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2015 (12) TMI 896 - AT - Income TaxAssessment u/s.153A - Held that - In absence of any incriminating material, no addition can be made in the assessment u/s.153A Disallowance of additional depreciation - Held that - Generation of electricity is a manufacturing activity and the assessee is eligible for additional depreciation u/s.32(1)(iia). Depreciation on electrical fittings used for mindmill - Held that - CIT(A) correctly following the decision of the Tribunal in the cases of Poonawala Finvest Agro Pvt. Ltd. Vs. ACIT 2008 (6) TMI 586 - ITAT PUNE held that on power evacuation, infrastructure, transformer, erection and commissioning of the structures, line work, electrical items will qualify for depreciation @80% whereas MEDA charges, site development expenses, cost of construction of controlled beam, civil work, internal road, development application charges, professional fees and bank charges will not qualify for higher rate of depreciation. She accordingly directed the AO to verify these expenses and allow depreciation on above items accordingly. Non making a claim u/s.80IA(4) in the original return of income filed u/s.139(1) - Held that - CIT(A) was not justified in rejecting the claim made u/s.80IA(4) of the I.T Act merely because the assessee had not made the claim in the original return. Methodology of computation of deduction u/s.80IA(4) - Held that - Each phase of windmill has to be considered as separate undertaking eligible for deduction u/s.80IA and therefore deduction u/s.80IA(4) should have been computed independently for each phase and not on consolidated basis. Applicability of provisions of section 80IA(5) - selection of initial assessment year - whether initial assessment year u/s.80IA(5) means year of installation of windmill or year in which the claim of deduction u/s.80IA is first made? - Held that - The provisions of section 80IA(5) are applicable only from the initial assessment year, i.e. the assessment year in which deduction u/s.80IA was first claimed by the assessee after exercising his option as per the provisions of section 80IA(2) of the Act. - Decided in favour of assessee.
Issues Involved:
1. Denial of deduction claimed under Section 80IA(4). 2. Fresh claims in returns filed under Section 153A. 3. Applicability of Section 80AC. 4. Incriminating evidence requirement for assessments under Section 153A. 5. Computation methodology for deductions under Section 80IA(4). 6. Eligibility for higher depreciation rates on specific assets. 7. Classification of power generation as manufacturing activity. 8. Additional depreciation on windmills. 9. Treatment of electrical fittings for depreciation purposes. 10. Selection of initial assessment year under Section 80IA(5). Detailed Analysis: 1. Denial of Deduction Claimed Under Section 80IA(4): The assessee claimed deductions under Section 80IA(4) for profits earned from wind power generation in returns filed in response to notices under Section 153A, which were not claimed in the original returns. The Assessing Officer (AO) disallowed these claims, and the CIT(A) upheld the AO's decision. The Tribunal, following the decision in B.G. Shirke Construction Technology Pvt. Ltd. vs. ACIT, held that fresh claims cannot be made in returns filed under Section 153A if no such claim was made in the original return. Consequently, the Tribunal dismissed the grounds raised by the assessee for all relevant assessment years. 2. Fresh Claims in Returns Filed Under Section 153A: The Tribunal noted that for assessment years where no assessment under Section 143(3) was completed prior to the search, the assessee could make fresh claims in returns filed under Section 153A. This was based on the principle that the AO retains original jurisdiction for such years. Therefore, the Tribunal allowed the assessee's claims for the years where assessments were pending at the time of the search. 3. Applicability of Section 80AC: The AO and CIT(A) disallowed the deductions on the basis that the claims were not made in the original returns filed under Section 139(1), invoking Section 80AC. The Tribunal, however, held that Section 80AC only requires the filing of the return under Section 139(1) and does not mandate that the claim must be made in that return. Thus, the Tribunal allowed the assessee's claims for deduction under Section 80IA(4). 4. Incriminating Evidence Requirement for Assessments Under Section 153A: For assessment years where assessments were completed under Section 143(3) prior to the search, the Tribunal held that additions or disallowances under Section 153A can only be made based on incriminating evidence found during the search. Since no such evidence was found, the Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO. 5. Computation Methodology for Deductions Under Section 80IA(4): The Tribunal held that each phase of windmills should be considered as a separate undertaking eligible for deduction under Section 80IA(4), and the deduction should be computed independently for each phase. This was in line with the decision in J-Sons Foundry Pvt. Ltd. vs. DCIT. 6. Eligibility for Higher Depreciation Rates on Specific Assets: The AO disallowed higher depreciation rates on electrical yard fencing and temporary approach roads, treating them as building assets eligible for lower depreciation rates. The Tribunal, following the decision in Poonawala Finvest & Agro Pvt. Ltd. vs. ACIT, upheld the disallowance of higher depreciation rates for these assets. 7. Classification of Power Generation as Manufacturing Activity: The Tribunal held that power generation from windmills qualifies as a manufacturing activity, making the assessee eligible for additional depreciation. This was based on decisions such as CIT vs. VTM Ltd. and ACIT vs. M. Satish Kumar. 8. Additional Depreciation on Windmills: The Tribunal upheld the CIT(A)'s decision to allow additional depreciation on windmills, following the reasoning that power generation is akin to manufacturing. 9. Treatment of Electrical Fittings for Depreciation Purposes: The Tribunal upheld the CIT(A)'s decision to allow higher depreciation rates on electrical fittings used for windmills, following the decision in Poonawala Finvest & Agro Pvt. Ltd. vs. ACIT. 10. Selection of Initial Assessment Year Under Section 80IA(5): The Tribunal held that the initial assessment year for the purposes of Section 80IA(5) is the year in which the assessee first claims the deduction, not the year of installation. This was based on the decision in Poonawalla Estate Stud & Agro Farm Pvt. Ltd. vs. ACIT. Conclusion: The Tribunal partly allowed the appeals filed by the assessee and dismissed all the appeals filed by the Revenue, providing detailed reasoning for each issue based on relevant case law and statutory provisions.
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