2021 (10) TMI 1057 - AT - Income Tax

Tribunal Upholds Assessee's Deductions and Liability Decisions

The Tribunal dismissed both appeals for A.Y. 2012-13 and A.Y. 2013-14, upholding decisions in favor of the assessee regarding deduction u/s.80IA and ... Deduction under section 80IA(4) - Set-off of pre-initial year losses against qualifying unit income - Mercantile system of accounting - Deductibility of wage revision liability on accrual basis - Effect of Wage Board recommendations and consequential notificationDeduction under section 80IA(4) - Set-off of pre-initial year losses against qualifying unit income - Whether losses of the eligible windmill unit incurred in years prior to the initial year can be set off against the assessee's claim of deduction under section 80IA(4) for the assessment years under appeal. - HELD THAT: - The Tribunal found that the losses relied upon by the Assessing Officer related to years prior to the initial year of the eligible unit and therefore could not be set off against the income qualifying for deduction on or after the initial year. The Tribunal noted that a similar contention in respect of earlier assessment years of the assessee had been considered and accepted in the assessee's favour by the Tribunal (order dated 25-06-2019 in ITA No. 1364/PUN/2011 etc.), and the Revenue's representative accepted the position. Applying that precedent and the principle that pre-initial year losses are not available to set off against post-initial year qualifying income, the Tribunal upheld the deletion of the disallowance and sustained the allowance of the deduction under section 80IA(4).Disallowance deleted; deduction under section 80IA(4) upheld.Mercantile system of accounting - Deductibility of wage revision liability on accrual basis - Effect of Wage Board recommendations and consequential notification - Whether additional liability on account of Wage Board revision, recomputed and claimed by the assessee by filing a revised return for the year though paid in subsequent years, is deductible for the assessment year under the mercantile system of accounting. - HELD THAT: - The Tribunal recorded that the Wage Board for working journalists submitted its report and the Central Government issued a consequential notification accepting the recommendations. The assessee, following the mercantile system of accounting, recomputed and claimed additional wages pertaining to the year under consideration by a revised return. The Tribunal held that where the additional liability arose and became payable during the year by reason of the government notification, the deduction was allowable in that year despite actual payment occurring in a later year. The Tribunal therefore accepted the assessee's claim that the recomputed wage liability was deductible on an accrual basis under the mercantile system and sustained the deletion of the Assessing Officer's addition.Addition disallowed; wage revision liability allowed as deduction in the relevant assessment year.Final Conclusion: Both appeals by the Revenue were dismissed: the Tribunal upheld the allowance of the section 80IA(4) deductions by rejecting set-off of pre-initial year losses, and upheld the deletion of additions by allowing the wage revision liability as deductible in the relevant assessment years under the mercantile system. Issues:1. Disallowance of deduction u/s.80IA for A.Y. 2012-13.2. Deletion of addition made by AO relating to liability on account of revised wages for A.Y. 2012-13.3. Disallowance of claim u/s.80IA for A.Y. 2013-14.4. Deletion of addition on account of liability for payment of wages under Wage Board recommendations for A.Y. 2013-14.Analysis:A.Y. 2012-13:1. The first issue pertains to the disallowance of deduction u/s.80IA. The AO disallowed the deduction as the assessee had suffered losses in the eligible wind mill unit in earlier years, exceeding the claim for the current year. However, the CIT(A) reversed this decision. The Tribunal noted that losses from years prior to the initial year cannot be set off against income from the wind mill after the initial year. Referring to a previous Tribunal order in favor of the assessee, the Tribunal upheld the CIT(A)'s decision on this issue.2. The second issue concerns the deletion of the addition related to liability on account of revised wages. The assessee claimed a deduction for Wage Board Revision, which the AO disallowed citing no corresponding payment in the relevant year. The Tribunal observed that the assessee revised wages following a Central Government notification and claimed the deduction under the mercantile system of accounting. Despite the payment being made in subsequent years, the Tribunal upheld the deletion of the liability on account of revised wages for the year under consideration.A.Y. 2013-14:3. The first issue raised for this assessment year is the disallowance of a claim u/s.80IA. The Tribunal, following the decision for the previous year, upheld the deletion of the claim.4. The second issue relates to the deletion of an addition on account of liability for payment of wages under Wage Board recommendations. Similar to the previous year, the Tribunal upheld the deletion of the disallowance towards additional liability for payment of wages for the relevant year.In conclusion, the Tribunal dismissed both appeals for A.Y. 2012-13 and A.Y. 2013-14, maintaining the decisions in favor of the assessee on the issues of deduction u/s.80IA and liability on account of revised wages under the Wage Board recommendations for both assessment years.