Choudhary Exports, Mumbai vs Department Of Income Tax

BEFORE HON'BLE S/SHRI H.L. KARWA, PRESIDENT AND B.R.BASKARAN (AM) सव ी एच.एल. कावा, अ य एवं बी.आर.बा करन, लेखा सद य आयकर अपील सं./I.T.A. No.6266/Mum/2012 ( नधारण वष / Assessment Year :2009-10)

Asstt.Commissioner of Income बनाम/ M/s Chaudhary Exports, Tax-18(1), Vs. A-Block (Basement) Room No.116, Shiv Sagar Estate, Piramal Chambers, Dr.A B Road, Lalbaug, Parel, Worli, Mumbai-400012 Mumbai. (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIRNo. :AACFC6677E

अपीलाथ ओर से / Appellant by : Shri Neil Philips यथ क ओर से/Respondent by Shri Nikhil Tiwari

सन ु वाई क तार ख / Date of Hearing : 1.1.2015 घोषणा क तार ख /Date of Pronouncement : 16.01.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The revenue has filed this appeal challenging the order dated 16.07.2012 passed by Ld CIT(A)-29, Mumbai and it relates to the assessment year 2009-10. The only issue urged by the revenue relates to the deduction allowed by Ld CIT(A) u/s 80IA of the Act.

2. We heard the parties and perused the record. The assessee claimed deduction u/s 80IA of the Act in respect of wind mill generating power. The assessee had set up the wind mill during the year relevant to the assessment year 2006-07. However, it started claiming deduction only from AY 2009-10 as per the option provided in sec. 80IA(2). The AO 2 I T A N o 6 2 6 6 / Mu m / 2 0 1 2

noticed that the assessee had incurred losses from wind mill operation in assessment years 2006-07 and 2007-08 and the assessee had set off those losses against income generated from non-eligible businesses. In assessment year 2008-09, even though the assessee made profit, it did not claim deduction u/s 80IA.

3. As per the provisions of sec. 80IA(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 enterprise ...... generates power or commences transmission or distribution of power.... Though the assessee has started generating power in AY 2006-07, it started claiming deduction u/s 80IA from AY 2009-10. Thus the present assessment year is the initial year in which the assessee started claiming deduction u/s 80IA of the Act.

4. The provisions of sec. 80IA(5) states that, for the purposes of determining the quantum of deduction under sub-section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, the profits of eligible business shall be computed as 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 up to and including the assessment year for which the determination is made. The AO took the view that the losses incurred by the assessee from generation of power in AY 2006-07 and 2007-08 is required to be adjusted against the profit earned during the year under consideration in terms of sec. 80IA(5) of the Act. Accordingly, he adjusted the said losses and thus denied the deduction claimed by the assessee u/s 80IA(5) of the Act, since no profit was remaining after such adjustment.

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5. The Ld CIT(A), however, followed the decision rendered by Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT (2010)(38 DTR (Mad) 57, wherein the Hon'ble High Court had held as under:-

" 6. Adverting to the facts of the case, the initial assessment 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 case, the initial assessment year is the assessment year in which assessee has chosen to claim deduction under s. 80-IA. Hence, the provisions of s. 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which assessee opted to claim relief under s. 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction under s. 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under s. 80-IA. At the cost of repetition, we make it clear that the case laws relied on by the Departmental Representative are delivered before the amendment to section by 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 the assessee in selecting the year of claiming relief under s. 80-IA. In view of this, we are of the opinion that there is no question of setting off notionally carried forward unabsorbed depreciation or loss against the profits of the units and assessee is entitled to claim deduction under s. 80-IA on current assessment year on the current year profit. Accordingly, we allow the claim of the assessee."

By following the above said decision, the Ld CIT(A) held that the provisions of sec. 80IA(5) treating the undertaking as a separate source of income cannot be applied to a year prior to the year in which the assessee opted to claim relief u/s 80IA for the first time. Accordingly the Ld CIT(A) held that the losses of earlier years cannot be notionally brought forward to be set off against current year's income, since the current year is the initial assessment year in which deduction u/s 80IA was claimed.

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6. At the time of hearing, the Ld A.R submitted that the view taken by the Ld CIT(A) is also supported by the following decisions:-

(a) Excel Crop Care (ITA No.3100/Mum/2010) dated 25-07-2014

(b) CIT Vs. Anil H Lad (102 DTR (Kar) 241)

(c) Emerald Jewel Industry Pvt Ltd (53 DTR 262)(Mad)

(d) Shevie Exports Vs. JCIT (2013)( 156 TTJ (Mum) 525)

7. Since the Ld CIT(A) has followed the decision rendered by Hon'ble Madras High Court and identical view has been expressed in the above cited cases also, we do not find any reason to interfere with his order on this issue.

8. In the result, the appeal filed by the revenue is dismissed.

The above order was pronounced in the open court on 16th Jan,2015.

घोषणा खुले यायालय म दनांकः 16 th Jan 2015 को क गई ।

sd sd

(एच.एल. कावा/ H.L. KARWA) (बी.आर. बा करन,/ B.R. BASKARAN) अ य / PRESIDENT लेखा सद य/Accountant Member मब ंु ई Mumbai: 16 th Jan, 2015.

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मब ंु ई / DR, ITAT, Mumbai concerned

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई /ITAT, Mumbai