Tribunal grants deduction under section 80IA, emphasizes separate treatment for windmills

The Tribunal allowed the assessee's appeal for deduction under section 80IA and provision for ULC charges, while dismissing the Revenue's appeal on depreciation for windmills. It emphasized treating each windmill as a separate unit for deductions and upheld setting off unabsorbed depreciation against income from other business sources within the same head of income.

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Issues Involved:
1. Deduction under section 80IA(5) for profits from windmills.
2. Allowability of depreciation on windmills against income from construction business.
3. Addition towards provision for outstanding expenses related to ULC charges.

Detailed Analysis:

1. Deduction under section 80IA(5) for profits from windmills:
The assessee, a partnership firm engaged in construction and power generation through windmills, claimed a deduction under section 80IA for profits derived from two windmills without setting off losses from three other windmills. The Assessing Officer (AO) denied the deduction, arguing that the deduction should be computed by considering the total profit or loss from all five windmills as one eligible business. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, relying on judicial precedents including the Supreme Court decision in Liberty India vs. CIT. The Tribunal, however, found that the assessee's claim was in accordance with section 80IA(5) and allowed the deduction, emphasizing that each windmill should be considered a separate unit for the purpose of deduction.

2. Allowability of depreciation on windmills against income from construction business:
The AO disallowed depreciation on windmills against income from the construction business, arguing that profits and gains of each business should be computed separately. The CIT(A) allowed the depreciation claim, and the Tribunal upheld this decision, stating that unabsorbed depreciation from one source of business can be set off against income from another source within the same head of income.

3. Addition towards provision for outstanding expenses related to ULC charges:
The AO added Rs. 14,21,49,279 towards provision for ULC charges, arguing that the liability was not crystallized as the assessee had disputed it in a writ petition before the Bombay High Court. The assessee contended that the liability was ascertained and related to a completed project, thus should be provided for in the books of accounts. The Tribunal agreed with the assessee, stating that the liability was crystallized based on the order from the competent authority, and the provision should be allowed. The Tribunal directed the AO to allow the provision for ULC charges, reversing the CIT(A)'s decision.

Conclusion:
The Tribunal allowed the assessee's appeal regarding the deduction under section 80IA and the provision for ULC charges, while dismissing the Revenue's appeal concerning the allowability of depreciation on windmills. The order emphasized the importance of considering each windmill as a separate unit for deductions and upheld the principle that unabsorbed depreciation can be set off against income from other business sources within the same head of income.

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