2018 (4) TMI 1627 - AT - Income Tax

Deduction u/s 80IA(4)(iv) in respect of windmill business - whether quantum of deduction is to be computed of the eligible business as its only source of income after adjusting brought forward unabsorbed depreciation against current year s income - Held that - There were no brought forward losses in the hands of assessee, which in any case were adjusted upto assessment year 2009-10. The said findings of CIT(A) have not been controverted by learned Departmental Representative for the Revenue except to stress that the same needs verification. We find no merit in the plea of learned Departmental Representative for the Revenue in this regard, especially where in assessment year 2010-11 which was the preceding year to the instant assessment year, the claim of deduction has been allowed in the hands of assessee. It may also be pointed out herein itself that the assessee was running civil construction activity from which it was showing profits from year to year and the losses arising from windmill in the earlier years have already been set off against the said income and the balance income had been assessed in the hands of assessee. It is not case of Revenue that after adjustment of losses in the respective years the assessee had shown any losses. There is no merit in the order of Assessing Officer in holding that deemed losses have to be adjusted against profits of undertaking. We hold that the assessee was entitled to the claim of deduction under section 80IA(4)(iv)(a) - Decided against revenue.

Summary

Issues:
- Appeal against order of CIT(A) allowing deduction under section 80IA(4)(iv) of the Income Tax Act 1961.

Analysis:

Issue 1: Allowability of Deduction under section 80IA(4)(iv) of the Act

The Revenue contested the allowance of deduction under section 80IA(4)(iv) of the Act by the CIT(A). The Revenue argued that the quantum of deduction should be computed based on eligible business as the only source of income, after adjusting brought forward unabsorbed depreciation against the current year's income. The Assessing Officer disallowed the deduction claimed under section 80IA(4) of the Act, stating that the eligible business should be considered the sole income source, and unabsorbed depreciation should be set off against the profit of such business. However, the CIT(A) reversed the Assessing Officer's decision, allowing the deduction claimed by the assessee. The CIT(A) determined that the provisions of section 80IA(5) of the Act would be applicable from the assessment year 2010-11 onwards, and since the assessee claimed the deduction for the first time in the assessment year 2010-11, the claim was valid. The CIT(A) relied on previous decisions and allowed the claim of the assessee, reversing the Assessing Officer's order.

Issue 2: Verification of Losses Absorption and Previous Year Adjustments

The Revenue contended that losses from earlier years should be absorbed and verified before allowing the deduction under section 80IA(4)(iv)(a) of the Act. The Departmental Representative stressed the need for verification, citing a decision of the Bombay High Court and a Tribunal ruling. However, the Authorized Representative for the assessee argued that the issue was previously resolved in the assessee's favor for the assessment year 2010-11 by the Tribunal. The Authorized Representative also referred to a CBDT circular for clarification. The Tribunal noted that in the instant case, losses from earlier years had been absorbed and adjusted up to the assessment year 2009-10. The Tribunal found no merit in the Revenue's argument, especially since the claim was allowed in the preceding year. The Tribunal held that the assessee was entitled to the deduction under section 80IA(4)(iv)(a) of the Act, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under section 80IA(4)(iv) of the Act for the assessee.