Hercules Hoists Limited v. ACIT (Mum) (Trib.)

S. 80-IA: Industrial undertakings - Infrastructure development –Loss of eligible unit- Loss of eligible unit,

even if set-off against non-eligible profits, has to be aggregated & carried forward for set-off

against future eligible profits.

The assessee set up two windmills, the income from which was eligible for deduction u/s 80IA. The

assessee suffered a loss in the said Wind Mills and claimed a set-off of the same against its other

income. The AO and the CIT (A) rejected the claim by relying on ACIT v GoldMine Shares and Finance

(P) Ltd. (2008) 113 ITD 209 (SB) (Ahd) where it was held that in view of s. 80-IA(5), the loss suffered

by the eligible unit cannot be set off against the profits of other units / other business in the initial year

of assessment or subsequent years of eligible years of assessments. The Tribunal had to consider the

following legal issues: (i) what is the “initial assessment year“?, (ii) whether the loss/ depreciation from

the eligible unit is entitled to be set-off against the other income?, (iii) whether the said loss/

depreciation of the eligible unit is, after set-off against the other income, still required to be notionally

carried forward for set-off against the future profits of the eligible unit? HELD by the Tribunal:

(i) The “initial assessment year” is the year in which the eligible unit commences operations. It is not

the year in which the assessee chooses to claim deduction. The requirement of s. 80-IA(5) is that the

loss and unabsorbed depreciation of the eligible unit should begin to be aggregated from the “initial

assessment year” to the last allowable year. The aggregation has to continue for every year irrespective

of whether s. 80-IA (1) deduction for that year is exigible or not;

(ii) If the eligible unit has no profit, the loss & depreciation of the eligible unit is entitled to be set-off

against the other income. However, despite such set-off, the loss and depreciation has to be aggregated

and notionally carried forward for set-off against the future profits of the eligible unit. (A. Y. 2005-06 to

2008-09)