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2022 (6) TMI 1315 - AT - Income TaxDeduction u/s 80IA for its unit at Silvassa - 10th year of commercial production - Addition on the ground that AY 2008-09 is the eleventh (11th) year of such a claim, whereas according to assessee AY 2008-09 is the tenth (10th) year of claim u/s 80IA of the Act and therefore it is a legitimate claim - HELD THAT - We note that as per Section 80IA of the Act, for the first five years, the assessee was entitled to claim 100% deduction and for the rest of the five years, the assessee can claim deduction only 30% of the profits from the eligible unit. Thus since the assessee s first year of claim was in A.Y.1999-2000, the assessee got upto A.Y.2003-04 (five years from AY.1999-2000) 100% deduction (refer page no. 102 of the P.B) and thereafter the assessee received only 30% deduction from AY. 2004-05 deduction u/s 80IA of the Act for Silvassa Unit was granted by the AO at 30% to the tune of Rs.48,31,672/-. And for A.Y.2007-08 i.e. 9th year, the assessee received 30% deduction which is evident from the page 106 of the paper book. We find that 10th consecutive year as per the assessment years framed by AO s as referred to (supra) is A.Y.2008-09, since the first year of deduction u/s 80IA of the Act in respect of profits for Silvassa Unit was for A.Y.1999-2000 and ten (10) year has to be reckoned from that year, so AY 2008-09 is the tenth year and therefore, the AO erred in holding that the assessee is not entitled for deduction u/s 80IA of the Act because AY 2008-09 is the 11th years. We find that the AO had erred in denying the claim of deduction u/s 80IA of the Act for A.Y.2008-09 and likewise the Ld. CIT(A) also erred in denying the claim of the assessee. Therefore, we are inclined to allow the claim of the assessee u/s 80IA of the Act and direct the AO to allow the claim. Ground no. 1 is allowed. Recomputation of the profits of the eligible unit at Silvassa at the reduced amount - reallocation of various expenses on turnover basis (as against on actual basis and partly on turnover basis) - HELD THAT - As shown by the Ld. AR that the allocation was based on turnover of the lubes sales of respective plants. Thus, we note that the AO was wrong to observe that the expenses were allocated more to the non-eligible unit at Thane and expenses were lesser allocated to the eligible unit (Silvassa Unit) which occasioned the AO to allocate more expenses to Silvassa Unit. We note that the total expenses were to the tune of Rs.9,645.84 crores out of which Rs.5,237.93 crores pertained to the non 80IA Unit (Thane) and Rs.4,264.70 crores pertained to the 80IA Unit at Silvassa. Thus, it is seen that the expenses incurred by the assessee for Thane unit was 54.3% and 44% to the Silvassa Unit. Therefore, we are of the considered opinion that the AO erred in re-allocating the expenses and thus reducing the 80IA of the Act profits shown for the unit at Silvassa. Therefore, on the facts and circumstances we direct the AO to accept the computation of profit of the eligible unit at Silvassa as made by assessee and allow deduction accordingly. Disallowance of the claim of deduction u/s 80-IA in respect of windmills installed at different locations - HELD THAT - As relying on HERCULES HOISTS LTD. 2015 (5) TMI 825 - BOMBAY HIGH COURT since the earlier year losses of the windmills were absorbed during those years and no losses were carried forward, for the initial year, the AO/Ld. CIT(A) erred in denying the claim. Therefore, we hold that the profits earned during the A.Y.2008-09 from the four (4) windmills would be entitled for deduction and the AO is directed to allow it as per law.
Issues Involved:
1. Disallowance of deduction under Section 80-IA for the Silvassa Unit. 2. Reallocation of various expenses on a turnover basis. 3. Disallowance of deduction under Section 80-IA for windmills. Issue-Wise Detailed Analysis: 1. Disallowance of Deduction under Section 80-IA for the Silvassa Unit: The primary issue was whether the assessment year 2008-09 was the 10th or 11th year of the assessee's claim for deduction under Section 80-IA for its Silvassa Unit. The assessee argued that the initial year of commercial production was 1999-2000, making 2008-09 the 10th year of the claim. The AO and CIT(A) contended that production commenced in 1998-99, thus making 2008-09 the 11th year and ineligible for deduction. The Tribunal analyzed the facts and found that: - The original assessment for 1998-99 noted only trial production, not commercial production. - No deduction under Section 80-IA was claimed or allowed for 1998-99. - The first claim for deduction under Section 80-IA for the Silvassa Unit was made in 1999-2000 and allowed by the AO. - Subsequent assessments consistently treated 1999-2000 as the first year of the claim. The Tribunal concluded that the AO and CIT(A) erred in treating 1998-99 as the initial year. Therefore, the Tribunal allowed the deduction under Section 80-IA for the assessment year 2008-09, recognizing it as the 10th year of the claim. 2. Reallocation of Various Expenses on Turnover Basis: The AO reallocated expenses between the Silvassa Unit (eligible for deduction) and the Thane Unit (non-eligible) based on turnover, suspecting that the assessee had allocated lesser expenses to the Silvassa Unit to inflate its profits. The Tribunal noted: - The assessee provided detailed records showing the allocation of expenses based on actual usage and turnover. - The Thane Unit had higher expenses due to more employees and complex production processes. - The AO's reallocation was not justified as the expenses were already proportionally allocated based on turnover and actual usage. The Tribunal directed the AO to accept the assessee's computation of profits for the Silvassa Unit and allow the deduction accordingly. 3. Disallowance of Deduction under Section 80-IA for Windmills: The AO disallowed the deduction under Section 80-IA for windmills, considering losses from earlier years that were set off against other incomes. The AO held that these losses should be carried forward and set off before calculating the current year's profits. The Tribunal referred to the CBDT Circular 01 of 2016 and the jurisdictional High Court's decision in CIT Vs. Hercules Hoists Ltd., which clarified that: - The initial assessment year for claiming deduction under Section 80-IA can be chosen by the assessee. - Losses from years prior to the chosen initial assessment year should not be considered for set off against the profits of the chosen years. The Tribunal found that there were no carried forward losses for the initial assessment year of the windmills. Hence, the AO and CIT(A) erred in disallowing the deduction. The Tribunal directed the AO to allow the deduction under Section 80-IA for the windmills as per law. Conclusion: The Tribunal allowed the appeal of the assessee, granting the deduction under Section 80-IA for the Silvassa Unit and windmills, and directed the AO to accept the assessee's allocation of expenses.
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