE ABOVE, THE RAJASTHAN HIGH COU RT HELD THAT IT IS NOT AT ALL REQUIRED THAT LOSSES OR OTHER DEDUCTIONS WHICH HAVE ALREADY BEEN SET OFF AGAINST THE INCOME OF THE PREVIOUS YEAR SHOULD BE REOPENED AGAI N FOR COMPUTATION OF CURRENT INCOME UNDER SECTION 80-I FOR THE PURPOSE OF COMPUT ING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WITH THE SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 21. THE STANDING COUNSEL APPEARING FOR THE REVENUE IS U NABLE TO BRING TO OUR NOTICE ANY RELEVANT MATERIAL OR ANY COMPELLING REASON OR A NY CONTRA JUDGMENT OF OTHER COURTS TO TAKE A DIFFERENT VIEW. HE ONLY RELIED HEAVILY ON THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO. 2) BILL, 1980, [1980 ] 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 INDUSTRIAL UNIT S, ETC., WILL BE DETERMINED AS IF SUCH UNITS WERE AN INDEPENDENT UNIT OWNED BY A TAXP AYER WHO DOES NOT HAVE ANY OTHER SOURCE 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 INTO ACCOUNT IN DETERM INING THE QUANTUM OF DEDUCTION ADMISSIBLE UNDER THE NEW SECTION 80-I EVEN THOUGH T HEY MAY HAVE BEEN SET OFF AGAINST THE PROFITS OF THE TAXPAYER FROM OTHER SOUR CES.' 22. WE ARE NOT AGREEING WITH THE COUNSEL FOR THE REVENU E. WE ARE, THEREFORE, OF THE VIEW THAT LOSS IN THE YEAR EARLIER TO THE INITIAL A SSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTI ONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN SECTION 80-IA(5). ITA 3078/MUM/2009 44 23. UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER O F THE TRIBUNAL AND ANSWER ALL THE QUESTIONS IN FAVOUR OF THE APPELLANT/ASSESSEE A ND AGAINST THE REVENUE IN TAX CASE NOS. 909 AND 940 OF 2009 RESPECTIVELY. ACCORDI NGLY, TAX CASES ARE ALLOWED. TAX CASE NO. 918 OF 2008 : 24. IT IS FILED BY THE REVENUE BY RAISING THREE QUESTIO NS OF LAW AS STATED ABOVE. IN RESPECT OF THE SECOND QUESTION, WHICH IS THE SAME A S THE ISSUE INVOLVED IN THE ABOVE TAX CASES IN TAX CASE NOS. 909 AND 940 OF 2009, WE ALSO ANSWER IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 25. IN RESPECT OF QUESTIONS NOS. 1 AND 3, THE ISSUES AR E RELATED TO THE EXERCISING THE OPTION OF CLAIMING DEDUCTION UNDER SECTION 80-IA. A S PER THE ASSESSEE, THE ASSESSMENT YEAR IS 2004-05. ACCORDING TO THE REVENU E, THE ASSESSMENT YEAR IS 1999- 2000. FROM THE RECORDS IT IS CLEAR THAT THE ASSESSE E CLAIMED DEDUCTION UNDER SECTION 80-IA FOR THE FIRST TIME DURING THE ASSESSMENT YEAR 2004-05. THE ASSESSING OFFICER ACCEPTED THE SAME AND THERE IS NO DISPUTE. THE DEDU CTION UNDER SECTION 80-IA IS REJECTED ONLY ON THE GROUND THAT THERE WAS NO POSIT IVE INCOME AND IT WAS HELD BY THE ASSESSING OFFICER THAT THE ELIGIBLE DEDUCTION UNDER SECTION 80-IA AFTER SETTING OFF OF THE LOSS WORKED OUT TO NIL. BEFORE THE ASSESSING OFFICE R, THERE WAS NO DISPUTE REGARDING THE CLAIM DURING THE YEAR. AGGRIEVED BY THAT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). BE FORE THE APPELLATE AUTHORITIES ALSO THERE IS NO DISPUTE REGARDING THE CLAIM DURING THE YEAR. LINE 3 IN PARAGRAPH 2 OF THE ORDER READS AS FOLLOWS : 'THE APPELLANT HAS CLAIMED DEDUCTION UNDER SECTION 80-IA FOR THE FIRST TIME IN THE CURRENT YEAR, NAMELY, THE ASSESSMENT YEAR 2004-05.' 