ACIT, CHENNAI v. M.Thangamaligai Trust, CHENNAI

ITA 1415/CHNY/2010 | 2007-2008
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 141521714 RSA 2010
Assessee PAN AAATM0655R
Bench Chennai
Appeal Number ITA 1415/CHNY/2010
Duration Of Justice 6 month(s) 29 day(s)
Appellant ACIT, CHENNAI
Respondent M.Thangamaligai Trust, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 25-03-2011
Date Of Final Hearing 14-03-2011
Next Hearing Date 14-03-2011
Assessment Year 2007-2008
Appeal Filed On 27-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI (BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NO. 1415/MDS/2010 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE III(3) CHENNAI 600 034. (APPELLANT) V. M/S M. THANGAMALIGAI TRUST 136 USMAN ROAD T. NAGAR CHENNAI 600 017. PAN : AAATM0655R (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI PHILIP GEORGE O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE ITS GRIEVANCE IS THAT THE CIT(APPEALS) ALLOWED DEDUCTION OF RS.12 64 364/- UN DER SECTION 80- IA OF INCOME-TAX ACT 1961 (HEREINAFTER CALLED THE ACT). 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD CLAIME D DEDUCTION OF RS. 12 64 364/- UNDER SECTION 80-IA OF THE ACT IN R ESPECT OF WINDMILLS WHICH COMMENCED OPERATIONS PRIOR TO THE RELEVANT AS SESSMENT YEAR. I.T.A. NO. 1415/MDS/10 2 THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEE FOR A REASON THAT UNABSORBED DEPRECIATION OF EARLIER YEARS WERE TO BE SET OFF BEFORE ALLOWING CLAIM UNDER SECTION 80-IA OF THE ACT. 3. IN ITS APPEAL BEFORE THE CIT(APPEALS) ASSESSEE W AS SUCCESSFUL. LD. CIT(APPEALS) HELD THAT INITIAL ASSESSMENT YEAR HAVING BEEN FIXED AS ASSESSMENT YEAR 2000-01 FOR ALLOWING DEDUCTION UNDER SECTION 80-IA OF THE ACT UNABSORBED DEPRECIATION PRIOR TO THAT YEAR COULD NOT BE CONSIDERED FOR SET OFF. FOR COMING TO THIS CONC LUSION HE RELIED ON AN ORDER PASSED BY HIM IN ITA NO.155/08-09 DATED 25 .01.10. THE RELEVANT PORTION OF THE SAID ORDER RELIED ON BY THE CIT(APPEALS) IS REPRODUCED HEREUNDER:- I HAVE CONSIDERED THE DECISION OF LEARNED CIT(A) THE DECISION OF HON'BLE ITAT CITED SUPRA AND THE FACTS ON RECORD. THE APPELLANT HAS STARTED THE WIND MILL BUSINESS SI NCE ASST.YEAR 96-97. THE ISSUE OF CHOOSING THE INITIAL ASST.YEAR FOR CLAIMING DEDUCTION U/S.80IA WENT UP TO THE HON'BLE TRIBUNAL IN OTHER GROUP CASES AND THE TRIBUNAL HAS GIVEN THE VERDICT THAT THE ASSESSEE HAS THE OPTION TO CHOOSE ITS INITIAL ASST. YEAR U/S.80IA(2) WITH EFFECT FROM 1.4.2000 FOR CLAIMING DEDUCTION I N ANY TEN CONSECUTIVE ASST.YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OF THE ENTERPRISE DEVELOPS OR BEGIN TO OPERATE ANY INFRASTRUCTURE FACILITY ETC. HON'BLE TRI BUNAL IN THE GROUP CASES HAS ALLOWED THE