When it comes to ‘Initial Assessment Year’ for the purpose of deduction under the Income Tax Act, It has been held by The Income Tax Appellate Tribunal (ITAT), Delhi Bench that the Initial assessment year for the purpose of claiming of deduction need not be first-year of the commencement of operations”.
Here is the case of Petronet LNG Ltd that is an assessee and has been engaged in the industry of operation of the port, purchase of LNG and so on. It has a port located at Dahej in Gujarat. The port undertaking of the assessee initiated its operations from the Financial Year 2004-05.
Notably, the first year of operation of the assessee i.e. 2004-05 incurred substantial losses. However, in the forthcoming assessment year 2006-07, 2007-08 and 2008-09, the assessee earned profits and consequentially the profits had been set off against the losses.
Coming to the relevant Assessment Year 2009-10, the assessee earned profits in this year also and so claimed a deduction under section 80IA. However, the Assessing Officer (AO) did not allow deduction on the ground that the assessee has not earned any profits that are available for claiming the deduction. He further asserted that the business losses/deprecation of business in earlier years have been set off against the income and they have been brought forward notionally and set off against the profits for the relevant assessment year consequently reducing the profits.
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However, the assessee asserted that for the objective of computing deduction u/s 80IA, depreciation (unabsorbed ) of earlier years have already been set off against income of the assessee in the preceding years and it ought not to be notionally brought forward and set off under section 80IA(5) for determining the claim of deduction.
Nevertheless, Commissioner Of Income-Tax (Appeals) {CIT(A)} removed the addition on the grounds that the act of the Assessing Officer to bring losses again notionally is rejected.
Interestingly, The Coram of Dr B. R. Kumar and Sudhanshu Srivastava held that the assessee possesses the right to claim the deduction under section 80IA(5) from the assessment year 2009-10. The initial assessment year here is the 4th year of operation of the activities.
