The DCIT, Kheda Circle, Kheda V. M/s. Chhotabhai Jethabhai Patel & Co., Kheda

ITA 567/AHD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8640 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Depreciation; Unabsorbed depreciation; Set aside
• Section: 143(3); 80IA; 72

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (THROUGH VIRTUAL COURT) BEFORE JUSTICE SHRI P. P. BHATT, PRESIDENT & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 567/AHD/2017 ( ASSESSMENT YEAR : 2012-13) THE DEPUTY COMMISSIONER OF INCOME- TAX KHEDA CIRCLE-3, NADIAD, DIST. KHEDA - 387002 / VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO. MOTA PORE, NADIAD, DIST. KHEDA - 387001 ./ ./ PAN/GIR NO. : AADFLP1222A ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIDHYUT TRIVEDI, SR.D.R. / RESPONDENT BY : SHRI S. N. SOPARKAR, SR. ADVOCATE DATE OF HEARING 08/07/2020 !'# / DATE OF PRONOUNCEMENT 20/07/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-2, VADODARA (CIT(A) IN SHORT), DATED 27 .12.2016 ARISING IN THE ASSESSMENT ORDER DATED 27.03.2015 PASSED BY THE ASSESSING ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 2 - OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2012-13. 2. THE GROUNDS OF APPEAL RAISED BY REVENUE READ HER EUNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T. (A) ERRED IN HOLDING THAT ' THE ACTION OF THE ASSES SING OFFICER IS NOT AS PER THE PROVISION OF LAW AND HE IS DIRECTED TO A LLOW THE DEDUCTION U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE BU SINESS I.E. RS, 3,61,15,115/- IN THE YEAR UNDER CONSIDERATION WITHO UT ADJUSTING THE LOSSES/DEPRECIATION OF EARLIER YEARS BROUGHT FORWAR D NOTIONALLY SINCE THE APPELLANT HAS CHOSEN THE YEAR UNDER CONSIDERATI ON AS THE 'INITIAL ASSESSMENT YEAR' , 'WITHOUT APPRECIATING THAT THE A .O. HAD CORRECTLY DISALLOWED ASSESSEE'S CLAIM OF DEDUCTION U/S. 80IA OF THE ACT, IN ACCORDANCE WITH THE PROVISION OF SECTION 80IA(5) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. C.I.T. (A) ERRED IN HOLDING THAT ' THE ACTION OF THE ASSES SING OFFICER IS NOT AS PER THE PROVISION OF LAW AND HE IS DIRECTED TO A LLOW THE DEDUCTION U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE BU SINESS I.E. RS. 3,61,15,115/- IN THE YEAR UNDER CONSIDERATION WITHO UT ADJUSTING THE LOSSES/DEPRECIATION OF EARLIER YEARS BROUGHT FORWAR D NOTIONALLY SINCE THE APPELLANT HAS CHOSEN THE YEAR UNDER CONSIDERATI ON AS THE 'INITIAL ASSESSMENT YEAR' . 'WITHOUT APPRECIATING THAT FOR T HE PURPOSE OF DEDUCTION U/S. 80IA OF THE ACT, NOT ONLY PROVISION OF SECTION 80IA(2) & 80IA(4) OF THE ACT HAVE TO BE CONSIDERED BUT THE PR OVISION OF SECTION 80IA(5) OF THE ACT HAS TO BE CONSIDERED IN ITS ENTI RETY. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN GENE RATION OF ELECTRICITY THROUGH WIND MILLS INSTALLED IN VARIOUS PARTS OF MAHARASHTRA, RAJASTHAN ETC. WHICH IS ELIGIBLE BUSIN ESS UNDER S.80IA(4) OF THE ACT FOR THE PURPOSES OF CLAIM OF D EDUCTION UNDER S.80IA(1) OF THE ACT. FOR THE AY 2012-13 UNDER CON SIDERATION, THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.3,61,15,115/- WITHOUT NOTIONALLY ADJUSTING THE LOSSES/DEPRECIATION OF THE EARLIER YEARS ARISING FROM THE ELIGIBLE BUSINESS WHICH ALREADY ST OOD SET OFF IN ACCORDANCE WITH LAW FROM OTHER STREAM OF INCOME. T HE AO DENIED THE DEDUCTION OF PROFITS ARISING FROM ELIGIBLE BUSI NESS BY INVOKING EMBARGO PLACED BY SUB-SECTION (5) OF SECTION 80IA O F THE ACT AND PROCEEDED TO MAKE ADJUSTMENT ON ACCOUNT OF NOTIONAL LY CARRY FORWARD LOSSES/DEPRECIATION OF EARLIER YEARS FROM A CTUAL COMMENCEMENT OF ELIGIBLE BUSINESS. WHILE DOING SO, THE AO ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 3 - ESSENTIALLY OBSERVED THAT THE ASSESSEE IS REQUIRED TO TREAT THE ELIGIBLE BUSINESS AS THE ONLY SOURCE OF INCOME OF ELIGIBLE UNDERTAKING AND SET OFF PROVISIONS OF SECTION 70, 7 1 & 72 IS REQUIRED TO BE IGNORED FOR THE QUANTIFICATION OF EL IGIBLE PROFITS FOR DEDUCTION. RESULTANTLY, DEDUCTION UNDER S.80IA(1) OF THE ACT ON PROFITS AMOUNTING TO RS.3,61,15,115/- ARISING FROM GENERATION OF ELECTRICITY THROUGH WIND MILLS WAS DENIED BY ARTIFI CIAL SET OFF OF LOSSES ARISING FROM ELIGIBLE BUSINESS NOTIONALLY CARRY FORWARD FOR THE PURPOSES OF DETERMINATION OF ELIGIBLE PROFITS. 4. AGGRIEVED BY THE DENIAL OF DEDUCTION CLAIMED UND ER S.80IA(1) OF THE ACT, THE ASSESSEE PREFERRED APPEAL BEFORE TH E CIT(A). THE CIT(A) TOOK COGNIZANCE OF VARIOUS JUDICIAL PRECEDEN TS AS WELL AS THE CBDT CIRCULAR NO. 1 OF 2016 DATED 15.02.2016 ISSUED SUBSEQUENT TO PASSING OF ASSESSMENT ORDER AND REVERSED THE ACTION OF THE AO IN FOLLOWING TERMS: 4. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD S AND SUBMISSION OF THE ID. AUTHORIZED REPRESENTATIVE. I HAVE ALSO GONE THR OUGH VARIOUS DECISIONS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVES. AS A MATTER OF FACT, THE APPELLANT COMPANY HAS CLAIMED DEDUCTION U/S. 80IA(4 ), POST AMENDMENT EFFECTED FROM 01.04.2000 BY FINANCE ACT, 1999. THE DEDUCTION U/S. 80IA(4) HAS BEEN CLAIMED IN RESPECT OF THE INCOME DERIVED F ROM WIND MILL BUSINESS AT RS.3,61,15,115/-. THERE IS NO DISPUTE REGARDING REQ UISITE CONDITIONS OF SECTION 80IA HAVING BEEN SATISFIED BY THE APPELLANT EXCEPT THE APPLICABILITY OF SECTION 80IA(5). THE APPELLANT HAS INSTALLED WIND MILLS AT AS MANY AS 4 LOCATIONS FOR GENERATION OF ELECTRICITY . THE BUSINESS OF GENERATION OF ELECTRICITY HAS STARTED ON DIFFERENT DATES IN DIFFE RENT WIND MILLS FROM 31.12.2005 TO 27.02.2010. UNDISPUTEDLY, THE APPELLA NT HAS CHOSEN THE YEAR UNDER CONSIDERATION AS 'INITIAL ASSESSMENT YEAR' AS PER PROVISIONS OF SECTION 80IA(5) AND CLAIMED THE DEDUCTION FOR THE FIRST TIM E. UNDOUBTEDLY, THE APPELLANT HAD INCURRED LOSSES INCLUDING DEPRECIATIO N LOSS IN THE YEARS PRIOR TO THE YEAR UNDER CONSIDERATION TO THE TUNE OF RS.1 9,14,93,281/- AND THE SAME HAD BEEN ADJUSTED AGAINST THE INCOME OF BIDI MANUFA CTURING BUSINESS. THEREFORE, THERE WAS NO BROUGHT FORWARD BUSINESS LO SS OR UNABSORBED DEPRECIATION AVAILABLE TO BE SET OFF AGAINST THE IN COME OF CURRENT YEAR. HOWEVER, THE ASSESSING OFFICER HAS HELD THAT SINCE THE WIND MILL BUSINESS BEING ELIGIBLE BUSINESS, HAS TO BE TREATED AS ONLY SOURCE OF INCOME AS PER PROVISIONS OF SECTION 80IA(5), THE LOSSES AND UNABS ORBED DEPRECIATION OF EARLIER YEARS SHOULD BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE INCOME OF ELIGIBLE BUSINESS BEFORE ALLOWING ANY DED UCTION U/S. 80IA(4). ACCORDINGLY, THE ASSESSING OFFICER HAS DISALLOWED T HE DEDUCTION CLAIMED U/S. 80IA(4) AT RS.3,61,15,115/- SINCE AFTER SET OFF OF NOTIONAL BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION, THERE REMAINED NO I NCOME DERIVED FROM ELIGIBLE BUSINESS. ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 4 - 4.1. THE APPELLANT HAS RELIED UPON VARIOUS DECISION S TO SUPPORT ITS CLAIM, BUT THE ASSESSING OFFICER HAS REJECTED THE SAME ON THE GROUND THAT THE ISSUE HAD NOT ATTAINED FINALITY AS THE REVENUE WAS IN APP EAL BEFORE HIGHER AUTHORITIES (HIGH COURT OR SUPREME COURT). AFTER GO ING THROUGH THE DECISIONS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE, I FIND THAT THE ISSUE ON HAND IS SQUARELY COVERED IN THE FAVOUR OF APPELLANT . THE LEAD CASE ON THE ISSUE UNDER CONSIDERATION IS OF HON'BLE MADRAS HIGH COURT WHICH IS AS UNDER:- VELAYUDHASWAMY SPINNING MILLS (P) LTD. V/S ACIT [20 12] 21 TAXMANN.CORN 95 (MAD.) SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTI ONS -PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS -ASSESSMENT YEARS 2004-05 AND 2005-06 LOSS IN YEAR EARLIER TO INITIAL ASSESSM ENT YEAR ALREADY ABSORBED AGAINST PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF ELIG IBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN SECTION 80-IA(5) [ASSES SMENT YEARS 2004-05 & 2005-06] [IN FAVOUR OF ASSESSES] UNDER SECTION 80-IA(1), DEDUCTION IS GIVEN TO ELIGI BLE BUSINESS AND THE SAME IS DEFINED IN SUB-SECTION (4). SUB-SEC TION (2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASS ESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED AND IF IT I S NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN Y EARS IS OUTER LIMIT AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH TH E UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY I NFRASTRUCTURE ACTIVITY ETC. SUB-SECTION (5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS 'INITIAL ASSESSMENT YE AR' ARE USED IN SUB- SECTION (5) AND THE SAME IS NOT DEFINED UNDER THE P ROVISIONS. IT IS TO BE NOTED THAT AN 'INITIAL ASSESSMENT YEAR' EMPLOYED IN SUB-SECTION (5) IS DIFFERENT FROM THE WORDS 'BEGINNING FROM THE YEA R' REFERRED TO IN SUBSECTION (2). WHEN THE ASSESSES EXERCISES THE OPTION, THE ONLY LO SSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEARS WHICH W ERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OFTEN YEARS FROM THE INITIAL ASSESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THO UGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND TH E 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 ASS ESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIO NALLY. FICTION CREATED IN SUB-SECTION DOES NOT CONTEMPLATE TO BRIN G SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHIC H IT IS CREATED. THUS, LOSS IN THE YEAR EARLIER TO INITIAL ASSESSMEN T YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNO T BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS, AS NO SUCH MANDATE IS PROVIDED IN SECTION 80-IA(5). FOLLOWING THE ABOVE MENTIONED DECISION, THE HON'BLE JURISDICTIONAL ITAT HAS ALSO DECIDED THE MATTER UNDER CONSIDERATION IN THE FAVOUR OF ASSESSEE IN THE FOLLOWING CASES:- ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 5 - I) JIVRAJ TEA & INDUSTRIES LTD. V/S ACIT [2014] 42 TAXMANN.COM 462 (AHD TRIB.) SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTI ONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS (COMPUTATION OF DEDUCTION) - WHETHER WHEN AN ASSESS EE EXERCISES OPTION OF CHOOSING INITIAL ASSESSMENT YEA R AS CULLED OUT IN SUB-SECTION (2) OF SECTION 80-IA FROM WHICH IT CHOOSES ITS 10 YEARS OF DEDUCTION OUT OF 15 YEARS, THEN ONL Y LOSSES OF YEARS STARTING FROM INITIAL ASSESSMENT YEAR ALONE A RE TO BE BROUGHT FORWARD; LOSS PRIOR TO INITIAL ASSESSMENT Y EAR WHICH HAS ALREADY BEEN SET-OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO PERIOD OF TEN YEARS FROM INITIAL ASSE SSMENT YEAR - HELD, YES- WHETHER WHERE ASSESSEE HAD NOT SUFFERE D ANY LOSS IN RELEVANT YEARS AND BROUGHT FORWARD LOSS OR DEPRE CIATION DID NOT RELATE TO INITIAL YEARS, SAME COULD NOT BE REDUCED FOR DETERMINING AMOUNT FOR WHICH DEDUCTION IS TO BE ALL OWED UNDER SECTION 80-IA - HELD, YES [PARA 28] [IN FAVOU R OF ASSESSEE] IN ALL THE APPEALS UNDER CONSIDERATION THE INITIA L YEAR CHOSEN BY THE ASSESSEE FOR CLAIMING DEDUCTION WAS A FTER 1-4-2000 WHEN THE AMENDED PROVISION OF SECTION 80-I A WAS APPLICABLE. [PARA 18] SECTION 80-IA, WHICH HAS BEEN SUBSTITUTED WITH E FFECT FROM 1-4-2000, PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAIN S DERIVED BY AN UNDERTAKING FROM ANY ELIGIBLE BUSINES S REFERRED TO IN SUB-SECTION 4, THERE SHALL, IN ACCOR DANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE DEDUCTION OF AN AMOUNT EQU AL TO 100 PER CENT OF THE PROFITS AND GAINS DERIVED FR OM SUCH BUSINESS FOR 10 CONSECUTIVE YEARS. SUBSTITUTED SUB- SECTION (2) OF SECTION 80-IA, PROVIDES THAT AN OPTI ON IS GIVEN TO THE ASSESSEE FOR CLAIMING ANY 10 CONSECUTI VE ASSESSMENT YEAR OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGIN TO OPERATE. THE 15 YEARS IS THE OUTER LIMIT W ITHIN WHICH THE ASSESSEE CAN CHOOSE THE PERIOD OF CLAIMIN G THE DEDUCTION. SUB-SECTION (5) IS A NON-OBSTANTE CL AUSE WHICH DEALS WITH THE QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS.[PARA 19] FROM A PLAIN READING OF SUB-SECTION (5) OF SECT ION 80- IA, IT CAN BE GATHERED THAT IT IS A NON-OBSTANTE CL AUSE WHICH OVERRIDES THE OTHER PROVISIONS OF THE ACT AND IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UNDER SECTION 80-IA, FOR THE ASSESSMENT Y EAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME. THUS, THE FICTION CREATED IS THAT THE ELIGIBLE BUSINESS I S THE ONLY SOURCE OF INCOME AND THE DEDUCTION WOULD BE ALLOWED FROM THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR. IT NOWHERE DEFINES AS T O WHAT IS THE INITIAL ASSESSMENT YEAR. PRIOR TO 1-4-2 000, THE INITIAL ASSESSMENT YEAR WAS DEFINED FOR VARIOUS TYPES OF ELIGIBLE ASSESSEES UNDER SECTION 80-IA (12 ). HOWEVER, AFTER THE AMENDMENT BROUGHT IN STATUTE BY THE ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 6 - FINANCE ACT, 1999, THE DEFINITION OF 'INITIAL ASSES SMENT YEAR' HAS BEEN SPECIFICALLY TAKEN AWAY. NOW, WHEN T HE ASSESSEE EXERCISES THE OPTION OF CHOOSING THE INITI AL ASSESSMENT YEAR AS CULLED OUT IN SUB-SECTION (2) OF SECTION 80-IA FROM WHICH IT CHOOSES ITS 10 YEARS OF DEDUCTION OUT OF 15 YEARS, THEN ONLY THE LOSSES OF THE YEARS STARTING FROM THE INITIAL ASSESSMENT YEAR ALO NE ARE TO BE BROUGHT FORWARD AS STIPULATED IN SECTION 80- IA(5). THE LOSS PRIOR TO THE INITIAL ASSESSMENT YEA R WHICH HAS ALREADY BEEN SET-OFF CANNOT BE BROUGHT FORWARD AND ADJUSTED INTO THE PERIOD OF TEN YEARS F ROM THE INITIAL ASSESSMENT YEAR AS CONTEMPLATED OR CHOS EN BY THE ASSESSEE. IT IS ONLY WHEN THE LOSS HAVE BEEN INCURRED FROM THE INITIAL ASSESSMENT YEAR, THEN THE ASSESSES HAS TO ADJUST LOSS IN THE SUBSEQUENT ASSES SMENT YEARS AND IT HAS TO BE COMPUTED AS IF ELIGIBLE BUSI NESS IS THE ONLY SOURCE OF INCOME AND THEN ONLY DEDUCTIO N UNDER SECTION 80-IA CAN BE DETERMINED. THIS IS THE TRUE IMPORT OF SECTION 80-IA(5).[PARA 20] IN THE PRESENT CASES, THERE WAS NO DISPUTE TH AT LOSSES INCURRED BY THE ASSESSEE WERE ALREADY SET OFF AND ADJUSTED AGAINST THE PROFITS OF THE EARLIER YEARS. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE EXERCISE D THE OPTION UNDER SECTION 80-IA(2). DURING THE RELEVANT PERIOD, THERE WERE NO UNABSORBED DEPRECIATION OR LO SS OF THE ELIGIBLE UNDERTAKINGS AND THE SAME WERE ALRE ADY ABSORBED IN THE EARLIER YEARS. THERE WAS A POSITIVE PROFIT DURING THE YEAR. [PARA 22] THUS, 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- IA FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. [PARA 24] SINCE ASSESSEE HAD NOT SUFFERED ANY LOSS IN T HE SAID YEARS, NO BROUGHT FORWARD LOSS OR DEPRECIATION COUL D BE REDUCED FOR DETERMINING THE AMOUNT IN WHICH THE DEDUCTION IS TO BE ALLOWED UNDER SECTION 80-IA. HEN CE, THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE W ERE SET ASIDE AND GROUND OF APPEAL OF THE ASSESSEE WAS ALLOWED. [PARA 28]. II) SADBHAV ENGINEERING LTD, V/S DCIT T20141 45 TAXMANN .COM 333 (AND -TRIB.) SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTI ONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS (COMPUTATION OF) - ASSESSMENT YEARS 2005-06 TO 2007 -08 - ASSESSEE HAD SET UP AN UNDERTAKING IN ASSESSMENT YE AR 2003-04 - WHETHER PROVISION THROUGH WHICH ASSESSEE COULD HA VE CHOSEN ITS INITIAL ASSESSMENT YEAR WAS BROUGHT IN STATUTE W.E.F. 1-4- 2000, BY VIRTUE OF SECTION 80-IA - HELD, YES - ASSE SSEE STARTED ITS UNDERTAKING IN ASSESSMENT YEAR 2003-04 - IN ASS ESSMENT YEAR 2005-06, ASSESSEE EARNED PROFITS FROM UNDERTAK ING AND ACCORDINGLY CLAIMED DEDUCTION UNDER SECTION 80-IA B Y TREATING SAID ASSESSMENT YEAR AS INITIAL ASSESSMENT YEAR - A SSESSING OFFICER WHILE COMPUTING DEDUCTION FOR ASSESSMENT YE AR 2005- ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 7 - 06 INVOKED PROVISIONS OF SUB-SECTION (5) OF SECTION 80-IA AND REDUCED DEDUCTION BY ADJUSTING LOSSES OF PREVIOUS A SSESSMENT YEARS 2003-04 AND 2004-05 FROM ELIGIBLE PROFIT OF U NDERTAKING - WHETHER IN INSTANT CASE, SINCE LOSS PERTAINED TO YEAR PRIOR TO INITIAL ASSESSMENT YEAR WHICH HAD BEEN SET OFF AGAI NST PROFITS OF NON-ELIGIBLE UNITS AND BEGINNING OF INITIAL ASSE SSMENT YEAR AS ADOPTED BY ASSESSEE IS ASSESSMENT YEAR 2005-06 O NLY, LOSSES OF ASSESSMENT YEARS 2003-04 & 2004-05 COULD NOT BE NOTIONALLY CARRIED FORWARD WITHIN MEANING OF SECTION 80-IA(5) - HELD, YES [PARA 9] [IN FAVOUR OF ASSESSEE]. 4.1.1. THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) HAS BEEN FOLLOWED SUBSEQUENTLY IN VARIOUS DECISIONS, A FEW OF THEM, A RE AS UNDER:- A) ACIT VS. PATANKAR WIND FARMS PVT. LTD. (2014) 36 ITR (TRIB) 0510 (PUNE) B) CIT VS. ANIL H. LAD (2014) 102 DTR 241 (KAR- HC) C) CIT VS. RAMRAJ HANDLOOMS (2015) 93 CCH 0133 (MAD-HC) D) CIT VS. EASTMAN SHIPPING MILLS PVT. LTD. (2015) 372 ITR 88 (MAD) E) CIT VS. MEERA TEXTILES MILLS PVT. LTD. (2015) 9 3 CCH 57 (MAD-HC) F) CIT VS. UCAL FUEL SYSTEMS LTD. (2016) 383 ITR 15 (MAD) G) CIT VS. PREM TEXTILE INTERNATIONAL (2016) 96 CCH 28 (MAD- HC) H) CIT VS. P.V. CHANDRAN (2016) 385 ITR 479 (M AD) 4.1.2. IN ORDER TO SETTLE THE CONTROVERSY AND ALSO TO AVOID LITIGATION, CBDT HAS ALSO ISSUED A CIRCULAR CLARIFYING THE MEANING O F TERM 'INITIAL ASSESSMENT YEAR' VIDE CIRCULAR NO. 1 OF 2016 DATED 15.02.2016 WHICH IS REPRODUCED AS UNDER:- 'SECTION 80-IA OF THE INCOME-TAX ACT, 1961 ('ACT'), AS SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1-4-2000, PROVIDES FOR DEDUCTION OF AN AMOUNT EQUAL TO 100 % OF THE PR OFITS AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FROM AN ELI GIBLE BUSINESS (AS REFERRED TO IN SUB-SECTION (4) OF THAT SECTION) IN ACCORDANCE WITH THE PRESCRIBED PROVISIONS. SUB-SECTION (2) OF SECTION 8 0-IA FURTHER PROVIDES THAT THE AFORESAID DEDUCTION CAN BE CLAIME D BY THE ASSESSEE, AT HIS OPTION, FOR ANY TEN CONSECUTIVE ASSESSMENT Y EARS OUT OF FIFTEEN YEARS (TWENTY YEARS IN CERTAIN CASES) BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING COMMENCES OPERATION, BEGINS DEVELOP MENT OR STARTS PROVIDING SERVICES ETC. AS STIPULATED THEREIN. SUB- SECTION (5) OF SECTION 80-IA FURTHER PROVIDES AS UNDER 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSI NESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB-SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 8 - 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 WH ICH THE 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 ASSESSM ENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/ MANUFACTURING ACTIV ITY HAD COMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT /OPERATION ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IG NORING THE CLEAR MANDATE PROVIDED UNDER SUB-SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRE S TO CLAIM DEDUCTION OUT 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 ELIGIB LE TO CLAIM DEDUCTION U/S 80-IA HAS THE OPTION TO CHOOSE THE IN ITIAL/ FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, 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 80-IA FOR TEN CONSE CUTIVE YEARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRE SCRIBED IN THE SECTION. HENCE, THE TERM 'INITIAL ASSESSMENT YEAR' WOULD MEA N THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING D EDUCTION U/S 80-IA. 