APPELLANT TO CHOOSE THE ASST.YEAR 2000-01 AS INITIAL ASST.YEAR FOR CLAIMING DEDUCTION U/S.80IA IN RESPECT OF WIND MILL BUSINESS. AS THE FACTS ARE SI MILAR I AM BOUND TO FOLLOW THE VERDICT OF JURISDICTIONAL TRIBU NALS ORDER IN I.T.A. NO. 1415/MDS/10 3 THIS CASE ALSO AND ALLOW THE APPELLANT TO CHOOSE TH E INITIAL ASST.YEAR AS 2000-01. ON THE BASIS OF THE FINDING O F HON'BLE TRIBUNAL MY PREDECESSOR CIT(A)-II VIDE ORDER CITED S UPRA HAS ALLOWED THE APPEAL OF THE APPELLANT AND DIRECTED TH E A.O. TO COMPUTE THE DEDUCTION U/S.80IA AS PER THE PROVISION S OF SECTION 80IA(5). WHILE PASSING ORDER MY PREDECESSOR CIT(A) IN PARA 9 REPRODUCED ABOVE HAS GIVEN THE FINDING THAT DEDUCTI ON HAS TO BE COMPUTED AS PER SECTION 80IA(5) TAKING INTO CONSIDE RATION THE PROFITS AND GAINS OF THE WIND MILL OPERATIONS FROM THE ASST.YEAR 2000-01 ONWARDS ONLY. ACCORDINGLY HE HAS DIRECTED TH E A.O. TO RECOMPUTED THE DEDUCTION U/S.80IA AS PER THE PROVIS IONS OF SECTION 80IA(5) FOLLOWING ASST.YEAR 2000-01 AS INITI AL ASST.YEAR. CONSIDERING THE PROFITS AND GAINS FROM WIND MILL OP ERATION FROM PREVIOUS YEAR RELEVANT TO ASST.YEAR 2000-01 ONWARDS. THEREFORE THE FINDING OF CIT(A) IN MY VIEW IS VERY CLEAR WHERE HE HAS DIRECTED THE A.O. TO CONSIDER THE PROFITS AND GAINS FROM WIND MILL OPERATION FROM PREVIOUS YEAR RELEVANT TO ASST.YEAR 20 00-01 ONWARDS ONLY. THEREFORE ALL THE PAST HISTORY OF THE COMPUTATION OF INCOME UNDER THE HEADS PROFITS AND GAINS OF BUSI NESS FROM WIND MILL HAS BEEN SCRAPPED. ACCORDINGLY THE UNABSO RBED DEPRECIATION OR LOSS FROM WIND MILL BUSINESS OF APP ELLANT PRIOR TO ASST.YEAR 2000-01 CANNOT BE SET OFF FROM THE INCOME FROM THE WIND MILLS FROM ASST.YEAR 2000-01 AS PER THE ORDER O F LEARNED CIT(A). ONLY UNABSORBED DEPRECIATION OR BUSINESS LO SS FROM WINDMILL OPERATION ACCRUING AFTER INITIAL ASST.YEAR THOUGH ADJUSTED AGAINST ANY OTHER BUSINESS INCOME FOR THAT ASST.YEAR HAS TO BE REDUCED FROM THE PROFIT OF WIND MILL IN S UBSEQUENT ASST.YEARS FOR QUANTIFYING THE DEDUCTION U/S.80IA(5). IN THIS REGARD IT IS PERTINENT TO MENTION THE PROVISIONS OF SECTION 80IA(5) FOR QUANTIFYING THE DEDUCTION WHICH IS REPRO DUCED AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT THE PROFITS AND GAINS OF AN ELIGIBLE B USINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLY SHALL FOR T HE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB -SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIA L ASSESSMENT YEAR OR ANY SUBSEQUENT ASST.YEAR BE COMPU TED AS IF I.T.A. NO. 1415/MDS/10 4 SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOM E OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE IN ITIAL ASST.YEAR AND TO EVERY SUBSEQUENT ASST.YEAR UPTO AND INCLUDING THE