ACIT v. Sulbha Subhash Lodha

INCOME TAX ACT, 1961

--Deduction under section 80-IA(4)--Set off of loss or depreciation brought forwardSource of income--The assessee was an individual engaged in the business of share trading and power generation from windmill. During the course of assessment proceedings, the AO noted that the assessee had claimed deduction under section 80-IA(4) on account of profits derived from generation and sale of electricity from windmill. The AO asked the assessee to justify the claim of such deduction under section 80-IA(4). The AO was not satisfied with the explanation given by the assessee. Since the initial year of claim was assessment year 2010-11, the quantum of deduction had to be determined after setting off of the total depreciation allowable on the Wind Mill up to 31-3-2009 against the total income generated from Wind Mill business. With such set-off, the assessee would still have a depreciation loss. Hence, when the income was negative, there was no question of allowing deduction under section 80-IA(4). Based on the above discussion, the AO held that the assessee's claim of deduction under section 80-IA(4) was not in accordance with law and accordingly, he withdrew the claim. The CIT(A) directed the AO to delete the disallowance. Held: When the assessee exercised the option, only the losses of the year beginning from the initial assessment year were to be brought forward and not the losses of earlier year which had been already set off against the other income of the assessee. The revenue could not notionally bring forward any loss of earlier years which had already been set off against any other income of the assessee and set off the same against the current income of the eligible business. Thus, Tribunal set aside the orders of the authorities below and directed the AO to allow the claimed deduction under section 80IA without bringing the notionally brought forward any loss or depreciation of earlier years which has already been set off against other income of the assessee. When the assessee exercised option identifying ten consecutive years as contained in sub-section (2) of section 80-IA of the Act, only the losses of the year beginning from such initial assessment year were to be brought forward and set off while applying the provisions of section 80-IA(5) of the Act and not the losses of earlier years which otherwise were set-off against other income of the assessee. Following the decision of the Co-ordinate Bench of the Tribunal, the order of the CIT(A) was upheld. Grounds raised by the revenue were acordingly dismissed.

Income Tax Act, 1961, Section 80-IA(4)

Income Tax Act, 1961, Section 80-IA(5)

Followed:Velayudhaswamni Shipping Mills (P) Ltd. 340 ITR 477 (Mad-HC), Serum International Ltd. v. Addl. CIT ITA Nos.290 to 292/PN/10 vide order dt. 28-9-2011 and Sangram Patil v. ITO vide ITA Nos. 177 and 178/PN/2011, order dt. 12-12-2012. Distinguished:ACIT v. Goldman Shares and Finance (P) Ltd. 113 ITD 209<>/i>. Relied:Prima Paper Engg. (P) Ltd. v. ITO ITA No. 1755 and 1205/PN/2007.

REFERRED : Poonawala Estate & Stud Farms (P) Ltd. (Pune-B) (2010) 48 DTR 210, Chordia Food Products Ltd. Pune Tribunal Order dt. 26-6-2012, Shavie Exports, Mumbai ITA No. 321/Mum/2012, Malpani Sales Corporation -- ITA No.471/PN/2010, Prashant Caterers, Mumbai ITA No.4226/Mum/2011 Order dt. 6-2-2013 Pidilite Industries Ltd. v. Dy. CIT (2011) ITA No. 3355 (Mum) of 2009.

FAVOUR : In assessee's favour.

A.Y. : 2010-11

IN THE ITAT PUNE A BENCH

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