Wind mills and solar power plants each qualify as separate undertakings for section 80IA(4) deduction purposes

The ITAT Pune ruled in favor of the assessee regarding deduction under section 80IA(4) for wind mills and solar power plants. The tribunal held that each wind mill and solar power plant constitutes a separate undertaking for deduction purposes, rejecting the AO's position that all should be treated as one undertaking. Additionally, the tribunal determined that profit from eligible business for section 80IA deduction need not be computed after deducting notional brought forward losses and depreciation, even when previously set off against non-eligible business income. The revenue's appeal was dismissed on both grounds.

---

---

Issues Involved:

1. Deletion of addition made by the AO on account of disallowance of deduction claimed by the assessee u/s 80IA.
2. Treatment of each windmill as a separate undertaking for deduction u/s 80IA(4).
3. Computation of profit from eligible business for deduction u/s 80IA without considering notional brought forward losses and depreciation.

Summary:

Issue 1: Deletion of Addition Made by AO on Account of Disallowance of Deduction Claimed by the Assessee u/s 80IA

The Revenue challenged the CIT(A)'s decision to delete the addition made by the AO, who disallowed the assessee's deduction claim u/s 80IA(4) amounting to Rs 5,08,09,048/-. The AO's disallowance was based on the premise that all windmills and solar power plants should be considered as "one undertaking," contrary to the assessee's approach of treating each windmill as a separate undertaking.

Issue 2: Treatment of Each Windmill as a Separate Undertaking for Deduction u/s 80IA(4)

The ITAT upheld the CIT(A)'s decision, stating that each windmill and solar power plant should be treated as a separate undertaking for the purposes of deduction u/s 80IA(4). This conclusion was based on the ITAT's earlier decisions in the assessee's own case for A.Y. 2012-13, 2013-14, and 2014-15, which consistently held that each unit of windmill is to be considered separately for computing the deduction. The ITAT found no reason to deviate from this established view and dismissed Revenue's grounds on this issue.

Issue 3: Computation of Profit from Eligible Business for Deduction u/s 80IA Without Considering Notional Brought Forward Losses and Depreciation

The ITAT addressed the Revenue's argument that the profit from eligible business should be computed after deducting notional brought forward losses and depreciation, as per section 80IA(5). The ITAT noted that the Revenue had not raised this issue in appeals for earlier years (A.Y. 2012-13, 2013-14, and 2014-15), indicating acceptance of the CIT(A)'s decisions for those years. Consequently, the ITAT deemed Revenue's ground on this issue as not maintainable and infructuous for A.Y. 2020-21.

Additionally, the ITAT referenced the Delhi High Court's decision in PCIT Vs. Sterling Agro Industries Limited, which supported the view that once earlier years' losses of eligible undertakings are set off against profits from other businesses, they should not be notionally carried forward for the purpose of section 80IA(4) deductions. The ITAT concluded that since there were no actual losses for the eligible undertakings during A.Y. 2020-21, the assessee was eligible for the deduction claimed.

Conclusion:

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the assessee's deduction u/s 80IA(4) and treating each windmill and solar power plant as a separate undertaking. The ITAT also held that notional brought forward losses and depreciation should not be considered for computing the deduction u/s 80IA(4).

---