Tribunal allows appeals for deductions under Section 80IA

The tribunal allowed the appeals in part for both AY 2008-09 and AY 2009-10, finding that losses from eligible business in years prior to the initial assessment year need not be notionally brought forward and should not affect the deduction claimed under Section 80IA. The tribunal dismissed other grounds raised in the appeals as not pressed, ultimately ruling in favor of the assessee in part.

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Issues:
Appeal against order passed u/s 263 for AY 2008-09 and appeal against order passed u/s 143(3) for AY 2009-10 regarding disallowance of deduction claimed u/s 80IA of the Act.

Analysis:
1. AY 2008-09 Disallowance: The assessee appealed against the order passed by the ld. CIT-3, Mumbai for AY 2008-09 regarding the disallowance of deduction claimed u/s 80IA of the Act. The CIT initiated action u/s 263 to examine the eligibility for deduction u/s 80IA(5) after reducing losses in the form of unabsorbed depreciation set off in earlier years. The AO held that the eligible deduction was "nil" after set off of losses and depreciation. The tribunal found that the assessee's windmill unit qualified for deduction u/s 80IA and exercised the option to claim deduction from AY 2008-09. The tribunal referred to various case laws supporting that losses from the eligible business in the year prior to the initial assessment year need not be notionally brought forward and have no effect on the deduction claimed.

2. AY 2009-10 Disallowance: For AY 2009-10, the AO held that the assessee was not entitled to deduction u/s 80IA(5) until unabsorbed losses and depreciation were fully set off. The tribunal analyzed the provisions of Section 80IA(5) and clarified that the losses of assessment years prior to AY 2008-09, which were set off against non-eligible unit profits, could not be notionally carried forward for setting off against eligible unit income in AY 2008-09 and 2009-10. The tribunal concluded that the lower authorities erred in reducing eligible profit by the amount of losses and depreciation from earlier years already set off against non-eligible unit profits.

3. Judgment: The tribunal found no merit in the actions of the lower authorities and allowed the appeals in part based on the reasoning provided for AY 2009-10. The tribunal dismissed the other grounds raised in the appeals as not pressed. The appeals were allowed in part for both AY 2008-09 and AY 2009-10, as indicated in the order pronounced on 3.6.2015.

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