AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 349
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....t the computation of the same at Rs. 71,31,266/- by the Assessing Officer?" 2. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in holding that the each of the wind mills constitute a separate undertaking for the purposes of deduction u/s.80IA?" 3. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in not reducing the profits of WTG 1,2,3 & 4 with the loss of WTG 5 for purposes of computing deduction u/s.80IA?." 4. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in splitting up of units and considering them as separate undertakings for the purpose of computation of deduction u/s.80IA of the Incometax Act, 1961 ignoring the fact that all the five units are into the same activity of generation of wind power and thus constitute one single "Industrial Undertaking" or an enterprises." 3. The brief facts of the case extracted from ITA No.6967/Mum/2017 are that the assessee is a partnership firm engaged in the business of hand tufted woollen carpets and also involved in the business of generation of power through wind turbine generator. The assessee has filed....
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....under section 80 IA as under- Windmi ll No. Year of set up Location Commencement of deduction (initial Assessment year) Profit 1. F.Y. 06-07 Dhule A.Y. 11-12 61,84,940/ 2. F.Y. 06-07 Sangli A.Y. 11-12 73,54,507/ 3. F.Y. 09-10 Jodhpur A.Y. 12-13 6,63,047/- 4. F.Y. 09-10 Bhiyan A.Y. 15-16 65,667/- 5. F.Y. 09-10 Akal A.Y.15-16 (-) 1,36,896/- 19.2 In the assessment order, the AO was of the view that the profits from three wind Mills WTG 1, WTG 2 and WTG 3 should be set off against the losses of Wind Mills WTG 4 and WTG 5 and the net income should be allowed to be claimed u/s 80IA of the Act for the year under consideration. In this regard, I find that provisions of sub sec. (1) and (5) of sec.80IA are relevant here. These sub-sections read as under: As per subsection (1) of section 80-IA, where the gross total income of the assessee includes any profit or gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), a deduction of 100% of profit and gains of such business will be allowed to the assessee as a deduction for a period of 10 consecutive assessment years. As per subsection (5) of section 80IA: "Notwit....
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....ration, as the initial assessment years for these Wind Mills start in subsequent years, there remains no question of clubbing the profits (or loss) of WTG 4 and WTG 5 with the profits of WTG 1, WTG 2 and WTG 3. In this regard, the reliance of the Ld. AR on various judicial pronouncements, as per written submissions are in order. Hence, the AO is directed to exclude the profit/ loss of WTG 4 and WTG 5 for the purpose of computation of deduction u/s 80IA of the Act for the year under consideration. Thus, the ground of appeal no. 1 is allowed." 5. Aggrieved by the order of CIT(A), the revenue is in appeals before us. 6. The Ld.DR submitted that the Ld.CIT(A) has erred in holding that the assessee is eligible for deduction u/s 80IA of the Income-tax Act, 1961 to each of the windmill separately as the only business of the assessee without appreciating the fact that the deduction provided u/s 80IA of the act has to be given for business, as a whole. The Ld.DR further submitted that the Ld.CIT(A) was not justified in splitting up of units and considering them as separate undertakings for the purpose of computation of deduction u/s 80IA of the Act ignoring the fact that all the five unit....
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....ction 80IA in respect of power generation business though setting off of windmills. The only dispute is with regard to computation of quantum of deduction. Whether the profits and gains of the eligible business as per the words of section 80IA(5) have to be considered unit-wise or as a total eligible business comprising of profits of all units. The provisions of section 80IA(5) provided mechanism for determination of quantum of deduction from eligible business and as per which the eligible business shall be considered as if the only source of income of the assessee during the initial year and every subsequent AYs. Therefore, one has to see what eligible business is whether it is the total business as a whole or each unit or undertaking. No doubt the provision of section 80IA speaks about profit and gains from industrial undertakings I T A No . 63 37 & 6 9 80 / M u m/ 2 01 4 or enterprises engaged in infrastructure development, etc. Sub-section (5) speaks about eligible business. Now the controversy to be resolved is whether the power generation segment of the assessee is an eligible business or each windmill is a separate unit eligible for deduction without considering profit or lo....
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....siness as referred to in sub- section 3(ii) to 11(a) of section 80IA of the Act. 12. In this case, admittedly the assessee is having two segment of business i.e. one is power generation through five windmills which is eligible business and another is construction segment. The assessee has generated profit from two windmills and incurred losses from three windmills. The assessee also derived profit from construction business. The gross total income computed from two segment of business is positive. If you consider each segment of business stand alone, then there is a loss from the power generation segment, if profit or losses of all five windmills are consolidated. The assessee has considered each wind Mill as a separate unit eligible for deduction under section 80IA, without considering profit or loss of other windmills and accordingly claimed deduction towards profit generated from two windmills. If one considered power generation business as one eligible business, certainly the assessee is not eligible for deduction under section 80IA, as from power generation business the assessee has incurred losses. If you strictly apply the provisions of section 80IA(5), the words used ther....
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....nsistently held that deduction provided u/s 80IA has to be given unit wise without considering profit or loss of other units. This legal proposition is strengthened by the decision of ITAT, Ahmadabad, special bench in the case of CIT vs. Goldmine Shares and Finance Pvt. Ltd." 9. A similar issue has been considered by Hon'ble Delhi High Court in the case of CIT vs Dewan Kraft System Pvt Ltd (2007) 160 Taxman 343 (Del), where the Hon'ble Delhi High Court, after considering relevant provisions of the Act, held that for the purpose of deduction u/s 80IA, each unit shall be treated as independent unit and same has to be treated as only source of income of the assessee for the purpose of computing deduction u/s 80IA of the Act. The relevant findings of the Hon'ble Court are as under:- "Section 80-IA(7) shows that it is a distinct and separate deeming provision which lays down the special method of computing [he profits and gains entitled to deduction under section 80-IA. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period in which the assessee is entitled to deduction under section 80-IA, this prov....