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TMI Blog2024 (7) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case has declared the additional income on the basis of impounded documents showing higher calculation of work in progress and there is no evidence on record that the assessee has incurred any such expenditure which has not been recorded in the books of account and since the assessee has not claimed any deduction of expenditure or allowance against the income offered u/s 69B of the Act and has paid the tax on the deemed income, therefore, we are of the considered opinion that the income so declared as additional work in progress will form part of the closing work in progress and cannot be taxed u/s 115BBE of the Act. We hold and direct accordingly. The grounds raised by the assessee on this issue are accordingly allowed. Computation of income of next AY - As additional income so declared during the course of survey shall form part of the closing stock, therefore, such closing stock as on 31.03.2015 shall be the opening stock of assessment year 2016-17. Therefore, the assessee is justified in claiming the same as deduction while computing the income for the assessment year 2016-17. We hold and direct accordingly. The grounds raised by the assessee on this issue are accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in the books. Accordingly, the assessee had declared additional income of Rs. 3,11,76,525/- for the year under consideration. 3. During the course of assessment proceedings, the Assessing Officer noted that while the assessee has declared the additional income in the hands of the firm, however, the assessee has included the same in the closing stock as on 31.03.2015. The Assessing Officer, therefore, asked the assessee to explain as to why the excess stock of Rs. 3,11,76,525/- disclosed during survey as additional income should not be added u/s 69B of the Act as unexplained investment as the same was unaccounted. The assessee submitted that during the course of survey, neither any instance of actual unaccounted entries concerning the stock was noticed by the survey party nor any unaccounted bills were detected during the survey proceedings. Whatever declaration was made was from the scratch details of stock available from the stock registers of the assessee and such statements were drawn purely on notional basis, rough estimation of available quantity of stock. It was submitted that since the assessee himself had offered the estimated excess stock as additional income for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce without survey u/s 133A of the Income Tax Act, 1961 in the case of assessee. Penalty proceedings are initiated separately u/s 271(1)( c) of the IT Act, 1961 for concealment of income. 5.7 In respect of income of assessed u/s 68/69/69A/69B/69C/69D of the I.T Act 1961 it has now been established by law that tax on such income should be charged at rate of 30% over and above regular income of assessee. It has been established that deduction/exemption / set off of losses cannot be claimed / adjusted against income assesses u/s 68/ 69 to 69D of the Act. Will and mandate of legislature is dearly evident from the incorporation of new section 115 BBE of the I.T. Act, 1961 w.e.f. 01.04.2013 wherein Act states as under- "115BBE (1) where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of-- (a) the amount of income-tax calculated on the income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b) The amount of income-tax with which the assessee would have been char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way. In other way, the onus of proving that the income detected is not taxable under sections 68, 69, 69A to 69D read with section 115BBE is on the assessee. 21. To sum up, before assessing the surrendered income under sections 68, 69, 69A to 69D and levy of higher rate of tax u/s 115BBE, following factors are required to be considered- • Whether nature of income is clearly explained during the survey or during assessment proceedings. • Whether income can be classified under a particular head of income based on nature so as to demonstrate that it is flowing from one of the specific sources of income of the assessee. • Whether supporting evidences for the above are available because the onus to satisfactorily explain the nature and source is on the assessee. 22. In the present case, an additional income of Rs. 3,11,76,525/- was declared during the survey operation. The claim of the appellant is that the said income was earned from the business conducted by it and the said income was declared accordingly. It is, however, seen that the manner in which the said income was earned from business activities has not been explained by the appellant. It is not a clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excess stock is taxable u/s 69B of the Act, therefore, as per provisions of section 115BBE(2), no deduction for this amount can be allowed to the appellant in any assessment year. Accordingly, the contention raised by the appellant is rejected. The grounds no. 8 and 9 raised by the appellant are DISMISSED." 