2015 (1) TMI 1369 - AT - Income Tax

Deduction under Section 80IA denied for carrying forward losses to set off current year's income

The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal challenging the deduction under section 80IA of the Income Tax Act for the ... Deduction u/s 80IA - assessee had set off losses from wind mill operation against income generated from non-eligible businesses - Held that:- CIT(A) held that the provisions of sec. 80IA(5) treating the undertaking as a separate source of income cannot be applied to a year prior to the year in which the assessee opted to claim relief u/s 80IA for the first time. Accordingly CIT(A) held that the losses of earlier years cannot be notionally brought forward to be set off against current year’s income, since the current year is the initial assessment year in which deduction u/s 80IA was claimed. Since the Ld CIT(A) has followed the decision rendered by Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd Vs. ACIT [2010 (3) TMI 860 - Madras High Court] we do not find any reason to interfere with his order on this issue. - Decided against revenue Issues:Challenge to deduction under section 80IA of the Income Tax Act.Analysis:The case involved an appeal challenging an order related to the assessment year 2009-10 concerning the deduction allowed under section 80IA of the Income Tax Act. The appellant claimed the deduction for wind mill power generation, setting up the wind mill in 2006-07 but starting to claim the deduction only from the assessment year 2009-10. The Assessing Officer (AO) noted losses in previous years set off against non-eligible business income. The AO adjusted losses against profits in the current year, denying the deduction claimed under section 80IA(5).The provisions of section 80IA(2) allow the deduction for ten consecutive assessment years out of fifteen, beginning from the year of power generation. The AO's adjustment was based on section 80IA(5), requiring eligible business profits to be computed as the sole income source. However, the CIT(A) followed a decision by the Madras High Court, stating that losses from previous years cannot be carried forward notionally to set off against the current year's income, as the current year was the initial year of claiming the deduction under section 80IA.The CIT(A)'s decision was supported by various cases, including Excel Crop Care, CIT Vs. Anil H Lad, Emerald Jewel Industry Pvt Ltd, and Shevie Exports. The Tribunal upheld the CIT(A)'s decision, citing the Madras High Court's ruling and the consistency with the aforementioned cases. Consequently, the appeal by the revenue was dismissed, affirming the CIT(A)'s order on the issue of deduction under section 80IA.In conclusion, the Tribunal upheld the CIT(A)'s decision based on the Madras High Court's ruling and other supporting cases, dismissing the revenue's appeal challenging the deduction under section 80IA of the Income Tax Act for the assessment year 2009-10.