The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that “Initial assessment year” for the claim of deduction need not be “first year” of the “commencement of operations”.
The assessee, Petronet LNG Ltd is a company engaged in the business of operation of port, purchase of LNG etc having port at Dahej in Gujarat. The port undertaking of the assessee commenced operations from the Financial Year 2004-05. In the first year of operation the assessee incurred substantial losses. In Assessment Year 2006-07, 2007-08 and 2008-09, the assessee made profits and the profits were set off against the losses. In the relevant Assessment Year 2009-10, the assessee also had profits and claimed a deduction under section 80IA.
The AO disallowed deduction claimed stating that the assessee does not have any profits available for claiming deduction. The business losses/deprecation of earlier years, which have been set off against the income have been notionally brought forward and set off against the profits for the relevant assessment year thereby reducing the profits.
The assessee stated that for the purpose of computing deduction u/s 80IA, unabsorbed depreciation of earlier years already set off against income of the assessee in the preceding years should not be notionally brought forward and set off under section 80IA(5) for determining claim of deduction.
The CIT(A) deleted the addition on the grounds that the action of the Assessing Officer to bring losses again notionally cannot be accepted.
The coram of Sudhanshu Srivastava and Dr. B. R. R. Kumar held that the assessee is entitled to claim the deduction from the assessment year 2009-10 as the “initial assessment year” under section 80IA(5) even though this is the fourth year of operation of the activities under section 80IA.
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