2022 (8) TMI 783 - AT - Income Tax

Deduction u/s 80IA - AO held that the assessee maintained consolidated figure of power generation unit and no separate and independent books of account was maintained by the assessee for each and every wind mill, hence, the profit/loss of each wind mill cannot be ascertained from the incomplete record, therefore, deduction u/s 80IA was disallowed - HELD THAT - We find that the CIT(A) while granting relief to the assessee has held that this is an undisputed fact that separate accounts are maintained for each windmill undertaking. The deduction is to be computed with respect to each unit independently taking into consideration the profit of each unit without clubbing loss of others. CIT(A) by referring the decision of Hon'ble Supreme Court in the case of Synco Industries Ltd. 2008 (3) TMI 13 - SUPREME COURT held that deduction under Chapter VIA of the Act would be available, only if the computation of gross total income as per the provisions of the Act after setting of different carries forward losses and unabsorbed depreciation of earlier year is not NIL. CIT(A) also held that after adjusting the losses of windmill units 7 to 9 against the profit of hotel, the profit was Rs. 6.292 crores. The profit from windmill No. 1 to 6 was Rs. 2.369 crore and the resultant income is worked out at Rs. 2.708 crore. Against which the assessee has claimed deduction to the extent of Rs. 1.068 crore, thus the claim of assessee is in accordance with ratio laid down in the case of Sintex Industries Ltd. 2013 (7) TMI 979 - GUJARAT HIGH COURT CIT(A) after referring the decision in Eastern Medikit Ltd., Jindal Aluminum, Meera Cotton and Synthetics Mills P Ltd. and Dewan Kraft Systems 2007 (2) TMI 149 - DELHI HIGH COURT concluded that in the said cases, it has been held that the primary step for considering the grant of deduction under Chapter VIA is to be determine the gross total income which in turn is computed by aggregating the total income from all sources in the year after aggregating the income. There is no question of adjusting loss of any other business against the business income of eligible undertaking for deduction under Chapter VIA and the deduction under Section 80IA is to be allowed unit wise without deducting incurred loss by the other unit of eligible business and allowed the appeal of assessee. We find that the facts of case in hand is almost similar in case of Rangamma Steels Melleables 2009 (11) TMI 909 - ITAT CHENNAI as recorded above. As per the spirit of Section 80IA of the Act, the assessee is eligible to claim deduction of profit of each undertaking from different period. Thus, each undertaking has to be considered as a separate undertaking and cannot be clubbed in order to compute the deduction under Section 80IA. In view of the aforesaid factual and legal discussion, we affirm the order of ld. CIT(A) with this additional observations. No contrary facts or law is brought to our notice to take other view. Grounds of appeal raised by the revenue are dismissed.

Issues Involved:
1. Justification of allowing the 80IA claim without maintaining separate books of account for each windmill.
2. Consideration of all windmills as one undertaking for 80IA claim and the resultant loss.
3. Eligibility for 80IA deduction when overall effect is a loss.
4. Validity of the reassessment initiated based on audit objections.

Issue-Wise Detailed Analysis:

Issue 1: Justification of Allowing 80IA Claim Without Separate Books of Account
The Revenue contended that the assessee did not maintain separate and independent books of account for each windmill, making it impossible to ascertain actual profit/loss from each unit. The Assessing Officer disallowed the 80IA deduction of Rs. 1.068 crore on this basis. However, the CIT(A) and the Tribunal found that separate accounts were maintained for each windmill undertaking. The Tribunal upheld the CIT(A)'s decision, noting that as per various judicial precedents, including the Hon'ble Supreme Court's decision in Synco Industries Ltd. Vs ITO, deductions under Section 80IA are to be computed independently for each unit without clubbing the losses of other units.

Issue 2: Consideration of All Windmills as One Undertaking
The Revenue argued that if all windmills were considered as one undertaking, the net result would be a loss, thus negating any income for 80IA deduction. The CIT(A) and the Tribunal disagreed, stating that Section 80IA allows for the deduction to be computed with respect to each unit independently. The Tribunal cited several cases, including Eastern Medikit Ltd. and Jindal Aluminum Ltd., to support the view that each windmill should be treated as a separate undertaking for the purpose of 80IA deduction.

Issue 3: Eligibility for 80IA Deduction When Overall Effect is a Loss
The Revenue's position was that since the overall effect was a loss, no income remained for allowing the deduction under Section 80IA. The CIT(A) and the Tribunal found that after adjusting the losses of certain windmill units against the profit of the hotel business, the resultant income was positive. The Tribunal concluded that the assessee's claim of Rs. 1.068 crore was in accordance with the law, as the gross total income was positive after considering all adjustments.

Issue 4: Validity of the Reassessment Based on Audit Objections
The assessee raised a cross-objection challenging the reassessment initiated on the basis of audit objections. However, since the Tribunal affirmed the CIT(A)'s order on merit, the cross-objection was dismissed as infructuous.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that allowed the 80IA deduction for the assessee. The Tribunal held that each windmill undertaking should be treated independently for the purpose of 80IA deduction, and the assessee's claim was justified as the gross total income was positive after necessary adjustments. The cross-objection raised by the assessee was dismissed as infructuous. The final result was pronounced on 25/07/2022, dismissing both the Revenue's appeal and the assessee's cross-objection.

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