ASST.YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. A PERUSAL OF THE SECTION CLEARLY SHOWS THAT THE PRO FITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PRO VISIONS OF SECTION (1) SHALL APPLY WILL BE TREATED AS ONLY SOU RCE OF INCOME OF ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO INITIA L ASST.YEAR OR ANY SUBSEQUENT ASST.YEAR THEREFORE IN MY VIEW THE P ROVISIONS OF SUB SECTION 80IA(5) I.E PROFITS AND GAINS FROM THE ELIGIBLE BUSINESS WILL BE TREATED AS ONLY SOURCE OF INCOME ST ARTS FROM THE INITIAL ASST.YEAR AND NOT PRIOR TO INITIAL ASST.YEAR . THEREFORE IN MY VIEW PRIOR TO INITIAL ASST.YEAR IF THERE IS ANY DEP RECIATION LOSS OR BUSINESS LOSS FROM WIND MILL UNDERTAKING THE SA ME IS TO BE IGNORED AS THE PROVISIONS OF SECTION 80IA(5) DOES N OT APPLY. IN VIEW OF THE ABOVE AND CONSIDERING THE APPELLATE ORD ER AND THE FACTS OF THE CASE I DIRECT THE A.O. TO IGNORE ALL D EPRECIATION LOSS OR BUSINESS LOSS FROM WIND MILL PRIOR TO INITIAL AS ST.YEAR 2000-01 AND COMPUTE THE DEDUCTION U/S.80IA(5) ON THE BASIS OF PROFITS AND GAINS STARTING FROM ASST.YEAR 2000-01 ONWARDS. THE VIEW TAKEN BY THE A.O. IN HIS APPEAL EFFECT ORDER CITED S UPRA STATING THAT PRIOR TO 2000-01 THERE IS DEPRECIATION LOSS OF WIND MILL WHICH IS TO BE SET OFF FROM INCOME OF WIND MILL FOR ASST.YEARS AFTER INITIAL ASST.YEAR 2000-01 IS NOT CORRECT. ACC ORDINGLY I ALLOW THE APPEAL OF THE ASSESSEE. A.O. IS DIRECTED TO AL LOW DEDUCTION U/S.80IA. 4. THUS HE CAME TO CONCLUSION THAT PROFITS AND GAI NS FROM THE ELIGIBLE BUSINESS COULD BE TREATED AS THE ONLY SOUR CE OF INCOME FROM INITIAL ASSESSMENT YEAR ONLY AND NOT PRIOR TO SUCH INITIAL ASSESSMENT YEAR. IN HIS OPINION THEREFORE ANY DEPRECIATION LOSS OR BUSINESS LOSS ARISING ON OPERATION OF THE WIND MILL FOR A PERIOD PRIOR TO SUCH INITIAL I.T.A. NO. 1415/MDS/10 5 ASSESSMENT YEAR HAD TO BE IGNORED WHILE COMPUTING D EDUCTION UNDER SECTION 80-IA OF THE ACT. 5. NOW BEFORE US THE LEARNED D.R. STRONGLY ASSAIL ING THE ORDER OF THE CIT(APPEALS) SUBMITTED THAT THE QUESTION WAS W HETHER DEPRECIATION LOSS OR BUSINESS LOSS OF EARLIER YEARS WAS ACTUALLY SET OFF AGAINST OTHER INCOME IN SUCH EARLIER YEARS OR WAS I T STILL REMAINING. ACCORDING TO HIM THE BAR WAS ONLY FOR NOTIONAL CAR RY FORWARD AND NOT FOR CARRY FORWARD AND SET OFF OF ACTUAL LOSS AVAILA BLE. 6. PER CONTRA THE LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF THE CIT(APPEALS) AND SUBMITTED THAT THE ISSUE WAS COVER ED BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN TH E CASE OF M/S VELAYUDHASWAMY SPG. MILLS P. LTD. V. ACIT (231 CTR 368). 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. LD. CIT(APPEALS) HAS COME TO A CONCLUSION THAT LOSS ES AND DEPRECIATION CARRIED FORWARD FROM YEARS PRIOR TO TH E INITIAL ASSESSMENT YEAR HAD TO BE IGNORED FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80-IA OF THE ACT. IN OUR OPINION THE REAS ON GIVEN BY THE CIT(APPEALS) CANNOT BE ACCEPTED SINCE THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPG. MILLS P. I.T.A. NO. 1415/MDS/10 6 LTD. (SUPRA) DOES NOT GIVE RISE TO A SITUATION THAT EVEN CARRIED FORWARD LOSSES WHICH WERE NOT NOTIONAL ALSO HAD TO BE DISCA RDED. IN PARA 14 TO 18 OF ITS ORDER THE HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER:- 14. IN THE PRESENT CASES THERE IS NO DISPUTE THAT 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 EXERCISED THE OPTION UNDER S. 80-IA(2). IN TAX CASE NOS. 909 OF 2009 AS WELL AS 940 OF 2009 THE ASSESSMENT YEAR WAS 2005-06 AND IN THE TAX CASE NO. 918 OF 2008 THE ASSESSMENT YEAR WAS 2004-0 5. DURING THE RELEVANT PERIOD THERE WERE NO UNABSORBED DEPRECIATION OR LOSS OF THE ELIG IBLE UNDERTAKINGS AND THE SAME WERE ALREADY ABSORBED IN THE EARLIER YEARS. THERE IS A P OSITIVE PROFIT DURING THE YEAR. THE UNREPORTED JUDGMENT OF THIS COURT CITED SUPRA CONSI DERED THE SCOPE OF SUB-S. (6) OF S. 80- I WHICH IS THE CORRESPONDING PROVISION OF SUB-S. ( 5) OF S. 80-IA. BOTH ARE SIMILARLY WORDED AND THEREFORE WE AGREE ENTIRELY WITH THE DIV ISION BENCH JUDGMENT OF THIS COURT CITED SUPRA. IN THE CASE OF CIT VS. MEWAR OIL & GEN ERAL MILLS LTD. (2004) 186 CTR (RAJ) 141 : (2004) 271 ITR 311 (RAJ) THE RAJASTHAN HIGH COURT ALSO CONSIDERED THE SCOPE OF S. 80-I AND HELD AS FOLLOWS HAVING CONSIDERED THE RIVAL CONTENTIONS WHICH FOLL OW ON THE LINE NOTICED ABOVE WE ARE OF THE OPINION THAT ON FINDING THE FACT THAT THERE WAS NO CARRY FORWARD LOSSES OF 1983-84 WHICH COULD BE SET OFF AGAINST THE INCOME OF THE CU RRENT ASST. YR. 1984-85 THE RECOMPUTATION OF INCOME FROM THE NEW INDUSTRIAL UND ERTAKING BY SETTING OFF THE CARRY FORWARD OF UNABSORBED DEPRECIATION OR DEPRECIATION ALLOWANCE FROM PREVIOUS YEAR DID NOT SIMPLY ARISE AND ON THE FINDING OF FACT NOTICED BY THE CIT(A) WHICH HAS NOT BEEN DISTURBED BY THE TRIBUNAL AND CHALLENGED BEFORE US THERE WAS NO ERROR MUCH LESS ANY ERROR APPARENT ON THE FACE OF THE RECORD WHICH COUL D BE RECTIFIED. 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 INDUSTRY AND WHETHER IT WAS REQUIRED TO BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IT IS NOT A T 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 COMPUTATION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE 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 S. 80-I IN THE PRESENT CASE ALBEIT FOR REASONS SOMEWHAT DIFFERENT FROM THOSE WHICH PREVAILED WITH THE TRIBUNAL. THERE BEING NO CARRY FORWARD OF ALLOWABLE DEDUCTIONS UNDER THE HEAD DEPR ECIATION OR DEVELOPMENT REBATE WHICH NEEDED TO BE ABSORBED AGAINST THE INCOME OF T HE CURRENT YEAR AND THEREFORE RECOMPUTATION OF INCOME FOR THE PURPOSE OF COMPUTIN G PERMISSIBLE DEDUCTION UNDER S. 80-I FOR THE NEW INDUSTRIAL UNDERTAKING WAS NOT REQ UIRED IN THE PRESENT CASE. I.T.A. NO. 1415/MDS/10 7 ACCORDINGLY THIS APPEAL FAILS AND IS HEREBY DISMIS SED WITH NO ORDER AS TO COSTS. FROM READING OF THE ABOVE THE RAJASTHAN HIGH COURT 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 AGAIN FOR COMPUTAT ION OF CURRENT INCOME UNDER S. 80-I FOR THE PURPOSE OF COMPUTING ADMISSIBLE DEDUCTIONS THEREUNDER. WE ALSO AGREE WITH THE SAME. WE SEE NO REASON TO TAKE A DIFFERENT VIEW. 15. THE STANDING COUNSEL APPEARING FOR THE REVENUE IS UNABLE TO BRING TO OUR NOTICE ANY RELEVANT MATERIAL OR ANY COMPELLING REASON OR ANY C ONTRA JUDGMENT OF OTHER COURTS TO TAKE A DIFFERENT VIEW. HE ONLY RELIED HEAVILY ON MEMORAN DUM EXPLAINING THE PROVISIONS IN THE FINANCE (NO. 2) BILL 1980 [ 123 ITR (ST) 154] TO SUPPORT THIS CASE AND THE SAME READS AS FOLLOWS CLAUSE 30(III) IN COMPUTING THE QUANTUM OF TAX HO LIDAY PROFITS IN ALL CASES TAXABLE INCOME DERIVED FROM THE NEW INDUSTRIAL UNITS ETC. WILL BE DETERMINED AS IF SUCH UNITS WERE AN INDEPENDENT UNIT OWNED BY A TAXPAYER WHO DO ES NOT HAVE ANY OTHER SOURCE OF INCOME. IN THE RESULT THE LOSSES DEPRECIATION AND INVESTMENT ALLOWANCE OF EARLIER YEARS IN RESPECT OF THE NEW INDUSTRIAL UNDERTAKING SHIP OR APPROVED HOTEL WILL BE TAKEN INTO ACCOUNT IN DETERMINING THE QUANTUM OF DEDUCTION ADM ISSIBLE UNDER THE NEW S. 80-I EVEN THOUGH THEY MAY HAVE BEEN SET OFF AGAINST THE PROFI TS OF THE TAXPAYER FROM OTHER SOURCES. WE ARE NOT AGREEING WITH THE COUNSEL FOR THE REVENU E. WE ARE THEREFORE OF THE VIEW THAT LOSS IN THE YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST THE PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFITS OF THE ELIGIBLE BUSINESS AS NO SUCH MANDATE IS PROVIDED IN THE S. 80-IA(5). 16. UNDER THESE CIRCUMSTANCES WE SET ASIDE THE ORD ER OF THE TRIBUNAL AND ANSWER ALL THE QUESTIONS IN FAVOUR OF THE APPELLANT/ASSESSEE AND A GAINST THE REVENUE IN TAX CASE NOS. 909 AND 940 OF 2009 RESPECTIVELY. ACCORDINGLY TAX CASES ARE ALLOWED. TAX CASE NO. 918 OF 2008: 17. IT IS FILED BY THE REVENUE BY RAISING THREE QUE STIONS OF LAW AS STATED ABOVE. IN RESPECT OF THE SECOND QUESTION WHICH IS THE SAME AS THE IS SUE 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. 18. IN RESPECT OF QUESTION NOS. 1 AND 3 THE ISSUES ARE RELATED TO THE EXERCISING THE OPTION OF CLAIMING DEDUCTION UNDER S. 80-IA. AS PER THE AS SESSEE THE ASSESSMENT YEAR IS 2004- 05. ACCORDING TO THE REVENUE THE ASSESSMENT YEAR I S 1999-2000. FROM THE RECORDS IT IS CLEAR THAT THE ASSESSEE CLAIMED DEDUCTION UNDER S. 80-IA FOR THE FIRST TIME DURING THE ASST. YR. 2004-05. THE AO ACCEPTED THE SAME AND THERE IS NO DISPUTE. THE DEDUCTION UNDER S. 80-IA IS REJECTED ONLY ON THE GROUND THAT THERE WAS NO POSITIVE INCOME AND IT WAS HELD BY THE AO THAT THE ELIGIBLE DEDUCTION UNDER S. 80-IA A FTER SETTING OFF OF THE LOSS WORKED OUT TO NIL. BEFORE THE AO THERE WAS NO DISPUTE REGARDI NG THE CLAIM DURING THE YEAR. AGGRIEVED BY THAT ORDER THE ASSESSEE FILED AN APPE AL BEFORE CIT(A). BEFORE THE APPELLATE I.T.A. NO. 1415/MDS/10 8 AUTHORITIES ALSO THERE IS NO DISPUTE REGARDING THE CLAIM DURING THE YEAR. LINE 3 IN PARA 2 OF THE ORDER READS AS FOLLOWS THE APPELLANT HAS CLAIMED DEDUCTION UNDER S. 80-IA FOR THE FIRST TIME IN THE CURRENT YEAR NAMELY THE ASST. YR. 2004-05. THE REVENUE HAS NOT FILED AN APPEAL AGAINST THE ORD ER OF THE CIT(A). IT REACHED FINALITY. AGGRIEVED BY THE ORDER OF THE CIT(A) REGARDING THE QUANTUM OF DEDUCTION THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. IN THE ASSESSE ES APPEAL THE REVENUE FILED A LETTER FIRST TIME BEFORE THE TRIBUNAL AND DISPUTED THE FAC T RELATING TO THE ASSESSEES CLAIM THAT ASST. YR. 2004-05 IS THE INITIAL ASSESSMENT YEAR. T HE TRIBUNAL FOUND THAT BOTH THE AO AND CIT(A) HAD GIVEN CATEGORICAL FINDING THAT THE ASSES SEE CLAIMED DEDUCTION FOR THE FIRST TIME DURING THE YEAR 2004-05 AND PARA 5 READS AS FO LLOWS IN THE PRESENT CASE THERE IS A CATEGORICAL FINDIN G BY THE AO AND CIT(A) THAT THE FIRST YEAR CLAIMED IS FROM THE ASST. YR. 2004-05. AT THE TIME OF HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FILED A LETTER WHICH RE ADS AS FOLLOWS ASSESSEES CLAIM IS THAT ASST. YR. 2004-05 IS THE INITIAL ASSESSMENT YEAR. HOWEVER FROM A PERUSAL OF RECORDS THE FOLLOWING FACTS ARE OBSERV ED ASST. YR. 1999-2000 ASSESSEE CLAIMED DEDUCTION OF RS. 2 15 59 112 UNDER S. 80-IA OF THE IT ACT. THE AO REJECTED THE CLAIM UNDER S. 143(3) R/W S. 263. AGGR IEVED BY THE ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AGITATING INT ER ALIA THE CLAIM FOR A DEDUCTION UNDER S. 80-IA. THE CIT(A) VIDE HIS ORDER IN ITA NO. 39/2 005-06/DT. 4TH AUG. 2005 IN PARA NO. 12 DIRECTED THE AO TO ALLOW THE CLAIM UNDER S. 80-IA WHICH WAS ACCORDINGLY ALLOWED. ASST. YR. 2000-01 IN THIS ASSESSMENT YEAR ALSO THE ASSESSEE IN THE CO MPUTATION MEMO CLAIMED DEDUCTION UNDER S.80-IA OF AN AMOUNT OF RS. 1 20 19 495 WHICH WAS ALLOWED IN FULL BY THE AO IN THE REGULAR ASSESSMENT ORDER UNDER S. 143(3) DT. 28 TH MARCH 2003. THIS BEING THE POSITION THE STATEMENT OF THE ASSES SEE THAT THE CLAIM UNDER S. 80-IA CLAIMED FOR THE FIRST TIME IN THE ASST. YR. 2004-05 IS TOTALLY CONTRARY TO THE FACTS AS MENTIONED. THIS PROVES THAT ASST. YR. 2004-05 IS NO T THE INITIAL ASSESSMENT YEAR AS CLAIMED BY THE ASSESSE. THE FACT OF THE MATTER IS THAT ASSESSEE EXERCISED I TS OPTION OF CLAIMING DEDUCTION UNDER S. 80-IA IN THE ASST. YR. 1999-2000 ITSELF. THEREFORE ASST. YR. 1999-2000 IS INITIAL ASSESSMENT YEAR. I.T.A. NO. 1415/MDS/10 9 BUT THIS LETTER IS CONTRARY TO THE FINDINGS OF THE LOWER AUTHORITIES. THE LOWER AUTHORITIES CATEGORICALLY OBSERVED THAT THE FIRST YEAR IN WHICH DEDUCTION WAS CLAIMED WAS 2004-05. WE HAVE ALREADY NARRATED IN THE FACTS OF THE CASE T HAT IF THE FACTS STATED BY THE AO OR CIT(A) ARE WRONG THE DEPARTMENTAL REPRESENTATIVE IS REQUIRED TO ADDUCE THE EVIDENCE AS PER RR. 10 AND 29 OF TRIBUNAL RULES 1963 WHICH REA D AS FOLLOWS RULE 10. FILING OF AFFIDAVITSWHERE A FACT WHICH CA NNOT 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. RULE 29. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE T HE TRIBUNALTHE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDITIONAL EVIDENC E EITHER ORAL OR DOCUMENTARY BEFORE THE TRIBUNAL BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT TO PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE OR IF THE IT AUTHORITIES HAVE D ECIDED THE CASE WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITH ER 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 CIT(A) AND AO. IT CANNOT BE CONSIDERED. THE ABOVE STATEMENT MADE BY THE AO IS N OT IN ACCORDANCE WITH RR. 10 AND 29. HENCE WE DECLINE TO CONSIDER THE SAME. 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 W HICH 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 SOURC E 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 U NIT WHICH CLAIMS DEDUCTION UNDER S. 80- IA CANNOT BE NOTIONALLY CARRIED FORWARD AND SET OF F 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 TH E DEPARTMENTAL REPRESENTATIVE ARE DELIVERED BEFORE THE AMENDMENT TO SECTION BY FINANC E 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 A ND THERE IS OPTION TO THE ASSESSEE IN SELECTING THE YEAR OF CLAIMING RELIEF UNDER S. 80-I A. 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 ASSESS EE IS ENTITLED TO CLAIM DEDUCTION UNDER S. 80-IA ON CURRENT ASSESSMENT YEAR ON THE CURRENT YEA R PROFIT. ACCORDINGLY WE ALLOW THE CLAIM OF THE ASSESSEE. I.T.A. NO. 1415/MDS/10 10 8. THEIR LORDSHIP HAD DULY CONSIDERED THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. MEWAR OI L & GENERAL MILLS LTD. (2004) 271 ITR 311 (RAJ.) WHILE COMING TO A C ONCLUSION THAT IT WAS NOT REQUIRED TO NOTIONALLY CARRY FORWARD LOSS O R DEPRECIATION FROM EARLIER YEARS AND SET IT OFF AGAINST THE INCOME OF THE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80-IA OF THE ACT. IN BOTH THE CASES VIZ. ONE BEFORE THE JU RISDICTIONAL HIGH COURT AS WELL AS ONE BEFORE HON'BLE RAJASTHAN HIGH COURT THE QUESTION WAS WHETHER THERE COULD BE ANY NOTIONAL CA RRY FORWARD OF DEPRECIATION LOSS OF EARLIER YEARS. IN OTHER WORDS DEPRECIATION AND CARRY FORWARD LOSS WHICH STOOD ADJUSTED AGAINST OT HER INCOME PRIOR TO THE INITIAL ASSESSMENT YEAR COULD NOT BE CONSIDERE D FOR SET OFF WHILE COMPUTING THE ELIGIBLE DEDUCTION UNDER SECTION 80-I A OF THE ACT. IN THE ABOVE CASES ASSESSING OFFICER HAD IGNORED SUCH SET OFF ALREADY DONE IN EARLIER YEAR AND MADE A NOTIONAL WORK OUT O F CARRY FORWARD DEPRECIATION LOSS PERTAINING TO THE UNIT ON WHICH DEDUCTION UNDER SECTION 80-IA OF THE ACT WAS CLAIMED AND THEN TRIE D TO SET OFF SUCH DEPRECIATION AND CARRY FORWARD LOSS WITH INCOME FRO M THE ELIGIBLE UNIT FOR INITIAL ASSESSMENT YEAR. IT WAS THIS TREATMENT THAT WAS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT AS NOT CALLED FOR . BUT IN THE CASE I.T.A. NO. 1415/MDS/10 11 BEFORE US IT IS NOT CLEAR EITHER FROM THE ASSESSME NT ORDER OR FROM THE ORDER OF THE CIT(APPEALS) WHETHER THE EARLIER DEPRE CIATION AND LOSSES WERE SET OFF AGAINST THE INCOME OR PROFITS OF SUCH EARLIER YEARS. IF THESE WERE ALREADY SET OFF BEFORE THE INITIAL ASSES SMENT YEAR ITSELF THEN BY VIRTUE OF THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT NO NOTIONAL CARRY FORWARD DEPRECIATION OR LOS S COULD BE CONSIDERED WHILE WORKING OUT THE DEDUCTION UNDER SE CTION 80-IA IN THE INITIAL ASSESSMENT YEAR. HOWEVER IF SUCH EARL IER DEPRECIATION OR LOSS ARISING FROM THE UNIT STILL REMAINED TO BE SET -OFF THEN NO DOUBT EVEN IN THE INITIAL ASSESSMENT YEAR IT HAD TO BE S ET OFF BEFORE ALLOWING DEDUCTION UNDER SECTION 80-IA OF THE ACT BECAUSE SU CH DEPRECIATION OR LOSS WOULD NOT BE NOTIONAL BUT ACTUAL. SINCE A S AFORESAID WHETHER THE DEPRECIATION OR LOSS OF THE EARLIER YEARS WERE ACTUALLY SET OFF OR NOT IN SUCH EARLIER YEARS ITSELF BEING NOT CLEAR FROM THE RECORDS WE ARE OF THE OPINION THAT THE MATTER NEEDS TO BE REVISITED B Y THE A.O. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMAND THE ISSUE BACK TO THE FILE OF THE A.O. TO CONSIDER WHETHER THE CARRIED FORWARD DEPRECIATION AND/OR LOSS OF EARLIER YEARS P ERTAINING TO THE WINDMILLS WERE NOTIONAL OR NOT. IN CASE IT IS NOTI ONAL NO SUCH SET OFF COULD BE DONE IN VIEW OF THE DECISION OF HON'BLE JU RISDICTIONAL HIGH I.T.A. NO. 1415/MDS/10 12 COURT IN THE CASE OF VELAYUDHASWAMY SPG. MILLS P. L TD. (SUPRA). IF IT IS OTHERWISE THEN SUCH SET OFF COULD BE DONE. 9. IN THE RESULT APPEAL OF THE REVENUE STANDS ALLO WED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH MARCH 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 25 TH MARCH 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II CHENNAI-34 (4) CIT CENTRAL-III CHENNAI (5) D.R. (6) GUARD FILE