6. Aggrieved with such order of CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1] The learned CIT(A) erred in holding that the additional income of Rs. 3,11,76,525/- which was declared in the course of survey u/s 133A is taxable u/s 69B of the Act and in view of provisions of section 115BBE(2), no deduction of the said amount can be allowed to the assessee in any of the asst. year. 2] The learned CIT(A) erred in holding that the excess work in progress of Rs. 3,11,76,525/- declared during the course of survey proceedings and which has been taxed u/s 69B of the Act would not form part of closing work in progress as on 31.03.2015 and the same would not be available as an opening work in progress as on 01.04.2015. 3] The learned CIT(A) erred in holding that me claim of the assessee for treating the excess WIP as part of closing WIP wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2017-18 wherein the set off of losses was also prohibited against the deemed income taxed u/s 69 to 69D of the Act. Therefore, the CBDT issued circular holding that the set off of losses is prohibited from assessment year 2017-18 onwards. He submitted that as per the circular, what is prohibited under sub-section (2) is set off of any expenditure or allowance or loss against the deemed income. Since the assessee in the instant case has not claimed any deduction or expenditure or allowance against the income offered u/s 69B of the Act, therefore, the addition made by the Assessing Officer is not correct. He submitted that since the assessee has paid the taxes on the deemed income and has not claimed any deduction against the said income, therefore, there is no reason for denial of carry forward of closing stock. He accordingly, submitted that the order of Ld. CIT(A) be set aside and the grounds raised by the assessee on this issue be allowed. He also relied on various decisions. 9. The Ld. DR on the other hand heavily relied on the orders of CIT(A) and the Assessing Officer. 10. We have heard the rival arguments made by both the sides, perused the orders of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. 4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 1-4-2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17. 5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly." 15. We find merit in the arguments of the Ld. Counsel for the assessee that although as per proviso to section 69C of the Act such unexplained expenditure which shall be deemed to be the income of the assessee was not to be allowed as deduction under any head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2016-17. Since while deciding the appeal of the assessee for assessment year 2015-16 vide ITA No.417/PUN/2024, we have already held that the additional income so declared during the course of survey shall form part of the closing stock, therefore, such closing stock as on 31.03.2015 shall be the opening stock of assessment year 2016-17. Therefore, the assessee is justified in claiming the same as deduction while computing the income for the assessment year 2016-17. We hold and direct accordingly. The grounds raised by the assessee on this issue are accordingly allowed. ITA No.1046/PUN/2024 (by Revenue for A.Y. 2015-16) 18. Facts of the case in brief, are that the assessee firm is engaged in the business of wind power generation. It has purchased windmill in the earlier years at different locations and claimed deduction u/s 80IA of the Act in respect of the profits derived through the windmills. The Assessing Officer during the course of assessment proceedings noted that the assessee has claimed deduction u/s 80IA of the Act amounting to Rs. 2,84,42,603/- on account of wind power generation, the details of which are as under: Sr. No Address of the site / Undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by the assessee, as clarified by CBDT vide Circular No. 1 of 2016 dated 15/02/2016. Thus, the unabsorbed losses and depreciation of each windmill which has already been set off against other business income of the assessee, cannot be notionally brought forward, as done by the assessing officer. The appellant has claimed that similar disallowance was made by the learned A.O. in the earlier years but the said action of the assessing officer has not been upheld at the level of CIT(A) or ITAT. It is also been submitted that in identical facts, the National Faceless Appeal Centre (NFAC) has also allowed the appellant's claim of 80IA for AY 2020-21 vide order dated 21.09.2023. 9. It is seen that the assessing officer has not disputed that the above-mentioned wind-mills are otherwise eligible for deduction u/s 80IA(4) of the Act. The reason for disallowing the claim is that as per assessing officer, all the above-mentioned units should be aggregated and considered as a 'single eligible business'. The issue as to whether each windmill is required to be treated as 'separate undertaking' or all the windmills should be aggregated has been examined by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining basic eligibility and there is no mention of word "business". Sub-sec.