2016 (8) TMI 913 - AT - Income Tax

Eligibility of deduction under S.80IA - A.O. denying deduction in respect of its wind mill projects installed in the earlier years and further in holding that the past losses have to be notionally adjusted even when they were adjusted against the other business income in earlier year - Held that - As comsidered in assessee s own case in A.Y. 2008-09 the assessee who is eligible to claim deduction under S.80IA has been given an option to choose initial/first year from which it may desire to claim the deduction for ten consecutive years out of the slab of 15 or 20 years as prescribed under the above sub-section. The term initial assessment year has been held to mean the first year opted to by the assessee for claiming deduction under S.80IA of the Act. Thus, it is clear that the initial assessment year is not the year of operation or commencement of business, as interpreted by the Assessing Officer, but it is the first year in which the assessee has opted to claim the deduction under S.80IA. In view of this clarification of the Board, which clinches the issue in favour of the assessee, and is binding on the Revenue authorities, we accept the contentions of the assessee in this behalf, and direct the Assessing Officer to allow the claim of the assessee, after verifying the records as to the initial assessment year in which the assessee for the first time has claimed the deduction under S.80IA of the Act, and consider the income of the assessee from the eligible unit from that year alone on a stand alone basis. - Decided in favour of assessee

Summary

Issues:
- Denial of deduction under section 80IA for windmill projects
- Notional adjustment of past losses against business income

Analysis:
1. The appeal concerns the denial of deduction under section 80IA for windmill projects installed in earlier years and the requirement to notionally adjust past losses against business income. The assessee contested the order of the CIT(A) upholding the view taken by the A.O.

2. The Ld. Counsel for the assessee highlighted a similar issue in the A.Y. 2008-09, where the Tribunal allowed the assessee's appeal. The Ld. D.R. acknowledged that the issue was covered by the Tribunal's order for the earlier year.

3. The Tribunal for the A.Y. 2008-09 had considered the deduction under section 80IA extensively. The Assessing Officer disallowed the deduction citing non-compliance with the Act's provisions regarding set off of unabsorbed losses. The CIT(A) affirmed this disallowance.

4. The assessee argued that a CBDT circular and a judgment of the Madras High Court supported their claim for deduction under section 80IA. The circular clarified the term "initial assessment year," stating it is the year opted by the assessee for claiming the deduction, not the year of business commencement.

5. The Tribunal, after analyzing the relevant provision of the Act, accepted the assessee's contentions. It held that the initial assessment year is the year chosen by the assessee for claiming the deduction under section 80IA. The Tribunal directed the Assessing Officer to allow the claim after verifying the initial assessment year chosen by the assessee.

6. Consequently, the Tribunal allowed the appeal of the assessee, following the precedent set in the A.Y. 2008-09 case. The decision was pronounced in favor of the assessee on 20.07.2016.