Deduction u/s 80IA is mandatory for both assessee and revenue to allow/claim, once initial assessment year is selected as there is no choice for postponement – ITAT
ABCAUS Case Law Citation:
ABCAUS 2711 (2019) (01) ITAT
Important Case Laws Cited/relied upon:
CIT Vs. Ramco International reported in 221 CTR 0491 ; Chicago Pneumatic India Ltd. Vs. Deputy Commissioner of Income Tax 15 SOT 0252 ; Commissioner of Income Tax Vs. Jindal Saw Pipes Ltd. 328 ITR 0338 ; National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax 229 ITR 0383; Sirova Developers (2017) 162 ITD 718 ; Goetze (India) Ltd. Vs. CIT (2006) [284 ITR 323 (SC)]; Vedanta Ltd. Vs. Pr.CIT-9, New Delhi (2018) 93 Taxman.com 392 ; of CIT Vs. G.M.Knitting Industries Pvt. Ltd. (2016) 71 Taxman.com 35
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals).
In this case, a search u/s 132 was carried out on the assessee and in response to the notice u/s 153A, the assessee filed the return of income declaring nil income. In the return so filed no claim was made u/s 80IA of the Act.
During the assessment proceedings, the assessee made submission stating that the assessee was owning captive power plant and the undertaking was eligible for deduction u/s 80IA of the Act and due to inadvertent mistake, the assessee did not claim the deduction u/s 80IA in the return filed in response to the notice issued u/s 153A.
The assessee requested to allow the deduction and also filed a revised return of income claiming deduction u/s 80IA of the Act.
The AO observed that the assessee did not make any claim of deduction u/s 80IA in the original return as well as in the return filed in response to notice u/s 153A of the Act and the claim was made only in the revised return which was barred by limitation. Accordingly the AO rejected the claim of the assessee for deduction u/s 80IA.
The CIT(A) dismissed the appeal of the assessee.
The Tribunal observed that in the return of income filed u/s 153A, there was mistake in computation of income and it resulted in ‘nil’ taxable income giving no occasion for the assessee to claim the deduction u/s 80IA of the Act.
The Tribunal noted that the entire profit as per P&L account was offered for taxation u/s 115JB of the Act, under the book profits and filed the nil return of income. Subsequently, when the AO detected the incorrect computation of income during the assessment proceedings the assessee realized the mistake and claimed the deduction u/s 80IA as the correct computation resulted in taxable income instead of nil income declared by the assessee. Therefore, the assessee filed revised return with revised computation of income claiming the deduction u/s 80IA of the Act before the AO.
The Tribunal observed that the assessee had filed the return of income within the due date allowed u/s 139(1) of the Act, but not claimed the deduction u/s 80IA. On realizing that there was a mistake in calculation and the revised computation resulted in taxable income, the profit from the unit entitled for deduction u/s 80IA, was claimed as deduction and filed all the necessary documents required for allowing the deduction along with the revised return.
The Tribunal observed that since the AO took up the case for scrutiny for understatement of income, he was not empowered to entertain the fresh claim which reduced the returned income, otherwise than by revised return. However, in the instant case, the assessee filed the return of income declaring nil income and the revised return filed during the assessment proceedings also resulted in nil income after the deduction u/s 80IA and hence the same was not against the spirit of scrutiny proceedings or for the purpose of issue of notice u/s 143(2) of the Act.
The Tribunal stated that it is decided issue that the assessee is required to pay the taxes only on true and correct income and the Government is not permitted to collect the taxes more than what was due from the assessee.
The Tribunal pointed out that as held by Hon’ble Supreme Court, it is settled issue that even if the AO is not permitted to entertain the fresh claim, the assessee is not barred from making additional claim before the appellate authorities and the appellate authorities are permitted to entertain the genuine additional claims in the interest of justice.
The Tribunal observed thatas per the scheme of deduction u/s 80IA the assessee is entitled for deduction u/s 80IA for 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking manufactures or begins to operate the eligible industry. The assessee is free to decide the initial assessment year and entitled for deduction u/s 80IA for 10 consecutive assessment years from the initial assessment year.
The Tribunal opined that once the initial assessment year is selected by the assessee, the assessee would be entitled for deduction u/s 80IA till completion of 10 consecutive years and the AO is bound to allow the deduction if the assessment results into positive income, even if the assessee did not make the claim in the return of income.
The Tribunal further stated that if the assessee do not claim the deduction for some reason or the other during the block period of 10 years, the assessee would not be entitled to postpone and claim the deduction in the subsequent assessment years after completion of block period of 10 years, thus, the assessee would loose the benefit forever. Therefore, if there is no choice for postponement of the deduction in the subsequent years, it is mandatory for both revenue as well as the assessee to claim deduction or to allow the deduction.
The Tribunal opined that the assessee did not claim the deduction since the taxable income as per the computation of income was zero. If the scrutiny assessment results in to positive income it is obligation on the part of the AO to allow all the statutory deductions including the deduction u/s 80IA for arriving the taxable income.
The Tribunal noted that there was no dispute that the assessee was entitled for deduction u/s 80IA. Therefore, it was injustice to deny the claim by appellate authorities who are permitted to entertain the fresh claim, when assessee makes the bonafide claim.
The Tribunal held that the assessee was entitled for the deduction u/s 80IA. Accordingly, the AO was directed to allow the deduction u/s 80IA of the Act. The case was restored back to the AO for limited issue of deciding the quantum of deduction and for obtaining the required details such as audit report etc.. before allowing the deduction.