2019 (4) TMI 349 - AT - Income Tax

Eligible for deduction u/s 80IA - benefit of deduction unit-wise without setting off of loss / profit of other eligible units - whether each windmill constitute a separate undertaking and the profit or loss of that undertaking alone will be considered for the purpose of deduction u/s 80IA or the sum of profit or loss of all five undertakings together is eligible for deduction u/s 80IA - HELD THAT - The co-ordinate bench of ITAT, Mumbai Bench C in the case of Punit Construction Co vs JCIT (2018 (2) TMI 1703 - ITAT MUMBAI has considered an identical issue in light of number of windmills and after considering relevant provisions of the Act, including sub section (5) of section 80IA, held that deduction has to be given unit-wise without considering profit or loss of other eligible units. Also Referring to decision of Hon ble Delhi High Court in the case of CIT vs Dewan Kraft Systems Pvt Ltd 2007 (2) TMI 149 - DELHI HIGH COURT we are of the considered view that the Ld.CIT(A) was right in allowing the benefit of deduction u/s 80IA in respect of each unit without setting off of loss incurred by other eligible units. Hence, we are inclined to uphold the findings of CIT(A) and dismiss appeal filed by the revenue.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IA of the Income-tax Act, 1961.
2. Treatment of each windmill as a separate undertaking for the purposes of deduction under Section 80IA.
3. Setting off profits of certain windmills against losses of others for computing deduction under Section 80IA.
4. Consideration of all windmills as a single industrial undertaking or enterprise for deduction purposes.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IA:
The primary issue was whether the assessee was eligible for deduction under Section 80IA of the Income-tax Act, 1961. The assessee, a partnership firm engaged in power generation through wind turbine generators, claimed deductions under Section 80IA for the profits derived from its power generation business. The Assessing Officer (AO) recomputed the profit eligible for deduction by setting off losses from other eligible units. The CIT(A) upheld the assessee's claim, stating that the deduction should be computed unit-wise without considering the profit or loss of other eligible units.

2. Treatment of Each Windmill as a Separate Undertaking:
The CIT(A) and the Tribunal both held that each windmill should be treated as a separate undertaking for the purposes of Section 80IA deduction. The CIT(A) noted that the provisions of sub-sections (1) and (5) of Section 80IA should be read together, which implies that the profit is to be computed undertaking-wise. The Tribunal supported this view, citing the decision in the case of Punit Construction Co vs JCIT, where it was held that the deduction has to be given unit-wise without considering the profit or loss of other eligible units.

3. Setting Off Profits Against Losses:
The AO had set off the profits from three windmills against the losses of two other windmills to compute the net income eligible for deduction under Section 80IA. The CIT(A) disagreed with this approach, stating that the profits and losses of each windmill should be considered independently. The Tribunal concurred with this view, emphasizing that the deduction under Section 80IA should be calculated as if each eligible business were the only source of income of the assessee.

4. Consideration of All Windmills as a Single Industrial Undertaking:
The revenue argued that all five windmills should be considered a single industrial undertaking or enterprise for the purpose of Section 80IA deduction. However, the CIT(A) and the Tribunal rejected this argument. They held that the assessee could select any ten consecutive years out of fifteen for availing the benefits of deduction under Section 80IA for each windmill independently. The Tribunal cited the decision of the Hon’ble Delhi High Court in CIT vs Dewan Kraft Systems Pvt Ltd, which supported the view that each unit should be treated as an independent unit for computing deduction under Section 80IA.

Conclusion:
The Tribunal, upholding the CIT(A)’s order, ruled that the assessee is eligible for deduction under Section 80IA for each windmill separately, without setting off the profits of one against the losses of another. The appeals filed by the revenue were dismissed, affirming that the computation of deduction should be unit-wise and not for the business as a whole. The Tribunal's decision was consistent with previous judicial pronouncements, ensuring that the legislative intent of providing specific period-based incentives for eligible units was maintained.