ACIT 21(1), MUMBAI V. CHOUDHARY EXPORTS, MUMBAI

ITA 7423/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1519 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7423/MUM/2014 ASSESSMENT YEAR: 2010-11 ACIT-21(1), ROOM NO.116, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 / VS. M/S CHOUDHARY EXPORTS, A-BLOCK (BASEMENT), SHIV SAGAR ESTATE, DR. A.B. ROAD, WORLI, MUMBAI-400018 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO.AACFC6777E $ % # & / DATE OF HEARING : 07/12/2016 % # & / DATE OF ORDER: 28/12/2016 ! / REVENUE BY SHRI RAJAT MITTAL-DR !' # ! / ASSESSEE BY SHRI RAJAN R. VORA ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 07/09/2014 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI. THE ONLY GROUND RAISED BY THE REVENUE IS WH ETHER THE LD. COMMISSIONER OF INCOME TAX (APPEAL) WAS COR RECT IN NOT ALLOWING THE BUSINESS LOSS FROM THE ELIGIBLE UNIT FOR ASSESSMENT YEAR 2006-07 AND 2007-08 TO BE SET OFF F ROM THE BUSINESS INCOME OF ASSESSMENT YEAR 2010-11 OF T HE ELIGIBLE UNIT BEFORE ALLOWING DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) AND FURT HER DELETING THE DISALLOWANCE OF DEDUCTION U/S 80IA OF THE ACT OF RS.1,65,52,770/-. 2. DURING HEARING, THE LD. DR, SHRI RAJAT MITTAL, DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER . ON THE OTHER HAND, SHRI RAJAN VORA ALONG WITH SHRI NIK HIL TIWARI, DEFENDED THE CONCLUSION, ARRIVED AT IN THE IMPUGNED ORDER, BY SUBMITTING THAT IN EARLIER YEAR LOSS WAS ALLOWED, THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF TH E FIRST APPELLATE AUTHORITY. RELIANCE WAS PLACED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS M/S JAYANT A GRO ORGANICS LTD. (ITA NO.5621/MUM/2014) ORDER DATED 30/03/2016. THIS FACTUAL ASSERTION WAS NOT CONTROVE RTED BY THE REVENUE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE FIRM IS MANUFACTURER AND EXPO RTER OF ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 3 HAND KNITTED WOOLEN CARPETS DURRIES. IT ALSO UNDER TAKES GENERATION AND SUPPLY OF ELECTRICITY THROUGH WINDMI LL, DECLARED TOTAL INCOME OF RS.1,07,54,740/-. THE ASSE SSMENT WAS COMPLETED U/S 143(3) VIDE ASSESSMENT ORDER DATE D 14/03/2013. WHILE MAKING THE ASSESSMENT, THE LD. ASSESSING OFFICER DISALLOWED DEDUCTION OF RS.1,65,6 2,770/- U/S 80IA OF THE INCOME TAX ACT, 1961 (HEREINAFTER T HE ACT) FOR THE WINDMILL AT COIMBATORE AND DHULLE, RESULTIN G INTO DEMAND OF RS.70,96,030/-. ON APPEAL, BEFORE THE LD . COMMISSIONER OF INCOME TAX (APPEAL), THE CLAIMED DEDUCTION WAS ALLOWED. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. IT IS ALSO NOTED THA T THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS M/S JAYANT AGRO ORG ANICS LTD. (ITA NO.5261/MUM/2014) ORDER DATED 30/03/2016. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EUNDER FOR READY REFERENCE:- THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 27/06/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO DELETING THE DISALLOWANCE OF DEDUCTION OF RS.1,02,85,478/-, CLAIMED U/S 80IA OF THE ACT, STATING THAT INITIAL ASSESSMENT YEAR WILL BE THE FIRST IN WHICH DEDUCTION WAS CLAIMED FOR THE FI RST TIME, WITHOUT APPRECIATING THE DECISION IN HERCULES HOIST LTD. (2013) 22 ITR (TRIB.) 527. 