Revenue's Appeal Dismissed: Deductions Upheld for Windmills & Additional Depreciation

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the deduction claimed under section 80IA of the Income Tax Act for windmills and the additional depreciation on windmill purchase. The judgments were based on previous favorable decisions for the assessee in earlier years, affirmed by higher courts. The order was pronounced on 24-01-2018.

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Issues Involved:
1. Disallowance of deduction claimed under section 80IA of the Income Tax Act for windmills.
2. Disallowance of additional depreciation claimed on windmill purchase during the year.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IA:

The first issue concerns the Revenue's appeal against the CIT(A)'s order, which deleted the disallowance of the deduction claimed by the assessee under section 80IA of the Income Tax Act on windmills. The assessee claimed a deduction amounting to Rs. 1,65,62,770 for windmill units at Coimbatore, Dhule, and Jethwai. The AO disallowed the claim, noting that the assessee had set off losses from windmill units in previous years with non-eligible export business profits, thus disallowing the deduction under section 80IA.

The CIT(A), however, allowed the claim by referencing the Tribunal's decision in the assessee's own case for AY 2009-10. The CIT(A) observed that the computation of the deduction under section 80IA should start with the initial assessment year, and any brought-forward losses that have already been set off against other sources of income should not be carried forward notionally to the initial assessment year. The CIT(A) cited various judicial pronouncements and a CBDT circular to support this view, concluding that the AO's disallowance was not justified.

The Tribunal upheld the CIT(A)'s decision, noting that this issue was covered in the assessee's favor by the Tribunal's decision for AY 2009-10, which was affirmed by the Hon'ble Bombay High Court. Consequently, the Tribunal dismissed the Revenue's appeal on this issue.

2. Disallowance of Additional Depreciation on Windmill Purchase:

The second issue involves the disallowance of additional depreciation claimed by the assessee on the windmill purchased during the year. The assessee claimed additional depreciation of Rs. 34,50,717 under section 32(1)(iia) of the Act for a windmill installed at Tejuva. The AO disallowed the depreciation, arguing that the relevant provision for additional depreciation on the business of generation or generation and distribution of power was effective from 01-04-2013.

The CIT(A) allowed the claim, referencing the Tribunal's decision in the assessee's own case for AY 2007-08, where it was held that the setting up of new machinery or plant should have been acquired and installed by an assessee already engaged in the business of manufacture or production of any article or thing. The CIT(A) noted that the facts of the current year were identical to those of AY 2007-08 and thus allowed the additional depreciation.

The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered in the assessee's favor by the Tribunal's decision for AY 2007-08. The Tribunal confirmed the order of the CIT(A) and dismissed the Revenue's appeal on this issue.

Conclusion:

In conclusion, the Tribunal dismissed the Revenue's appeal on both issues, confirming the CIT(A)'s orders allowing the deduction under section 80IA and the additional depreciation claimed by the assessee. The judgments were based on precedent decisions in the assessee's own cases from previous years, which were affirmed by higher courts. The order was pronounced in the open court on 24-01-2018.

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