26. THE REVENUE HAS NOT FILED AN APPEAL AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). IT REACHED FINALITY. AGGRIEVE D BY THE ORDER OF THE COMMISSIONER ITA 3078/MUM/2009 45 OF INCOME-TAX (APPEALS) REGARDING THE QUANTUM OF DE DUCTION, THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. IN THE ASSESSEES APPEA L, THE REVENUE FILED A LETTER FIRST TIME BEFORE THE TRIBUNAL AND DISPUTED THE FACT RELA TING TO THE ASSESSEES CLAIM THAT ASSESSMENT YEAR 2004-05 IS THE INITIAL ASSESSMENT Y EAR. THE TRIBUNAL FOUND THAT BOTH THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOM E-TAX (APPEALS) HAD GIVEN CATEGORICAL FINDING THAT THE ASSESSEE CLAIMED DEDUC TION FOR THE FIRST TIME DURING THE YEAR 2004-05 AND PARAGRAPH 5 READS AS FOLLOWS : 'IN THE PRESENT CASE, THERE IS A CATEGORICAL FINDIN G BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE FIRST YEAR CLAIMED IS FROM THE ASSESSMENT YEAR 2004-05. AT THE TIME OF HEARING, TH E LEARNED DEPARTMENTAL REPRESENTATIVE FILED A LETTER WHICH READS AS FOLLOW S : THE ASSESSEES CLAIM IS THAT ASSESSMENT YEAR 2004- 05 IS THE 'INITIAL ASSESSMENT YEAR'. HOWEVER, FROM A PERUSAL OF RECORDS THE FOLLO WING FACTS ARE OBSERVED : ASSESSMENT YEAR 1999-2000 : THE ASSESSEE CLAIMED DEDUCTION OF RS. 2,15,59,112 U NDER SECTION 80-IA OF THE INCOME-TAX ACT. THE ASSESSING OFFICER REJECTED THE CLAIM UNDER SECTION 143(3) READ WITH SECTION 263. AGGRIEVED BY THE ORDER, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) AGITATING, INTER ALIA, THE CLAIM FOR A DEDUCTION UNDER SECTION 80-IA. THE COMMISSIONER OF INCOME-TAX (APPEALS), VIDE HIS ORDER IN I. T. A. NO. 39/2005-06, DATED AUGUST 4, 2 005, IN PARAGRAPH 12 DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM UNDER SECT ION 80-IA WHICH WAS ACCORDINGLY, ALLOWED. ASSESSMENT YEAR 2000-01 : ITA 3078/MUM/2009 46 IN THIS ASSESSMENT YEAR ALSO THE ASSESSEE IN THE CO MPUTATION MEMO CLAIMED DEDUCTION UNDER SECTION 80-IA OF AN AMOUNT OF RS.1, 20,19,495 WHICH WAS ALLOWED IN FULL BY THE ASSESSING OFFICER IN THE REGULAR ASS ESSMENT ORDER UNDER SECTION 143(3), DATED MARCH 28, 2003. THIS BEING THE POSITION, THE STATEMENT OF THE ASSES SEE THAT THE CLAIM UNDER SECTION 80-IA CLAIMED FOR THE FIRST TIME IN THE ASSESSMENT YEAR 2004-05 IS TOTALLY CONTRARY TO THE FACTS AS MENTIONED. THIS PROVES THAT ASSESSM ENT YEAR 2004-05 IS NOT THE INITIAL ASSESSMENT YEAR AS CLAIMED BY THE ASSESSEE. THE FACT OF THE MATTER IS THAT THE ASSESSEE EXERCIS ED ITS OPTION OF CLAIMING DEDUCTION UNDER SECTION 80-IA IN THE ASSESSMENT YEA R 1999-2000 ITSELF. THEREFORE, THE ASSESSMENT YEAR 1999-2000 IS THE INITIAL ASSESS MENT YEAR. BUT THIS LETTER IS CONTRARY TO THE FINDINGS OF THE LOWER AUTHORITIES. THE LOWER AUTHORITIES CATEGORICALLY OBSERVED THAT THE FIRST Y EAR IN WHICH DEDUCTION WAS CLAIMED WAS 2004-05. WE HAVE ALREADY NARRATED IN TH E FACTS OF THE CASE THAT IF THE FACTS STATED BY THE ASSESSING OFFICER OR THE COMMIS SIONER OF INCOME-TAX (APPEALS) ARE WRONG THE DEPARTMENTAL REPRESENTATIVE IS REQUIR ED TO ADDUCE THE EVIDENCE AS PER RULES 10 AND 29 OF THE INCOME-TAX (APPELLATE TR IBUNAL) RULES, 1963, WHICH READ AS FOLLOWS : 10. FILING OF AFFIDAVITS.