2016 (3) TMI 589 - AT - Income Tax

Denial of deduction u/s.80IA on the profits from the windmills - claim for initial assessment year - that - Recently, the Coordinate Bench of the Tribunal in the case of D.J. Malpani 2015 (12) TMI 896 - ITAT PUNE has reiterated the position with regard to the initial assessment year . Accordingly, we are of the considered view that the assessee is eligible to claim deduction u/s.80IA on the profits from the windmill for the impugned assessment year. All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. See CIT Vs. See Velayudhasamy Spinning Mills (2010 (3) TMI 860 - Madras High Court ) - Decided in favour of the assessee.

Summary

Issues:
- Denial of deduction u/s.80IA on profits from windmills

Analysis:
The appeal before the Appellate Tribunal ITAT Pune concerned the denial of deduction u/s.80IA on profits from windmills for the Assessment Year 2006-07. The primary issue raised was the determination of the 'initial assessment year' for claiming the deduction. The assessee had set up a windmill for power generation in the relevant period and claimed the deduction for the first time in A.Y. 2004-05. The dispute arose as the AO and CIT(A) disagreed on whether the 'initial assessment year' was the year of first operation or the year of first deduction claim. The assessee contended that the 'initial assessment year' should be the year of first deduction claim, not the year of first operation.

The assessee argued that the 'initial assessment year' should be the year in which the deduction was first claimed, citing precedents where the Tribunal had ruled in favor of the assessee in similar cases. The Departmental Representative, on the other hand, supported the CIT(A)'s findings, emphasizing the lack of profits in the impugned assessment year for claiming the deduction. The Departmental Representative relied on a past decision to support the denial of the deduction.

After hearing both parties and reviewing the relevant provisions, the Tribunal observed that the assessee had chosen A.Y. 2004-05 as the 'initial assessment year' for claiming the deduction u/s.80IA. The Tribunal referred to the statutory provisions granting the assessee the option to select the 'initial assessment year' and held that the AO erred in thrusting a different assessment year on the assessee. The Tribunal emphasized that the 'initial assessment year' should align with the year of first deduction claim as per the statutory provisions.

The Tribunal also noted a recent decision reaffirming the position on the 'initial assessment year.' It dismissed the Departmental Representative's reliance on an older decision, stating that subsequent rulings by the Hon'ble Madras High Court had settled the issue. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the assessee, affirming the eligibility to claim the deduction u/s.80IA on profits from windmills for the impugned assessment year.