CIT AND ORS. Vs. ANIL H. LAD

JUDGEMENT

(1.) THIS appeal is preferred by the Revenue against the order passed by the Income -tax Appellate Tribunal, Bangalore Bench A, Bangalore (hereinafter referred to as the Tribunal, for short), directing the assessing authority to grant deduction to the assessee under section 80 -IA of the Income Tax Act (for short the Act) for the quantum claimed by the assessee without diluting the same by the notional deduction of earlier loss and depreciation.

(2.) THE assessee is engaged in the business of windmill operations. The said windmill was started in the year 2006. The assessee claimed deduction of Rs. 1,97,73,931 under section 80 -IA of the Act being the income derived from the business of windmill power generation for the assessment year 2008 -09. The assessing authority while granting the benefit of deduction relying on sub -section (5) of section 80 -IA of the Act deducted the said profit and gains from the business in the depreciation/unabsorbed depreciation and carried forward losses in a sum of Rs. 36,90,28,139 and directed carry forward of unabsorbed loss in a sum of Rs. 34,92,54,208 for the subsequent year. Aggrieved by the said set off, to arrive at the income eligible for deduction under section 80 -IA for the relevant assessment year, the assessee preferred an appeal to the Commissioner (Appeals). The appellate authority held, the assessing officer was justified in denying the deduction of Rs. 1,97,72,931 claimed under section 80 -IA of the Act as the losses and depreciation in respect of eligible business for the assessment years 2006 -07 and 2007 -08 has to be set off notionally against the profits of eligible business as the assessment year as per sub -section (5) of section 80 -IA of the Act. Thus, he dismissed the appeal. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal relying on the judgment of the Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. v. Asstt. CIT (2010) 38 ITR (Mad) 57, held where the depreciation and loss of earlier assessment years have already been set off against other business income of those assessment years, there is no need for notionally carrying forward and set off the same depreciation and loss in computing the quantum of reduction available under section 80 -IA of the Act. Following the said judgment, the Tribunal accepted the contention of the assessee and reversed the order of the Commissioner (Appeals) on that point and directed the assessing authority to grant deduction to the assessee under section 80 -IA of the Act for the quantum claimed by the assessee without diluting the same by the notional deduction of earlier loss and depreciation. Aggrieved by the said order, the Revenue is in appeal.

(3.) PER contra, learned counsel appearing for the assessee submitted sub -section (5) of section 80 -IA of the Act has to be read along with sub -section (2) of section 80 -IA; if so read, it is clear that the benefit granted to the assessee under sub -section (1) of section 80 -IA can be claimed by the assessee for 10 consecutive assessment years out of 15 years beginning from the year under which the business or enterprise develops. Therefore, only when a claim is made for the said benefit in the returns filed by the assessee, from that assessment year consecutively he will be entitled to the said benefit for a period of 10 years. Before putting forth such claim, all the losses and depreciation, which the assessee could claim, has to be set off against the profits of the assessee from other business source. But, once he put forths such a claim, then from that day onwards the losses and depreciation of the said eligible business is to be taken into consideration for determining the quantum of deduction for the purpose of benefit under section 80 -IA of the Act. Therefore, in the instant case, though the business was commenced in 2006 -07, the assessee did not claim the benefit for the assessment years 2006 -07 and also 2007 -08; for the first time, the said claim was made for the assessment year 2008 -09 and, therefore, the loss and depreciation till such time was set off against the profit from other source. The assessing authority could not have set off the profit of the eligible business against the said depreciation and losses which were already claimed set off from other sources. Therefore, the Tribunal was justified in following the judgment of Madras High Court and upholding the claim of the assessee.