-WHERE A FACT WHICH CANNO T BE BORNE OUT BY, OR IS CONTRARY TO, THE RECORD IS ALLEGED, IT SHALL BE STATED CLEAR LY AND CONCISELY AND SUPPORTED BY A DULY SWORN AFFIDAVIT. 29. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE TR IBUNAL.-THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDITIONAL EVIDENC E EITHER ORAL OR DOCUMENTARY ITA 3078/MUM/2009 47 BEFORE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES A NY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE F ILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE, OR, IF THE INCO ME-TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO T HE ASSESSEE TO ADDUCE EVIDENCE EITHER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRIBUNAL, FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED. THESE FACTS ARE CONTRARY TO THE FACTS RECORDED BY T HE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE ASSESSING OFFICER. IT CANNOT BE C ONSIDERED. THE ABOVE STATEMENT MADE BY THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH RULES 10 AND 29. HENCE, WE DECLINE TO CONSIDER THE SAME. ADVERTING TO THE FACTS OF THE CASE, THE INITIAL ASS ESSMENT YEAR IN THIS CASE STARTS FROM 2004-05 SINCE THE ASSESSEE HAS OPTED TO CLAIM THIS DEDUCTION ONLY IN THIS ASSESSMENT YEAR, THE INITIAL ASSESSMENT YEAR CANNOT BE THE YEAR IN WHICH THE UNDERTAKING COMMENCED ITS OPERATIONS AND IN THIS CA SE, THE INITIAL ASSESSMENT YEAR IS THE ASSESSMENT YEAR IN WHICH ASSESSEE HAS C HOSEN TO CLAIM DEDUCTION UNDER SECTION 80-IA. HENCE, THE PROVISIONS OF SECTI ON 80-IA(5) TREATING UNDERTAKING AS A SEPARATE SOLE SOURCE OF INCOME CANNOT BE APPLI ED TO A YEAR PRIOR TO THE YEAR IN WHICH THE ASSESSEE OPTED TO CLAIM RELIEF UNDER SECT ION 80-IA FOR THE FIRST TIME. DEPRECIATION AND CARRY FORWARD LOSS RELIEF TO THE U NIT WHICH CLAIMS DEDUCTION UNDER SECTION 80-IA, CANNOT BE NOTIONALLY CARRIED FORWARD AND SET OFF AGAINST THE INCOME FROM THE YEAR IN WHICH THE ASSESSEE STARTED CLAIMIN G DEDUCTION UNDER SECTION 80- IA. AT THE COST OF REPETITION, WE MAKE IT CLEAR THA T THE CASE LAW RELIED ON BY THE DEPARTMENTAL REPRESENTATIVE ARE DELIVERED BEFORE TH E AMENDMENT TO SECTION 80-IA BY THE FINANCE ACT, 1999. BEFORE THE AMENDMENT, THE INITIAL ASSESSMENT YEAR WAS DEFINED IN THE ACT BUT AFTER THE AMENDMENT THERE IS NO DEFINITION FOR INITIAL ASSESSMENT YEAR IN THE ACT AND THERE IS OPTION TO T HE ASSESSEE IN SELECTING THE YEAR ITA 3078/MUM/2009 48 OF CLAIMING RELIEF UNDER SECTION 80-IA. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THERE IS NO QUESTION OF SETTING OFF NOTIONALLY CARR IED FORWARD UNABSORBED DEPRECIATION OR LOSS AGAINST THE PROFITS OF THE UNI TS AND THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80-IA ON THE CURRENT ASSESSMENT YEAR ON THE CURRENT YEAR PROFIT. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE.' 27. FROM A READING OF THE ABOVE ORDER, IT IS CLEAR THAT ALL THE AUTHORITIES BELOW HAD GIVEN A CATEGORICAL FINDING THAT THE FIRST YEAR IS 2004-05. THE ISSUE ALSO REACHED FINALITY. THE REVENUE HAS ACCEPTED THE FINDING GIVE N BY THE COMMISSIONER OF INCOME- TAX (APPEALS) AND, THEREFORE, THE SAME CANNOT BE RA ISED IN THE ASSESSEES APPEAL BEFORE THE TRIBUNAL. IT IS A QUESTION OF FACT. IT I S NOT A PERVERSE ORDER. WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE TRIBUNA L WARRANTING INTERFERENCE. THE ORDER OF THE TRIBUNAL IS IN CONFORMITY WITH LAW. UNDER THESE CIRCUMSTANCES, WE ALSO ANSWER QUESTIONS NOS. 1 AND 3 IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE. THE TAX CASE FILED BY THE REVENUE IS DISMISSED. 