2. DURING HEARING OF THIS APPEAL, SHRI ASHISH HELIWAL, LD. DR, ADVANCED ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, MS. INDIRA G. ANAND, ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 4 CONTENDED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 24/02/2016 FOR A.Y. 2010-11, THAT TO IN THE CASE OF ASSESSEE ITSELF. TH E LD. COUNSEL FURNISHED THE COPY OF THE AFORESAID ORDER I TA NO.5056/MUM/2014. THIS ASSERTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS NOT CONTROVERTED BY TH E LD. DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE AFORESAID ORDER DATED 24/02/2016 FOR READY REFERENCE AND ANALYSIS:- XXXXXXXXXXXXXXX IV. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING TH E DISALLOWANCE OF DEDUCTION OF RS. 1,11,14,473/- U/S 80IA STATING THAT 'INITIAL ASSESSMENT YEAR' WILL BE THE YEAR IN WHICH CLAIM OF DEDUCTION WAS MADE FOR THE FIRST TIME WITHOUT APPRE CIATING THAT THE OBSERVATIONS OF MUMBAI ITAT AT PARA 25 IN THE CASE OF HERCULES HOIST LTD (2013) 022 ITR (TRIB) 0527 WHERE IN THE HON'BLE ITAT HAS HELD THAT THE 'INITIAL ASSESSMENT YEAR' WILL BE THE YEAR IN WHICH THE OPERATIONS HAVE BEEN COMMENCED. ? V. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING TH E DISALLOWANCE OF RS. 1,11,14,473/- U/S 80IA WITHOUT APPRECIATING THAT IN THE ASSESSEE'S CASE ONLY FOR AY 2009-10, ON THE IDENTICAL ISSUE, LD CIT(A) HAS CONFIRMED THE DISALLOWANCE.? XXXXXXXXXXXXXXXX THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 16.05.2014 OF THE COMMISSIONER OF INCOM E TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2010-11. XXXXXXXXXXXXXXXX ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 5 8. SO FAR AS THE SECOND ISSUE IS CONCERNED, THE FAC TS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER (HEREINAFTER R EFERRED TO AS THE AO) OBSERVED THAT THE ASSESSEE HAS BEEN PERMITTED B Y THE GUJARAT ENERGY DEVELOPMENT AGENCY TO SET UP A WIND FARM OF CAPACITY 1.6 MW (2 NO. WTG OF 800 KW= 1.6 MW) AT VILLAGE NAVADRA OF TALUKA KALYANPUR, IN DISTRICT OF JAMNAGAR, GUJARAT. ASSESSEE ACQUIRED TWO WINDMILLS IN THE FY 2005-06 FROM M/S. ENERCON INDIA LTD. FOR A SUM OF RS.7.4 CRORES AND ENTERED INTO AN AGREEMENT WITH GUJARAT ENERGY TRANSMISSION CORPORATION LTD. ON 21. 04.2006 FOR SALE OF POWER. DURING THE FY RELEVANT TO AY 2010-11 , THE ASSESSEE GENERATED INCOME OF RS.1,33,71,946/- AND AFTER DEDU CTING EXPENSES UNDER VARIOUS HEADS AND DEPRECIATION, PROFIT HAD BE EN ARRIVED AT RS.1,11,14,473/-. THIS PROFIT DERIVED FROM WIND MIL L UNIT HAD BEEN CLAIMED EXEMPT U/S. 80IA(4)(IV)(A) BEING 100% OF IT S PROFIT DERIVED FROM THE WIND MILL PROJECT. THE AO NOTED THAT THOUG H THE PROJECT WAS STARTED IN AY 2006-07, THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IA(4)(IV)(A) FOR THE FIRST TIME IN AY 2009-10 AND THE YEAR UNDER CONSIDERATION WAS THE SECOND YEAR OF SUCH CLAIM OF DEDUCTION U/S. 80IA(4)(IV)(A) OF THE ACT. THE AO OBSERVED THAT AS PER THE PROVISION OF SECTION 80IA(5), WHILE QUANTIFYING THE AMOUNT OF DEDUCTION UNDER SECTION 80IA, IT HAS TO BE PRESUMED THAT THE ELIGIB LE BUSINESS IS THE ONLY SOURCE OF INCOME AND HENCE THE LOSSES INCURRED IN EARLIER YEAR HAS TO BE FIRST SET OFF WITH THE PROFITS OF ELIGIBL E BUSINESS AND BALANCE PROFIT, IF ANY IS ONLY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. HE ALSO FURTHER OBSERVED THAT SINCE THE ASSESSEE HAD I NCURRED HUGE LOSSES IN EARLIER YEAR, IF THE SAME ARE SET-OFF FROM THE I NCOME OF THE WINDMILL OF THIS YEAR, DEDUCTION UNDER SECTION 80IA WOULD NOT BE AVAILABLE. HE FURTHER OBSERVED THAT AS PER THE PRO VISIONS OF SECTION 80IA(5), A TAXPAYER HAS THE OPTION TO CLAIM DEDUCTI ON FOR A PERIOD OF 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS AND ALSO SUCH PROVISIONS MANDATE THAT THE ELIGIBLE BUSINESS SHOUL D BE FICTIONALLY TREATED AS THE ONLY SOURCE OF INCOME OF THE TAXPAYE R. THE AO HELD THAT THEREFORE LOSSES INCURRED IN EARLIER YEAR HAVE TO BE FIRST SET OFF AND BALANCE PROFIT, IF ANY IS ONLY ELIGIBLE FOR DED UCTION UNDER SECTION 80IA. HE FURTHER HELD THAT THE PROFIT FROM THE ELI GIBLE BUSINESS FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDU CTION UNDER SECTION 80IA OF THE ACT HAS TO BE COMPUTED AFTER DE DUCTION OF NOTIONAL BROUGHT FORWARD LOSSES AND DEPRECIATIONS O F ELIGIBLE UNITS, EVEN THOUGH THEY HAVE BEEN ALLOWED SET OFF AGAINST OTHER INCOME IN ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 6 EARLIER YEARS. HE OBSERVED THAT IT IS THE MANDATE OF LAW THAT LOSSES OF EARLIER YEARS THOUGH ALREADY ADJUSTED AGAINST INCOM E FROM OTHER SOURCES, THE SAME ARE ONCE AGAIN TO BE NOTIONALLY B ROUGHT FORWARD AND SET OFF AGAINST PROFITS OF THE ELIGIBLE UNIT TO COMPUTE ELIGIBLE DEDUCTION. 9. THE LD. CIT(A) HOWEVER ALLOWED THE CLAIM OF THE ASSESSEE. THE REVENUE IS THUS IN APPEAL BEFORE US. 10. AT THE OUTSET, THE LD. A.R. OF THE ASSESSEE SUB MITTED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF THE PROFITS OUT OF THE GENERATION OF ELECTRICITY OUT OF WINDMILL ACTIVITY AND THE UNABSORBED DEPRECIATION AND LOSSES OF THE E ARLIER YEARS TO THE INITIAL YEAR IN WHICH THE ASSESSEE STARTED TO CLAIM THE BENEFIT UNDER SECTION 80IA, SINCE ALREADY SET OFF WITH THE INELIG IBLE PROFITS OF THE ASSESSEE FROM OTHER BUSINESS, COULD NOT BE REDUCED FROM PROFITS OF ELIGIBLE BUSINESS FOR COMPUTING DEDUCTION U/S 80IA OF THE ACT. THE LD. A.R. OF THE ASSESSEE HAS FURTHER STATED THAT TH IS ISSUE IS SQUARELY IN FAVOUR OF THE ASSESSEE BY A SERIES OF DECISIONS AS MENTIONED BELOW: (A ) VELAYUDHASWAMY SPINNING MILLS PVT. LTD. VS. ACIT (2010) 231 CTR (MAD) :[2012] 340 ITR 477 (MAD) (HIGH COURT) (A FTER CONSIDERING SPECIAL BENCH DECISION). (B) CIT VS. EMRALD JEWEL INDUSTRY P. LTD. [2011] 53 DTR 263 (MAD) (HIGH COURT) (AFTER CONSIDERING THE ABOVE DECISION ) (C) M/S PRASHANT CATERERS VS. ITO ITA NO. 4226/M/20 11 DECIDED ON 6.02.2013 (MUMBAI TRIBUNAL) 11. FURTHER, THE LD AR HAS MENTIONED THAT IN THE D ECISIONS OF HON'BLE MADRAS HIGH COURT, THE SPECIAL BENCH DECISI ON IN THE CASE OF ACIT VS. GOLD MINE SHARES AND FINANCE (P) LTD. 113 ITD 209 (SB), HAS ALSO BEEN CONSIDERED. THE LD. DR ON THE OTHER HAND HAS RELIED UPON THE FI NDINGS OF THE AO ON THIS ISSUE. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FIND THAT THE HON'BLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHA SWAMY SPINNING MILLS (P) LTD. VS. ACIT (2010) 231 CTR (M AD) 368 (BCAJ) HAS HELD THAT THE ASSESSEE IS ENTITLED TO CL AIM DEDUCTION U/S ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 7 80IA FOR 10 CONSECUTIVE YEARS OUT OF 15 YEARS AND T HAT INITIAL YEAR OF BENEFIT CAN BE OPTED BY THE ASSESSEE. LOSSES AND DE PRECIATION OF THE YEARS EARLIER TO THE INITIAL ASSESSMENT YEAR WHICH HAVE ALREADY BEEN ABSORBED AGAINST PROFITS OF OTHER BUSINESSES CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS FOR COMPUTING THE DEDUCTION U/S.80IA. SIM ILAR VIEW HAS BEEN TAKEN IN THE DECISION OF HON'BLE MADRAS HIGH C OURT IN THE CASE OF CIT VS. EMERALD JEWEL INDUSTRY P. LTD. (SUPRA) AND BY THE MUMBAI TRIBUNAL IN THE CASE OF M/S PRASHANT CATERE RS VS. ITO (SUPRA). RESPECTFULLY FOLLOWING THE SAME, THIS ISSU E IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THE AO IS DIRECT ED TO ALLOW THE CLAIM OF DEDUCTION IN THE LIGHT OF THE ABOVE STATED DECISIONS. 