Initial Assessment year in Section 80IA(5) would only mean year of claim of deduction, not year of commencement of eligible business: Madras HC [Read Judgment]

The Madras High Court has ruled that the initial Assessment year in Section 80IA(5) would only mean year of claim of deduction, not year of commencement of eligible business.

The appellant / Revenue, challenging the order passed by the Income Tax Appellate Tribunal relating to the assessment year 2011-12, by raising the substantial question whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that the initial Assessment year in Section 80IA(5) would only mean the year of claim of deduction under section 80IA and not the year of commencement of eligible business.

The appellant / Revenue submitted that the substantial questions of law involved herein are covered against the Revenue, as per the decision of a Co-ordinate Bench of this Court in Principal Commissioner of Income – tax-3, Coimbatore v. Prabhu Spinning Mills (P) Limited.

The division bench of Justice R.Mahadevan and Justice J.Satyanarayana Prasad has held that an assessee who is eligible to claim deduction u/s 801A has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfilment of conditions prescribed in the section. Hence, the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s 801A. However,the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity.

The court stated that the Assessing Officers are, therefore, directed to allow deduction u/s 801A in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting ‘initial assessment year’ as mentioned in sub section (5) of that section for which the Standing Counsels/D.R.s be suitably instructed.

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