28. IN FINE, TAX CASE (APPEAL) NOS. 909 AND 940 OF 2009 , ALL THE QUESTIONS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE A ND, HENCE, THESE APPEALS ARE ALLOWED. 29. UNDER THESE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE TRIBUNAL AND ANSWER ALL THE QUESTIONS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN TAX CASE (APPEAL) NO. 918 OF 2008 AND DISMISS THE APPEAL. THUS KEEPING IN VIEW JUDGMENT OF THE HONBLE MADRA S COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS PRIVATE LIMITED V. AC IT(2012) 340 ITR477(MAD.) , JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT V. GRT JEWELLERS(INDIA) (SUPRA) , CBDT CIRCULAR NO. 01/2016 DATED 15-02-201 6 , PROVISIONS OF SECTION 80IA ITA 3078/MUM/2009 49 OF THE ACT AND AS PER DISCUSSIONS AND REASONING AS SET OUT ABOVE, WE HAVE NO HESITATION IN HOLDING THAT THE ASSESSMENT YEAR 2002 -03 CHOSEN BY THE ASSESSEE COMPANY SHALL BE THE INITIAL ASSESSMENT YEAR FOR THE PURPOSES OF CLAIMING DEDUCTION U/S 80IA OF THE ACT , ALTHOUGH THE JOJOBE RA 67.5MW UNIT STARTED GENERATING POWER W.E.F. ASSESSMENT YEAR 1997-98. TH US, JOJOBERA 67.5 MW POWER UNDERTAKING SHALL BE DEEMED TO BE THE ONLY SOURCE O F THE INCOME AS PROVIDED U/S 80IA(5) OF THE ACT ONLY FROM THE ASSESSMENT YEAR SU CCEEDING THE ASSESSMENT YEAR 2002-03 BEING THE INITIAL ASSESSMENT YEAR AND SUBSE QUENT ASSESSMENT YEAR UP-TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DET ERMINATION IS TO BE MADE WHICH IN ANY CASE SHALL NOT TRANSGRESS BEYOND FIFTEEN YEA RS FROM THE YEAR WHEN JOJOBERA 67.5 MW POWER GENERATING UNIT STARTED GENERATING PO WER. WE ALSO HOLD THAT THE NOTIONALLY BROUGHT FORWARD LOSSES/ DEPRECIATION OF THE JOJOBERA 67.5 MW POWER GENERATING UNIT FOR THE PERIOD FROM THE ASSESSMENT YEAR 1997-98 TO 2001-02 WHICH ARE ALREADY SET OFF AGAINST THE OTHER BUSINESS INCO ME IN EARLIER YEARS AND SET-OFF BEING ALLOWED BY THE REVENUE SHALL NOT BE ADJUSTED FROM THE PROFIT SO COMPUTED BY THE ASSESSEE COMPANY WITH RESPECT TO JOJOBERA 67.5M W POWER GENERATING UNIT FOR THE ASSESSMENT YEAR 2002-03 FOR THE PURPOSES OF COM PUTING DEDUCTION U/S.80IA OF THE ACT. SINCE, WE HAVE ADJUDICATED THIS ISSUE ON MERIT IN F AVOUR OF THE ASSESSEE COMPANY BASED ON DETAILED DISCUSSIONS AND REASONING AS SET OUT ABOVE, THE GROUNDS RAISED BY THE ASSESSEE COMPANY CHALLENGING THE REOPENING O F THE ASSESSMENT U/S 147/148 OF THE ACT HAS BECOME ACADEMIC AND INFRUCTUOUS AND HENCE WE REFRAIN FROM DECIDING THE SAME AND THE QUESTIONS RAISED BY THE A SSESSEE COMPANY IN THE GROUNDS OF APPEAL ARE KEPT OPEN. WE ORDER ACCORDING LY. ITA 3078/MUM/2009 50 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE COMPANY IN ITA NO. 3078/MUM/2009 FOR THE ASSESSMENT YEAR 2002-03 IS AL LOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MAY , 2016. # $% &' 19-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 19-05-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI