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2015 (3) TMI 757 - AT - Income TaxDisallowance of deduction claimed under section 80IA in respect of profit derived from wind mills - notionally brought forward the losses relating to different wind mill units for set off against the profits of the wind mill units - Held that - The Coordinate Bench of this Tribunal in assessee s own case after considering the decision of Hon ble Madras High Court in the case of Velayudha Swamy Spinning Mills P. Ltd., vs. ACIT (2010 (3) TMI 860 - Madras High Court) as well as the decision of ACIT vs. Gold Mine Shares and Finance Limited 2008 (4) TMI 405 - ITAT AHMEDABAD wherein wherein following its earlier unreported judgment held that once the assessee exercises the option of claiming deduction from a particular assessment year, then only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee cannot be notionally brought forward. - assessee s claim of deduction under section 80IA is not maintainable - Decided against assessee. Disallowance of weighted deduction claimed under section 35(2AB) - Held that - Considering assessee s claim that Form 3CL containing necessary details was furnished before the first appellate authority which has not been taken into consideration before disallowing assessee s claim, we remit the matter back to the file of A.O. to verify assessee s claim and decide it accordingly. - Decided in favour of assessee for statistical purposes. Disallowance of deduction claimed under section 80IB - Held that - As can be seen from the facts on record, the A.O. has disallowed assessee s claim of deduction in A.Ys. 2007-08 to 2009-2010, basically on the ground that Jammu unit has been set up by splitting up or reconstruction of a business already in existence. Ld. CIT(A) while deciding the issue in A.Y. 2007-08 had gone through the enquiry report of the Inspector of Income Tax and has concluded, as the assessee has made substantial investment in land, building, machinery, plant etc., while setting up the Jammu unit, it cannot be considered to have been set up by splitting up or reconstruction of existing business. Hence, assessee is eligible for deduction under section 80IB. There is no reason to hold that the assessee is not eligible for deduction under section 80IB as the Jammu unit is formed by splitting up or reconstruction of business already in existence. After, going through the facts and materials on record, we are of the firm view that the order passed by the Ld. CIT(A) for A.Y. 2007-08 allowing assessee s claim of deduction under section 80IB deserves to be upheld whereas, the decision taken by the Ld. CIT(A) in A.Ys. 2008-09 and 2009-10 is not the correct view. Accordingly, we set aside the impugned orders of the Ld. CIT(A) for A.Ys. 2008-09 and 2009-10 and direct the A.O. to allow assessee s claim of deduction under section 80IB of the Act. It is relevant to note that in the grounds taken for A.Y. 2007-08 the department has alleged that assessee has transferred old machinery and plant for setting up the Jammu unit and is also engaged in manufacturing of oil. However, at the time of hearing, learned D.R. could not substantiate the aforesaid fact by bringing any material on record. Therefore, the aforesaid allegation of the department not being borne out from record deserves to be rejected. - Decided in favour of assessee.
Issues Involved:
1. Disallowance of deduction claimed under section 80IA for wind mill units. 2. Disallowance of weighted deduction claimed under section 35(2AB). 3. Eligibility for deduction under section 80IB for a new unit set up in Jammu. Issue-wise Detailed Analysis: 1. Disallowance of Deduction Claimed under Section 80IA for Wind Mill Units: The assessee, a public limited company engaged in the manufacture and sale of chemicals and pesticides and generation of power through wind mills, claimed a deduction under section 80IA for various wind mill units. The Assessing Officer (A.O.) disallowed the deduction by notionally bringing forward past years' losses and setting them off against the current year's profits, as per sub-section (5) of section 80IA. The assessee contended that losses already set off against other income in prior years should not be brought forward. The A.O. and the CIT(A) rejected this argument, following the precedent set by the ITAT, Hyderabad, and the Special Bench decision in ACIT vs. Gold Mine Shares and Finance P. Ltd. The Tribunal upheld the CIT(A)'s decision, emphasizing that the quantum of deduction under section 80IA must be computed as if the eligible business were the only source of income, thus requiring the notional carry forward and set off of losses. The Tribunal referenced the Hon'ble Madras High Court's decision in Velayudha Swamy Spinning Mills P. Ltd. vs. ACIT but maintained that the Special Bench decision in Gold Mine Shares and Finance P. Ltd. was more applicable. 2. Disallowance of Weighted Deduction Claimed under Section 35(2AB): The A.O. disallowed the weighted deduction claimed under section 35(2AB) amounting to Rs. 13,26,533 due to the absence of Form 3CL showing the quantum of amount spent. The CIT(A) upheld this disallowance. The Tribunal remitted the matter back to the A.O. for verification, as the assessee claimed to have submitted the necessary Form 3CL to the first appellate authority, which was allegedly ignored. 3. Eligibility for Deduction under Section 80IB for a New Unit Set Up in Jammu: The assessee set up a new unit in Jammu and claimed deduction under section 80IB. The A.O. disallowed the claim, arguing that the Jammu unit was formed by splitting up or reconstructing the existing unit at Balanagar. The CIT(A) for A.Y. 2007-08 allowed the deduction, recognizing the Jammu unit as a separate and independent unit with substantial investment. However, for A.Ys. 2008-09 and 2009-10, the CIT(A) reversed this view, asserting that the Jammu unit was not independent due to shared management, marketing, and research activities centered at Balanagar. The Tribunal analyzed the conditions under section 80IB and relevant judicial precedents, including the Hon'ble Supreme Court's decision in Textile Machinery Corporation Ltd. vs. CIT. The Tribunal concluded that the Jammu unit was an independent and self-sustaining unit, not formed by splitting up or reconstructing the existing business. The Tribunal upheld the CIT(A)'s decision for A.Y. 2007-08 and reversed the CIT(A)'s decision for A.Ys. 2008-09 and 2009-10, directing the A.O. to allow the deduction under section 80IB for the Jammu unit. Conclusion: The Tribunal's consolidated order addressed the disallowance of deductions under sections 80IA and 35(2AB) and the eligibility for deduction under section 80IB, providing a detailed analysis and upholding or reversing the decisions of the lower authorities based on the specific facts and applicable legal principles.
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