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 80-IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFT ER BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULAR CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U/S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELAT ES TO INTERPRETING 'INITIAL ASSESSMENT YEAR' AS MENTIONED IN SUB-SECTI ON (5) OF THAT SECTION FOR WHICH THE STANDING COUNSELS/D.R.S BE SU ITABLY INSTRUCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED.' AFTER CONSIDERING THE ABOVE MENTIONED CIRCULAR, HON 'BLE MADRAS HIGH COURT VIDE ORDER DATED 01.03.2016 IN THE CASE OF CIT VS. M/S. G.R.T. JEWELLERS (INDIA) PVT. LTD. CONTAINED IN TCA NO. 176 OF 2016 HAVE HELD THAT LOSSES/UNABSORBED DEPRECIATION PERTAINING TO WIND M ILL, WHICH WERE SET OFF IN THE EARLIER YEAR AGAINST OTHER BUSINESS INCOME OF T HE ASSESSEE, CANNOT BE NOTIONALLY BROUGHT FORWARD AND AGAIN SET OFF AGAINS T THE INCOME OF ELIGIBLE BUSINESS OF THE YEAR WHICH WAS CHOSEN AS 'INITIAL A SSESSMENT YEAR' FOR CLAIM OF DEDUCTION U/S. 80IA. I ALSO FIND THAT SLP FILED BY THE DEPARTMENT AGAINST THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE LE AD CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) HAS ALSO BEEN DISMISSED AND THE SAME IS REPORTED AS ACIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD. (2016) 76 TAXMANN.COM 176 (SC). 4.1.3. THEREFORE, IN VIEW OF THE ABOVE DISCUSSION A ND LEGAL POSITION, IT IS CRYSTAL CLEAR THAT LOSSES/DEPRECIATION OF THE WIND MILL BUSINESS FOR THE YEARS PRIOR TO THE 'INITIAL ASSESSMENT YEAR' WHICH HAD BE EN ALREADY SET OFF AGAINST ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 9 - THE INCOME OF OTHER BUSINESS, CANNOT BE BROUGHT FOR WARD NOTIONALLY AND AGAIN SET OFF AGAINST THE INCOME OF ELIGIBLE BUSINESS WHI CH IS WIND MILL BUSINESS OF GENERATING ELECTRICITY IN THE CASE OF APPELLANT. AC CORDINGLY, I HOLD THAT ACTION OF THE ASSESSING OFFICER IS NOT AS PER THE P ROVISIONS OF LAW AND HENCE HE IS DIRECTED TO ALLOW THE DEDUCTION U/S. 80IA(4) TO THE EXTENT OF INCOME OF ELIGIBLE BUSINESS I.E. RS.3,61,15,115/- IN THE YEAR UNDER CONSIDERATION WITHOUT ADJUSTING THE LOSSES/DEPRECIATION OF EARLIE R YEARS BROUGHT FORWARD NOTIONALLY SINCE THE APPELLANT HAS CHOSEN THE YEAR UNDER CONSIDERATION AS THE INITIAL ASSESSMENT YEAR. THUS, APPELLANT SUCCEEDS IN RESPECT OF GROUND NOS. 1 TO 4. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED DR FOR THE REVENUE RELIED UPON THE A SSESSMENT ORDER. 7. THE LEANED SENIOR COUNSEL FOR THE ASSESSEE, ON T HE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A) AS WELL AS THE CBDT CIRCULAR GIVING CLARIFICATION OF EXPRESSION INITIAL ASSESSM ENT YEAR AND SET OFF OF BROUGHT FORWARD LOSSES AS PROVIDED IN SECTIO N 80IA(5) OF THE ACT. THE LEARNED SENIOR COUNSEL ALSO POINTED OUT T HAT THE IDENTICAL ISSUE HAS EARLIER CROPPED UP IN ASSESSEES OWN CASE IN ITA NO. 1849/AHD/2017, ORDER DATED 05.12.2019 CONCERNING AY 2013-14 WHERE THE ISSUE HAS BEEN ADJUDICATED IN FAVOUR OF T HE ASSESSEE. THE LEARNED SENIOR COUNSEL ALSO REFERRED TO PARA 4.1 OF THE CIT(A) ORDER AND SUBMITTED THAT THE ISSUE HAS NOW ATTAINED FINAL ITY BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P.) LTD. VS. ACIT [2012] 340 ITR 47 7 (MADRAS). IT WAS SUBMITTED THAT SLP BY REVENUE AGAINST THE AFORE SAID DECISION HAS BEEN DISMISSED AS REPORTED IN [2016] 76 TAXMANN.COM 176(SC). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SHORT ISSUE THAT ARISES FOR CONSIDERATION IN THE PRESENT CASE IS WHETHER THE ASSESSEE IS ENTITLED IN LAW FOR CLAIM OF DEDUCTION OF INCOME ARISING FROM ELIGIBLE BUSINESS DURING THE YEAR UNDER S. 80I A(1) R.W.S. ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 10 - 80IA(4) OF THE ACT WITHOUT MAKING ADJUSTMENTS TOWAR DS LOSSES ARISING IN THE EARLIER ASSESSMENT YEARS PRIOR TO EX ERCISE OF OPTION OF INITIAL ASSESSMENT YEAR WITH REFERENCE TO THE ELI GIBLE BUSINESS. HENCE, THE CENTRAL QUESTION FOR CONSIDERATION IS WH ETHER THE LOSSES ARISING IN ELIGIBLE BUSINESS, IF ANY, PRIOR TO EXER CISE OF OPTION TOWARDS INITIAL ASSESSMENT YEAR IS REQUIRED TO BE ARTIFICIALLY CARRIED FORWARD AND NOTIONALLY ADJUSTED FROM THE PR OFITS ARISING FROM ELIGIBLE BUSINESS IN THE INITIAL ASSESSMENT Y EAR AND SUBSEQUENT ASSESSMENT YEARS FOR THE PURPOSES OF SEC TION 80IA(5) OF THE ACT. 9. THE MANNER OF DETERMINATION OF QUANTUM OF DEDUCT ION AS PROVIDED UNDER S.80IA(5) OF THE ACT HAS SINCE BEEN CLARIFIED BY THE CBDT CIRCULAR NO.1 OF 2016 DATED 15.02.2016 AND IS DEVOID OF CONTROVERSY ANY MORE. HAVING REGARD TO THE WIDE RAN GING CONTROVERSIES, THE CBDT CIRCULAR HAS GIVEN CATEGORI CAL INTERPRETATION ON EXERCISE OF OPTION OF CHOOSING I NITIAL ASSESSMENT YEAR REFERRED TO SUB-SECTION (5) OF SECTION 80IA O F THE ACT IN FAVOUR OF THE ASSESSEE. THE CBDT HAS ALSO CLARIFIE D THAT EMBARGO PLACED UNDER S.80IA(5) OF THE ACT FOR QUANTIFICATIO N OF DEDUCTION OF PROFITS AND GAINS OF AN ELIGIBLE BUSINESS WOULD APP LY FROM THE ASSESSMENT YEARS IMMEDIATELY SUCCEEDING INITIAL AS SESSMENT YEARS ONLY. HAVING REGARD TO EXPRESS ELUCIDATION BY CBDT , THE CIT(A), IN OUR VIEW, HAS RIGHTLY DECIDED THE ISSUE OF MANNE R OF COMPUTATION OF QUANTUM OF DEDUCTION UNDER S.80IA(5) OF THE ACT IN FAVOUR OF THE ASSESSEE. THE ASSESSEE, THUS, WHILE DETERMINING TH E ELIGIBLE PROFIT, IS NOT REQUIRED TO NOTIONALLY REDUCE LOSSES ARISING FROM ELIGIBLE BUSINESS IN THE EARLIER YEARS ALREADY SET OFF AGAIN ST OTHER BUSINESS OF ASSESSEE IN TERMS OF SECTIONS 70, 71 & 72 OF THE AC T PRIOR TO EXERCISE OF OPTION OF INITIAL ASSESSMENT YEAR. T HE LOSSES ARISING IN ELIGIBLE BUSINESS, IF ANY, SUBSEQUENT TO EARMARKI NG OF INITIAL ITA NO. 567/AHD/17 [DCIT VS. M/S. CHHOTABHAI JETHABHAI PATEL & CO.] A.Y. 2012-13 - 11 - ASSESSMENT YEAR SHALL HOWEVER CONTINUE TO BE GOVER NED BY EMBARGO PLACED IN SECTION 80IA(5) OF THE ACT. 10. HENCE, IN THE LIGHT OF ABOVE DISCUSSION AND IN CONSONANCE WITH THE DECISION OF THE CO-ORDINATE BENCH IN AY 20 13-14 AS WELL AS CBDT CIRCULAR REFERRED ABOVE, WE SEE NO MERIT IN TH E GRIEVANCE OF THE REVENUE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. SD/- SD/- (JUSTICE P. P. BHATT) (PRADIP KUMAR KEDIA) PRESIDENT ACCOUNT ANT MEMBER AHMEDABAD: DATED 20/07/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED ON 20/07/2020