Tribunal rules in favor of appellant on windmill unit deduction dispute

The Tribunal partially allowed the appeal, ruling in favor of the appellant regarding the disallowance of deduction under S.80IA for windmill units. The Tribunal emphasized that profits for deduction should be computed on a standalone basis from the initial assessment year chosen by the assessee, as clarified by a CBDT circular. The decision was based on the interpretation that the initial assessment year is the first year opted for claiming the deduction, not the year of business commencement. The Tribunal directed the AO to allow the deduction after verifying the initial assessment year chosen by the assessee.

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Issues:
- Disallowance of deduction under S.80IA of the Act for windmill units
- Notional adjustment of past losses for deduction under S.80IA
- Disallowance of weighted deduction under S.35(2AA) of the Act
- Interpretation of initial assessment year for deduction under S.80IA

Analysis:
1. The appellant appealed against the order of the CIT(A) denying deduction under S.80IA of the Act for windmill units and notional adjustment of past losses. The assessing officer disallowed the deduction as the assessee did not set off earlier years' unabsorbed losses against windmill profits before claiming the deduction. This was in line with the Special Bench decision of the Tribunal in a similar case. The CIT(A) upheld this disallowance.

2. The appellant argued that the CBDT circular dated 15.2.2016 clarified the term 'initial assessment year' under S.80IA(5), stating that it is the year opted by the assessee for claiming the deduction, not the year of business commencement. Citing the Madras High Court judgment, the appellant contended that only losses from the opted initial assessment year should be considered for disallowance under S.80IA(5).

3. The Tribunal examined the relevant provision of the Act, emphasizing that profits for deduction under S.80IA should be computed on a standalone basis from the initial assessment year chosen by the assessee. The CBDT circular clarified that the initial assessment year is the first year opted for claiming the deduction, not the year of business commencement. As per this interpretation, the Tribunal directed the AO to allow the deduction after verifying the initial assessment year chosen by the assessee.

4. Consequently, the Tribunal partially allowed the appeal, ruling in favor of the appellant based on the CBDT circular's clarification regarding the initial assessment year for claiming deduction under S.80IA. The decision was pronounced on 10th June 2016.

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