(5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub sec.(2) of Sec. 80IA. It is well settled principle of interpretation of statutory provision that they are to be interpreted harmoniously to make workable to give intended results. Hence, as rightly held by Ld. CIT(A) term "business" used in sec.80IA(5) is to be construed and understood to mean "business" or "undertaking or enterprise". In our opinion, the Ld. CIT(A) in his well-reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profits. Another unit engaged in the same business for the purpose of computing the deduction u/s 80IA. We find no reason to interfere with the findings of the Ld. CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the revenue are dismissed. 9.2 An identical issue was involved in the case of D.J. Malpani vs ACIT in ITA Nos 1148 to 1154/PN/2013 for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered. Sec.80IA(2) is charging sections for determining basic eligibility and there is no mention of word "business". Sub-sec.(5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub-sec.(2) of Sec.80IA. It is well settled principle of interpretation of statutory provision that they are to be interpreted harmoniously to make workable to give Intended results. Hence, as rightly held by Ld. CIT(A) term "business" used in sec.80IA(5) is to be construed and understood to mean "business" or "undertaking or enterprise". In our opinion, the Ld.CIT(A) in his well reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profits. Another unit engaged in the same business for the purpose of computing the deduction u/s. 80IA. We find no reason to interfere with the findings of the Ld.CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the Revenue are dismissed." 58. Respectfully following the decision of the Coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view already taken. No contrary judgment has been placed on record before us by the Revenue. The Id. DR has pointed that the Department has fifed appeal against the Tribunal's decision in the case of M/s. D.J. Malpani Vs. ACIT (supra), however, no order by the Hon'ble High Court either staying or reversing the aforesaid decision of Tribunal has been furnished by the Id. DR. 9. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in allowing assessee's claim of deduction u/s. 80IA(4) considering each windmill as separate unit for allowing deduction u/s. 80IA(4) of the Act. Hence, the impugned order is upheld and the appeal of Revenue is dismissed. 9.5 Thus, the jurisdictional Tribunal has consistently held that the deduction u/s 80IA should be computed independently for each unit and not on consolidated basis. 10.1 The Hon'ble Karnataka High Court in the case of CIT vs Karnataka Power Corporation Limited 127 taxmann.com 282 (Karnataka) held that the assessee is entitled to deduction u/s 80IA without setting-off of loss of loss-making units, against income of its profit-making units. 10.2 The same principle has been laid down b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of income of the assessee for the purpose of computing deduction u/s 80IA of the Act. The relevant findings of the Hon'ble Court are as under: - 13. Perusal of the above provision shows that it is a distinct and separate deeming provision which lays down the special method of computing the profits and gains entitled to deduction under section 80-IA of the Act. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period in which the assessee is entitled to deduction under section 80-IA of the Act, this provision will be applied as if the industrial unit is an independent unit and is the one and only source of income possessed by the assessee. 14. It is clear that while computing deduction under section 80-IA of the Income-tax Act, 1961, the profits and gains of Kalamb unit for the purpose of determining the quantum of deduction under section 80-IA(5) of the Act is to be computed if such eligible business of the said unit is the only source of income of the assessee. The Assessing Officer mixed the profits of the Kalamb unit with the profits of units at Delhi and NOIDA and, thus, he erroneously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted that the assessee is eligible for claiming deduction under section 80IA in respect of power generation business though setting off of windmills. The only dispute is with regard to computation of quantum of deduction. Whether the profits and gains of the eligible business as per the words of section 80IA(5) have to be considered unit-wise or as a total eligible business comprising of profits of all units. The provisions of section 80IA(5) provided mechanism for determination of quantum of deduction from eligible business and as per which the eligible business shall be considered as if the only source of income of the assessee during the initial year and every subsequent AYs. Therefore, one has to see what eligible business is whether it is the total business as a whole or each unit or undertaking. No doubt the provision of section 80IA speaks about profit and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. Sub-section (5) speaks about eligible