13. IN VIEW OF THE ABOVE, THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 2.2. WE FIND THAT THE TRIBUNAL HAS DISCUSSED THE ISSUE IN PARA-8 OF THE ORDER DATED 24/02/2016 A ND FOLLOWING VARIOUS DECISIONS INCLUDING FROM HONBLE MADRAS HIGH COURT, WHEREIN, THE DECISION OF THE SPE CIAL BENCH IN THE CASE OF ACIT VS GOLDMINE SHARES AND FINANCE PVT. LTD. (113 ITD 209)(SB) WAS ALSO CONSIDERED. THE TRIBUNAL ALSO CONSIDERED ANOTHER DECISION IN M/S PRASHAN CATERERS VS ITO (ITA NO.4226/MUM/2011) ORDER DATED 06/02/2013 AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE, DIRECT ING THE ASSESSING OFFICER TO ALLOW THE CLAIMED DEDUCTIO N U/S 80IA OF THE ACT. FOLLOWING THE AFORESAID DECISI ON AND IN THE ABSENCE OF ANY CONTRARY DECISION/FACTS, BY THE REVENUE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. CIT(A). THUS, THE APPEAL OF THE REVENUE IS DISMISSED. CONSIDERING THE FOREGOING DISCUSSION, BEFORE COMIN G TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER SEC TION 80IA OF THE ACT FOR READY REFERENCE AND ANALYSIS:- ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 8 DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IN DUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT, ETC. 80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES 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 WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE 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 T HE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRA STRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVEL OPS AN INDUSTRIAL PARK OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE ( III ) OF SUB- SECTION (4) OR GENERATES POWER OR COMMENCES TRANSMI SSION OR DISTRIBUTION OF POWER OR UNDERTAKES SUBSTANTIAL RENOVATION AND M ODERNISATION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES : PROVIDED THAT WHERE THE ASSESSEE DEVELOPS OR OPERATES AND MA INTAINS OR DEVELOPS, OPERATES AND MAINTAINS ANY INFRASTRUCTURE FACILITY REFERRED TO IN CLAUSE ( A ) OR CLAUSE ( B ) OR CLAUSE ( C ) OF THE EXPLANATION TO CLAUSE ( I ) OF SUB- SECTION (4), THE PROVISIONS OF THIS SUB-SECTION SHA LL HAVE EFFECT AS IF FOR THE WORDS 'FIFTEEN YEARS', THE WORDS 'TWENTY YEARS' HAD BEEN SUBSTITUTED. (2A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1) OR SUB-SECTION (2), THE DEDUCTION IN COMPUTING THE TOTAL INCOME OF AN UNDERTAKING PROVIDING TELECOMMUNICATION SERVICES, SPECIFIED IN CLAUSE ( II ) OF SUB- SECTION (4), SHALL BE HUNDRED PER CENT OF THE PROFI TS AND GAINS OF THE ELIGIBLE BUSINESS FOR THE FIRST FIVE ASSESSMENT YEARS COMMEN CING AT ANY TIME DURING THE PERIODS AS SPECIFIED IN SUB-SECTION (2) AND THE REAFTER, THIRTY PER CENT OF SUCH PROFITS AND GAINS FOR FURTHER FIVE ASSESSMENT YEARS. (3) THIS SECTION APPLIES TO AN UNDERTAKING REFERRED TO IN CLAUSE ( II ) OR CLAUSE ( IV ) OF SUB-SECTION (4) WHICH FULFILS ALL THE FOLLOWIN G CONDITIONS, NAMELY: ( I ) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTR UCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF A N UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT , RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B , IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; ( II ) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINES S OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE: PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY IN THE CASE OF TRANSFER, EITHER IN WHOLE OR IN PART, OF MACHINE RY OR PLANT PREVIOUSLY USED BY A STATE ELECTRICITY BOARD REFERRED TO IN CL AUSE ( 7 ) OF SECTION 2 OF THE ELECTRICITY ACT, 2003 (36 OF 2003), WHETHER OR NOT SUCH TRANSFER IS IN ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 9 PURSUANCE OF THE SPLITTING UP OR RECONSTRUCTION OR REORGANISATION OF THE BOARD UNDER PART XIII OF THAT ACT. EXPLANATION 1. FOR THE PURPOSES OF CLAUSE ( II ), ANY MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OTHER TH AN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLANT PREVIOUSLY US ED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY : ( A ) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PREV IOUS TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, USED IN INDIA; ( B ) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FR OM ANY COUNTRY OUTSIDE INDIA; AND ( C ) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPEC T OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PR OVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOME OF ANY PERSON FOR ANY PE RIOD PRIOR TO THE DATE OF THE INSTALLATION OF MACHINERY OR PLANT BY THE AS SESSEE. EXPLANATION 2. WHERE IN THE CASE OF AN UNDERTAKING, ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY USED FOR ANY P URPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL VALUE OF THE MACHINERY O R PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE ( II ) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THER EIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH. (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 B Y A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPOR ATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT; ( B ) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY 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 MAINTAININ G THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVEL OPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN T HIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THI S SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUT HORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE A PPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH T RANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR EN TERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 10 FOLLOWING SECOND PROVISO SHALL BE INSERTED AFTER TH E EXISTING PROVISO TO CLAUSE ( I ) OF SUB-SECTION (4) OF SECTION 80-IA BY THE FINANC E ACT, 2016, W.E.F. 1-4-2017 : PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO ANY ENTERPRISE WHICH STARTS THE DEVELOPMENT OR OPERATIO N AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 2017. EXPLANATION .FOR THE PURPOSES OF THIS CLAUSE, 'INFRASTRUCTURE FACILITY' MEANS ( A ) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SY STEM; ( B ) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTI VITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; ( C ) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, I RRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAG EMENT SYSTEM; ( D ) A PORT, AIRPORT, INLAND WATERWAY, INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA; ( II ) ANY UNDERTAKING WHICH HAS STARTED OR STARTS PROVI DING TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLULAR, INCLUDING RADI O PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TRUNKING, BROADBAND N ETWORK AND INTERNET SERVICES ON OR AFTER THE 1ST DAY OF APRIL, 1995, BU T ON OR BEFORE THE 31ST DAY OF MARCH, 2005. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'DOMESTIC SATELLIT E' MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY F OR PROVIDING TELECOMMUNICATION SERVICE; ( III ) ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPER ATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK OR SPECIAL ECONOMIC ZON E NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FR AMED AND NOTIFIED 15 BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1997 AND ENDING ON THE 31ST DAY OF MARCH, 20 06 : PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN IN DUSTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL, 1999 OR A SPECIAL ECONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL, 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS THE CASE MAY BE, TO ANOTHER UNDERTAKING (HEREAFTER IN T HIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DEDUCTION UNDER SU B-SECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMA INING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AN D MAINTENANCE WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING : PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK, THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF F OR THE FIGURES, LETTERS AND WORDS '31ST DAY OF MARCH, 2006', THE FIGURES, LETTE RS AND WORDS '31ST DAY OF MARCH, 2011' HAD BEEN SUBSTITUTED; ( IV ) AN UNDERTAKING WHICH, ( A ) IS SET UP IN ANY PART OF INDIA FOR THE GENERATION OR GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWE R AT ANY TIME DURING THE ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 11 PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1993 AND ENDING ON THE 31ST DAY OF MARCH , [2017]; ( B ) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A N ETWORK OF NEW TRANSMISSION OR DISTRIBUTION LINES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1999 AND ENDING ON THE 31ST DAY OF MARCH , 2017: PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO AN UNDERTA KING UNDER SUB-CLAUSE ( B ) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSIO N OR DISTRIBUTION; ( C ) UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATI ON OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LINES AT AN Y TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2004 AND ENDING ON THE 31ST DAY OF MARCH, [2017]. EXPLANATION. FOR THE PURPOSES OF THIS SUB-CLAUSE, 'SUBSTANTIAL RENOVATION AND MODERNISATION' MEANS AN INCREASE IN THE PLANT A ND MACHINERY IN THE NETWORK OF TRANSMISSION OR DISTRIBUTION LINES BY AT LEAST FIFTY PER CENT OF THE BOOK VALUE OF SUCH PLANT AND MACHINERY AS ON THE 1S T DAY OF APRIL, 2004; ( V ) AN UNDERTAKING OWNED BY AN INDIAN COMPANY AND SET UP FOR RECONSTRUCTION OR REVIVAL OF A POWER GENERATING PLANT, IF ( A ) SUCH INDIAN COMPANY IS FORMED BEFORE THE 30TH DAY OF NOVEMBER, 2005 WITH MAJORITY EQUITY PARTICIPATION BY PUBLIC SECTOR COMPANIES FOR THE PURPOSES OF ENFORCING THE SECURITY INTEREST OF THE LENDERS TO THE COMPANY OWNING THE POWER GENERATING PLANT AND SUCH INDIAN C OMPANY IS NOTIFIED BEFORE THE 31ST DAY OF DECEMBER, 2005 BY THE CENTRA L GOVERNMENT FOR THE PURPOSES OF THIS CLAUSE; ( B ) SUCH UNDERTAKING BEGINS TO GENERATE OR TRANSMIT O R DISTRIBUTE POWER BEFORE THE 31ST DAY OF MARCH, 2011; ( VI ) [***] (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 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 I NCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE. XXXXXXXXXXXXXXXXXXX IF THE LANGUAGE USED IN THE SECTION IS ANALYZED, IT PROVIDES FOR DEDUCTION AT 100% OF THE PROFIT DERIVE D FROM THE ELIGIBLE BUSINESS. THE SECTION HAS BEEN AMENDED W.E.F 01/04/2000, WHICH SPEAKS ABOUT GROSS TOTAL INCOME O F ASSESSEE INCLUDES ANY PROFIT & GAINS DERIVED BY AN ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 12 UNDERTAKING FROM ANY ELIGIBLE BUSINESS REFERRED TO IN SUB- SECTION 4, IN ACCORDANCE WITH AND SUBJECT TO THE PR OVISION OF THIS SECTION WHILE COMPUTING THE TOTAL INCOME AN D THE DEDUCTION OF AN AMOUNT EQUAL TO 100% OF THE PROFIT & GAINS DERIVED FROM SUCH ELIGIBLE BUSINESS FOR TEN CONSECU TIVE YEARS. THE SUBSTITUTED SUB-SECTION (2) OF SECTION 8 0IA PROVIDES AN OPTION TO THE ASSESSEE FOR CLAIMING THE DEDUCTION UNDER THE SECTION FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FRO M THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DWE LLS AND BEGIN TO OPERATE, THUS, FIFTEEN YEAR IS OUTER LIMIT WITHIN WHICH THE ASSESSEE CAN CHOOSE THE PERIOD FOR CLAIMI NG THE DEDUCTION. SECTION 80IA(5) OF THE ACT DEALS WITH QU ANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS, THUS, SECTION 8 0IA(5) OF THE ACT HAS TO BE READ ALONG WITH SUB-SECTION (2) O F THE ACT. AS PER AMENDED PROVISIONS, WHICH CAME INTO OPERATIO N W.E.F 01/04/2000, THE DEDUCTION U/S 80IA OF THE ACT WOULD START WITH THE INITIAL ASSESSMENT YEAR AND THE BROU GHT FORWARD LOSSES OF THE EARLIER YEAR, WHICH HAVE ALRE ADY BEEN SET OFF AGAINST THE PROFIT FROM ANY OTHER SOURCE, T HERE IS NO NEED TO CARRY FORWARD THE NOTIONAL LOSSES OF EARLIE R YEARS TO THE INITIAL ASSESSMENT. IT IS ONLY WHEN THE LOSSES HAVE BEEN INCURRED FROM THE INITIAL ASSESSMENT YEAR, THEN THE ASSESSEE HAS TO ADJUST LOSS IN THE SUBSEQUENT YEARS AND IT HAS TO BE COMPUTED AS IF THE ELIGIBLE BUSINESS IS O NLY SOURCE OF INCOME AND THEN ONLY DEDUCTION U/S 80IA C AN BE DETERMINED. BUT ONCE THE BROUGHT FORWARD LOSSES OF THE EARLIER YEARS HAVE ALREADY BEEN SET OFF, PRIOR TO I NITIAL ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 13 ASSESSMENT YEAR, NO NOTIONAL LOSSES CAN BE BROUGHT FORWARD FOR SETTING OFF AGAINST THE INCOME OF INITI AL ASSESSMENT YEAR. THE RATIO LAID DOWN IN THE CASE O F SHEVI EXPORTS VS JCIT 33 TAXMAN.COM 446 (MUM. TRIB.) SUPP ORTS OUR VIEW. IDENTICAL RATIO WAS LAID DOWN IN THE CAS E OF M/S EXCEL CROP CARE LTD. VS DCIT (ITA NO.3100, 3101, 87 41 AND 7155 ORDER DATED 25/07/2014) SIMILARLY, THE HON 'BLE KARNATAKA HIGH COURT IN ANIL H. LAD VS CIT (TS-140- HC- 2014(KAR.) AND MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS PVT. LTD. VS ACIT 231 CTR (MAD.) 368 . IN THE LIGHT OF THE FOREGOING DISCUSSION, WE FIND NO INFIR MITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THE APPEAL OF THE REVENUE IS DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF THE LD. REPRESENTATIVE FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 07/12/2016. SD/- SD/- ( RAJESH KUMAR ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER $ MUMBAI; ( DATED : 28/12/2016 F{X~{T? P.S / /. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT (RESPECTIVE ASSESSEE) 2. ./,- / THE RESPONDENT. 3. 0 0 1# ( *+ ) / THE CIT, MUMBAI. ITA NO. 7423/MUM/2014 M/S CHOUDHARY EXPORTS 14 4. 0 0 1# / CIT(A)- , MUMBAI, 5. 34 .# , 0 *+& * 5 , $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. ! / BY ORDER, /3+# .# //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI