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| The Tax Publishers2020 TaxPub(DT) 2909 (Ahd-Trib) : (2020) 183 ITD 0603 INCOME TAX ACT, 1961
Section 80-IA(4) Section 80-IA(5)
In view of CBDT Circular No. 1 of 2016, dt. 15-2-2016 assessee was entitled in law for claim of deduction of income arising from eligible business during the year under section 80-IA(1) read with section 80-IA(4) without making adjustments towards losses arising in earlier assessment years prior to exercise of option of 'initial assessment year' with reference to the eligible business. Embargo placed under section 80-IA(5) for quantification of deduction of profits and gains of an eligible business would apply from assessment years immediately succeeding 'initial assessment years' only.
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Deduction under section 80-IA(4) - Computation - AO adjusted losses arising in eligible business, prior to exercise of option towards 'initial assessment year' -
Assessee engaged in generation of electricity through wind mills claimed deduction under section 80-IA(4) without notionally adjusting losses/depreciation of earlier years arising from eligible business which already stood set off in accordance with law from other stream of income. AO denied deduction of profits arising from eligible business by invoking embargo placed by sub-section (5) of section 80-IA and proceeded to make adjustment on account of notionally carry forward losses/depreciation of earlier years from actual commencement of eligible business.Held: Manner of determination of quantum of deduction as provided under section 80-IA(5) has since been clarified by CBDT Circular No. 1 of 2016, dated 15-2-2016 and is devoid of controversy any more. Having regard to the wide ranging controversies, CBDT circular has given categorical interpretation on exercise of option of choosing 'initial assessment year' referred to sub-section (5) of section 80-IA. The CBDT has clarified that embargo placed under section 80-IA(5) for quantification of deduction of profits and gains of an eligible business would apply from assessment years immediately succeedinginiial assessment years' only. Having regard to express elucidation by CBDT, assessee, while determining eligible profit, was not required to notionally reduce losses arising from eligible business in earlier years already set-off against other business of assessee in terms of sections 80,71 and 72 prior to exercise of option of 'initial assessment year'. The lossess arising in 'eligible business', if any, subsequent to earmarking of 'initial assessment year'. The losses arising in 'eligible business', if any, subsequent to earmarking of 'initial assessment year' would however, continue to be governed by embargo placed in section 80-IA(5).
Followed:Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT (2012) 340 ITR 477 (Madr) : (2012) 21 Taxmann.com 95 (Mad.) : 2010 TaxPub(DT) 1648 (Mad-HC) : (2016) 76 Taxmann.com 176 (SC) : 2016 TaxPub(DT) 4736 (SC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
IN THE ITAT, AHMEDABAD BENCH
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