2013 (11) TMI 929 - AT - Income Tax

Tribunal Upholds CIT(A) Decision on Section 80IA Deduction, Emphasizes Adherence to ITAT Precedents

The Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80IA, emphasizing adherence to binding ITAT decisions. The Tribunal ruled ... Notice u/s 148 - Deduction u/s 80IA - set off of losses - Held that:- the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA - Decision in earlier case [2012 (11) TMI 507 - ITAT BANGALORE] of the the assessee followed - Decided against Revenue. Issues Involved:1. Whether the CIT(A) is justified in allowing the assessee's claim of deduction under section 80IA of the Act.Detailed Analysis:Background and Facts:The case pertains to the assessment year 2005-06. The assessee, a company engaged in the manufacture and sale of aluminum extrusions and generation and sale of wind energy, filed a return declaring a total income of Rs. 8,70,55,300/-. The initial assessment was completed under section 143(3) of the Act, but was later reopened under section 148 due to discrepancies in the deduction claimed under section 80IA. The assessee had four windmill units, three of which were profit-making and one incurring losses. The deduction claimed was Rs. 4,51,83,841/-, but upon considering the profits and losses of all units, the total profit of the eligible business was negative, leading to the denial of the deduction in the reassessment.Issue 1: Justification of CIT(A) in Allowing Deduction under Section 80IA:The CIT(A) allowed the deduction by following the Tribunal's order in the assessee's own case for the assessment year 2006-07. The department appealed against this decision, raising several grounds:1. The CIT(A) allowed the deduction without appreciating the facts and circumstances under which the disallowance was made by the Assessing Officer.2. The CIT(A) did not consider that the deduction under section 80IA is on the profits of 'eligible business' and not on eligible units, and should be understood along with sections 80B(5) and 80AB.3. The CIT(A) relied on a Tribunal decision that had not reached finality due to a pending appeal under section 260A.Tribunal's Findings:The Tribunal reviewed the rival submissions and past decisions, including the assessee's own case for the assessment year 2006-07 and 2004-05, and other relevant cases. The key points considered were:1. Section 80IA(5): This section requires that the profit from the eligible business be computed as if the eligible business were the only source of income. The Tribunal found that the deduction should be computed undertaking-wise, and losses from one unit should not be set off against the profits of another unit. This aligns with the decision in the case of M/s. Karnataka Power Corporation Ltd. and the Special Bench decision in Asst. CIT v. Goldmine Shares & Fin. (P) Ltd.2. Synco Industries Ltd. v. Assessing Officer: The Supreme Court held that the gross total income should be computed after adjusting losses. However, the Tribunal distinguished this case, noting that in the present case, the gross total income was positive, and the deduction claimed was less than the gross total income.3. Meera Cotton and Synthetics Mills Pvt. Ltd. v. ACIT: The Mumbai Bench held that each eligible unit's profit should be considered separately for deduction under section 80-IB, without reducing losses from other eligible units.Conclusion:The Tribunal upheld the CIT(A)'s decision, directing the Assessing Officer to allow the deduction under section 80IA. The Tribunal emphasized that the CIT(A) should follow the binding decisions of the ITAT and noted that the facts of the present case were identical to those in the earlier assessment years where the deduction was allowed. Therefore, the CIT(A)'s order was deemed correct and in accordance with the law.Final Judgment:The appeal filed by the revenue was dismissed, and the order pronounced in the open court on 27/02/2013 confirmed the CIT(A)'s decision to allow the deduction under section 80IA of the Act.