2019 (8) TMI 795 - AT - Income Tax

Deduction u/s 80IA(4) - profits earned from power generation from windmill - CIT(A) treating the windmills set up at different place in different year as separate undertaking and that such windmill do not constitute as single business undertaking for the purpose of deduction u/s 80IA - HELD THAT - The claim of deduction was denied by AO but when the matter was carried before Ld.CIT(A), she following the order of her predecessor in assessee s own case for A.Ys. 2011-12 and 2012-13 allowed the claim of assessee as held that the initial assessment year for the assessee for claiming deduction u/s.80IA (4) r.w.s (5) is the issue adjudicated by the Tribunal in favour of the assessee. While granting relief in para 65 of the Tribunal order, the Tribunal relied on the decision of Coordinate Bench of the Tribunal in the case of Poonawala Estate Stud Agro Farm Pvt. Ltd. 2010 (9) TMI 1080 - ITAT PUNE and Velayudhaswamy Spinning Mills Pvt. Ltd 2010 (3) TMI 860 - MADRAS HIGH COURT . As such, Ld. DR could not bring any contrary decision on the issue under consideration. Thus, the initial assessment year constitutes the assessment year in which the deduction u/s.80IA of the Act is first claimed by the assessee after exercising his option as per the provisions of Section 80IA(2) of the Act. Therefore, we are of the opinion that the relief granted by the CIT(A) on this issue does not require any interference - Decided against revenue.

Summary

Issues Involved:
1. Deduction under Section 80IA(4) of the Income Tax Act, 1961
2. Treatment of windmills as separate undertakings for the purpose of deduction
3. Methodology of computing deduction under Section 80IA(4)

Issue-wise Detailed Analysis:

1. Deduction under Section 80IA(4) of the Income Tax Act, 1961:
The primary issue revolves around the deduction claimed by the assessee under Section 80IA(4) of the Income Tax Act, 1961. The assessee, engaged in the business of tobacco and power generation from windmills, claimed a deduction of ?17,69,56,668/- under this section. The Assessing Officer (AO) denied the deduction, stating that the assessee had a cumulative loss of ?142,13,14,341/- on a consolidated basis and thus was not eligible for the deduction. The Commissioner of Income Tax (Appeals) [CIT(A)], however, granted relief to the assessee by treating each windmill as a separate undertaking, following the precedent set in the assessee's own case for previous assessment years.

2. Treatment of windmills as separate undertakings for the purpose of deduction:
The CIT(A) and the Tribunal had to decide whether each windmill set up at different locations and in different years should be treated as separate undertakings for the purpose of Section 80IA deduction. The AO's stance was that the windmills should be treated as a single business undertaking, thereby consolidating profits and losses. However, the CIT(A) and the Tribunal sided with the assessee, referencing the Pune ITAT's decision in the case of M/s. J-Sons Foundry Pvt. Ltd., which held that each windmill constitutes a separate undertaking. This interpretation aligns with the statutory language of Section 80IA, which refers to "undertaking" or "enterprise" rather than the business as a whole.

3. Methodology of computing deduction under Section 80IA(4):
The AO argued that the deduction should be computed on a consolidated basis for all windmills. In contrast, the CIT(A) and the Tribunal upheld the view that the deduction should be computed independently for each windmill. This approach was supported by the Tribunal's previous decisions and the CIT(A)'s interpretation, which emphasized that each windmill's financial results should be considered separately. The Tribunal reiterated that the "business" in Section 80IA(5) should be understood as the business of each "undertaking" or "enterprise."

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the deduction under Section 80IA(4) on an undertaking-wise basis rather than a consolidated basis. The Tribunal's decision was consistent with its previous rulings in the assessee's own case and similar cases, thereby providing a clear interpretation of Section 80IA that supports treating each windmill as a separate undertaking for the purpose of computing deductions. The appeal of the Revenue was thus dismissed, and the order pronounced on 1st August 2019 confirmed the CIT(A)'s relief granted to the assessee.