2010 (11) TMI 1067 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80-IA of the Income Tax Act, 1961.
2. Treatment of each windmill as a separate undertaking.

Summary:

Issue 1: Deduction u/s 80-IA of the Income Tax Act, 1961
The Assessee firm, engaged in manufacturing automobile components and windmill power generation, filed its return for AY 2006-07, claiming a deduction of Rs. 62,49,568 u/s 80-IA. The Assessing Officer (AO) disallowed this deduction, arguing that the conditions of Section 80-IA(5) were not met. The AO stated that losses from the eligible unit must be carried forward and set off against future profits of the same unit, even if they were previously set off against other sources. The Commissioner (Appeals) upheld this view, relying on the decision in Asstt CIT v. Goldmine Shares & Finance (P) Ltd.

The Tribunal, however, found that the Assessee has the option to choose the initial year for claiming the deduction within a 15-year period. The Tribunal held that the initial assessment year is the year in which the Assessee opts to claim the deduction, not necessarily the year the enterprise begins operations. The Tribunal referenced the Chennai Bench decision in Mohan Breweries & Distilleries Ltd., which supports the Assessee's right to choose the initial year. The Tribunal concluded that the Special Bench decision in Goldmine Shares does not contradict this interpretation but rather supplements it. Therefore, the Assessee is entitled to claim the deduction on the current year's profit without notionally carrying forward and setting off unabsorbed depreciation or losses from earlier years.

Issue 2: Treatment of Each Windmill as a Separate Undertaking
The Assessee argued that each windmill should be treated as a separate undertaking for the purpose of computing deductions u/s 80-IA. The Tribunal agreed, citing the Chennai Bench decision in Bennari Amman Sugars, which held that each co-generation plant installed in different years should be considered a separate undertaking. Consequently, the profit or loss of each windmill cannot be clubbed together for deduction purposes.

Conclusion:
The appeal of the Assessee is allowed. The Assessee can claim the deduction u/s 80-IA based on the initial year of their choice within the stipulated period, and each windmill is to be treated as a separate undertaking for computing the deduction.