Court affirms deduction under Section 80IA for windmill division without setting off losses.

The Court upheld the decision of the Income Tax Appellate Tribunal, affirming the entitlement of the assessee to deduction under Section 80IA without setting off losses/unabsorbed depreciation related to the windmill division. Citing relevant case law and emphasizing the separate entity status of each windmill division, the Court maintained consistency with previous decisions favoring the assessee. The Tribunal's confirmation of the Commissioner of Income-Tax (Appeal) order was upheld, and the Tax Case Appeal was dismissed in favor of the assessee at the admission stage without costs.

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Issues:
Challenge to an order passed by the Income Tax Appellate Tribunal regarding deduction under Section 80IA without setting off losses/unabsorbed depreciation pertaining to windmill.

Analysis:
The Tax Appeal challenged an order by the Income Tax Appellate Tribunal dismissing the appeal by the Revenue against the order of the Commissioner of Income-Tax (Appeals) for the Assessment Year 2006-07. The substantial question of law raised was whether the Tribunal was right in holding that the assessee is entitled to deduction under Section 80IA without setting off losses/unabsorbed depreciation pertaining to the windmill. The jurisdictional High Court's decision in M/s. Velayudhasamy Spinning Mills case was cited, pending appeal before the Supreme Court. The Court consistently followed the decision in Velayudhaswamy Spinning Mills case, stating that once losses and deductions are set off against the income in the previous year, it should not be reopened for the current year's income computation under Section 80-I and 80-IA of the Act.

The Court referred to the judgments in Liberty India vs. CIT and CIT vs. Mewar Oil & General Mills Ltd., maintaining that the assessee's entitlement to deductions should not be re-opened if set off against income in previous years. The Tribunal confirmed the order of the Commissioner of Income-Tax (Appeal) based on the assessee's arguments and the jurisdictional High Court's decision. The Court upheld the decision, emphasizing that each windmill division is a separate entity, and the option of claiming deductions under Section 80IA rests with the assessee. The pendency of the Revenue's Special Leave Petition before the Supreme Court did not justify a different approach in the assessment year, as consistency was maintained with previous decisions in the assessee's favor.

After reviewing the material on record, the Court found no valid grounds to reverse the order. The question of law was answered against the Revenue and in favor of the assessee. Consequently, the Tax Case Appeal was dismissed at the admission stage with no costs incurred.

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