business. Now the controversy to be resolved is whether the power generation segment of the assessee is an eligible business or each windmill is a separate unit eligible for deduction wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in sub- section 3(ii) to 11 (a) of section 80IA of the Act. 12. In this case, admittedly the assessee is having two segments of business i.e. one is power generation through five windmills which is eligible business and another is construction segment. The assessee has generated profit from two windmills and incurred losses from three windmills. The assessee also derived profit from construction business. The gross total income computed from two segment of business is positive. If you consider each segment of business stand alone, then there is a loss from the power generation segment, if profit or losses of all five windmills are consolidated. The assessee has considered each wind Mill as a separate unit eligible for deduction under section 80IA, without considering profit or loss of other windmills and accordingly claimed deduction towards profit generated from two windmills. If one considered power generation business as one eligible business, certainly the assesses is not eligible for deduction under section 80IA, as from power generation business the assessee has incurred losses. If you strictly apply the provisions of section 80IA(5), the words used therein are clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven unit wise without considering profit or loss of other units. This legal proposition is strengthened by the decision of ITAT, Ahmadabad, special bench in the case of CIT vs. Goldmine Shares and Finance Pvt. Ltd." 9. A similar issue has been considered by Hon'ble Delhi High Court in the case of CIT vs Dewan Kraft System Pvt Ltd (2007) 160 Taxman 343 (Del), where the Hon'ble Delhi High Court, after considering relevant provisions of the Act, held that for the purpose of deduction u/s 80IA, each unit shall be treated as independent unit and same has to be treated as only source of income of the assessee for the purpose of computing deduction u/s 80IA of the Act. The relevant findings of the Hon'ble Court are as under:- "Section 80-IA(7) shows that it is a distinct and separate deeming provision which lays down the special method of computing the profits and gains entitled to deduction under section 80-IA. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period in which the assessee is entitled to deduction under section 80-IA, this provision will be applied as if the indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l should be considered as separate undertaking eligible for deduction u/s 80IA and the deduction should be computed independently for each unit and not on consolidated basis. Accordingly, the addition of Rs. 2,84,42,603/- made by the assessing officer is directed to be deleted. The grounds no. 1 to 7 raised by the appellant are accordingly ALLOWED." 21. Aggrieved with such order of CIT(A), the Revenue is in appeal before the Tribunal. 22. The Ld. DR heavily relied on the order of Assessing Officer. He submitted that although the issue has been decided in favour of the assessee by the decision of the Tribunal, however, the Revenue in certain other cases has challenged the order of the Tribunal under identical situation before the Hon'ble High Court which is still pending. Therefore, to keep the matter alive, the Revenue has filed the appeal. He accordingly, submitted that the order of the Assessing Officer be upheld and the order of CIT(A) be set aside. 23. The Ld. Counsel for the assessee on the other hand submitted that the Assessing Officer rejected the claim of the assessee holding that the deduction u/s 80IA of the Act is to be worked out by considering all the windmills as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons of which are already reproduced in the preceding paragraphs. 25. We do not find any infirmity in the order of CIT(A) on this issue. We find the CBDT vide Circular No.1 of 2016 dated 15.02.2016 has clarified that the initial assessment year would mean the year in which the assessee has claimed the deduction for the first time and not the year in which the windmill is installed. Further, the Tribunal in assessee's own case for assessment years 2012-13 to 2014-15 has held that each windmill is to be considered as a separate undertaking. Since the Tribunal in assessee's own case for the immediately preceding assessment years i.e. 2012-13 to 2014-15 vide ITA No.76/PUN/2019 for assessment year 2012-13, ITA No.2614/PUN/2017 for assessment year 2013-14 and 07/PUN/2018 for assessment year 2014-15 common order dated 27.08.2019 has already decided the issue in favour of the assessee by dismissing the appeals filed by the Revenue and since the CIT(A) while deciding the issue in favour of the assessee while relying on the order of Tribunal in assessee's own case has also relied on various other decisions of the Tribunal under identical circumstances, therefore, in absence of any con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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