July 2010
Industrial undertaking : Deduction u/s.80-IA of Income-tax Act, 1961 : A.Y. 2005-06 : Computation : Adjustment of brought forward losses and depreciation set off in earlier years : Only the losses of the years beginning from the initial assessment year ar
By K. B. Bhujle | Advocate
New Page 1
Reported :
32 Industrial undertaking : Deduction u/s.80-IA of Income-tax
Act, 1961 : A.Y. 2005-06 : Computation : Adjustment of brought forward losses
and depreciation set off in earlier years : Only the losses of the years
beginning from the initial assessment year are to be brought forward and not the
losses of the earlier year which have been already set off against other income
of the assessee.
[Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT, 231
CTR 368 (Mad.)]
For the A.Y. 2005-06, the assessee had claimed a deduction of
Rs.1,70,76,945 u/s.80-IA of the Income-tax Act, 1961. The Assessing Officer
disallowed the claim on the ground that the eligible income is a negative
figure. CIT(A) allowed the claim and held that since the A.Y. 2005-06 is the
initial assessment year, unabsorbed depreciation and the losses of earlier
years, which had already been absorbed, cannot be notionally carried forward and
taken into consideration for computing deduction u/s.80-IA. The Tribunal
reversed the order of the CIT(A) and restored the order of the Assessing
Officer.
On appeal by the assessee, the Madras High Court reversed the
decision of the Tribunal and held as under :
“Losses and depreciation of the years earlier to the
initial assessment year which have already been absorbed against profits of
other businesses cannot be notionally brought forward and set off against the
profits of the eligible business for computing the deduction u/s.80-IA.”
