2015 (6) TMI 210 - AT - Income Tax

Tribunal upholds CIT(A) order on deduction calculation for windmill income under section 80IA

Deputy Commissioner of Income Tax Versus M/s. Bajaj Electricals Ltd.

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order regarding the computation of deduction under section 80IA for income from a ... Deduction u/s 80IA - income from windmill business - whether the unabsorbed depreciation accumulated in earlier years prior to the initial year needs to be adjusted while computing the amount eligible for deduction u/s 80IA? - eligible business being the only source of income of the assessee - Held that:- This issue has been considered by the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. Vs. ACIT [2010 (3) TMI 860 - Madras High Court] wherein after considering the decision of CIT vs. Goldmine Shares and Finance (P) Ltd. [2008 (4) TMI 405 - ITAT AHMEDABAD ] and referring the provisions of section 80IA of the Act, held that if the loss in the earlier years to the initial assessment year has already been absorbed, then it cannot be notionally brought forward and set off against the profits of the eligible business. This view has been reiterated again by the Hon'ble Karnataka High Court in the case of CIT & DCIT vs. Anil H. Lad [2014 (3) TMI 808 - KARNATAKA HIGH COURT]. Thus choosing of initial assessment year for the purpose of claiming deduction for the period of 10 years out of 15 years is with the assessee and secondly, before claiming deduction u/s 80IA of the Act, the loss on depreciation claimed by the assessee in respect of eligible business is to be set off against the income of the assessee from other source, that is, other business income and earlier loss/depreciation of the Wind Mill cannot be notionally set off against the profit of eligible business for the computation of deduction. Accordingly, the order of the ld. CIT(A) is confirmed - Decided against revenue. Issues:1. Computation of deduction u/s 80IA in respect of income from windmill business.2. Treatment of unabsorbed depreciation of the period prior to the opted initial assessment year.Issue 1: Computation of deduction u/s 80IA in respect of income from windmill business:The appeal was filed by the revenue against an order passed by the CIT(A) for the quantum of assessment under the Income Tax Act, 1961. The assessee, engaged in manufacturing and trading, set up a Wind Mill division and claimed a deduction u/s 80-IA (4) for the assessment year 2006-07. The AO noted that the assessee ignored the set off of unabsorbed depreciation of earlier years against the profits of the Wind Mill division. The AO disallowed the deduction claimed by the assessee, leading to the appeal.Issue 2: Treatment of unabsorbed depreciation of the period prior to the opted initial assessment year:The key dispute centered around whether unabsorbed depreciation accumulated in earlier years prior to the initial year should be adjusted while computing the deduction u/s 80IA of the Act. The assessee argued that the loss in earlier years should not be notionally brought forward and set off against the profits of the eligible business. The CIT(A) relied on decisions of High Courts and Tribunals to support the assessee's position. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee has the discretion to choose the initial assessment year for claiming the deduction and that unabsorbed depreciation from earlier years should not be adjusted against the profit of the eligible business for deduction computation.In conclusion, the Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order. The judgment highlighted the importance of the assessee's choice of the initial assessment year and clarified that unabsorbed depreciation from earlier years should not be notionally set off against the profit of the eligible business for deduction computation under section 80IA of the Act. The decision was based on precedents set by High Courts and Tribunals, emphasizing the assessee's discretion in choosing the initial assessment year and the specific treatment of unabsorbed depreciation for deduction calculation purposes.