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

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 windmill business. It was determined that unabsorbed depreciation from earlier years should not be adjusted against the profits of the eligible business for deduction calculation purposes. The decision emphasized the assessee's discretion in choosing the initial assessment year and aligned with precedents set by High Courts and Tribunals.

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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.

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