TaxTMI 
TaxTMI 
2024 (7) TMI 577
X X X X Extracts X X X X
X X X X Extracts X X X X
....se in brief, are that the assessee is a partnership firm engaged in the business of civil construction and power generation. It filed its return of income on 10.09.2015 declaring total income of Rs. 3,54,87,490/- after claiming deduction of Rs. 2,84,42,603/- u/s 80IA(4) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). A survey u/s 133A of the Act was conducted in the case of the assessee on 17.12.2014, during which certain papers were impounded which indicated that the actual work in progress was much higher than the work in progress shown in the books. Accordingly, the assessee had declared additional income of Rs. 3,11,76,525/- for the year under consideration. 3. During the course of assessment proceedings, the Assessing Officer noted that while the assessee has declared the additional income in the hands of the firm, however, the assessee has included the same in the closing stock as on 31.03.2015. The Assessing Officer, therefore, asked the assessee to explain as to why the excess stock of Rs. 3,11,76,525/- disclosed during survey as additional income should not be added u/s 69B of the Act as unexplained investment as the same was unaccounted. The assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....noticed during the survey. The contention of the assessee is not acceptable because as already discussed there was difference in stock as per books of account and actual stock statement file impounded during the survey. This discrepancy/difference has been accepted by the Partner in his statement recorded during the survey and it was stated that difference is due to purchase which are not accounted for in books of account. 5.6 In view of the above excess stock of Rs. 3,11,76,525/- is added u/s 69B as unexplained investment. This discrepancy would not have come to notice without survey u/s 133A of the Income Tax Act, 1961 in the case of assessee. Penalty proceedings are initiated separately u/s 271(1)( c) of the IT Act, 1961 for concealment of income. 5.7 In respect of income of assessed u/s 68/69/69A/69B/69C/69D of the I.T Act 1961 it has now been established by law that tax on such income should be charged at rate of 30% over and above regular income of assessee. It has been established that deduction/exemption / set off of losses cannot be claimed / adjusted against income assesses u/s 68/ 69 to 69D of the Act. Will and mandate of legislature is dearly evident f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mportant to mention here that the Hon'ble Supreme Court in case of Kale Khan Mohammad Hanif vs CIT [1963] 50 ITR 1 (SC) held that onus of proving the source of a sum of money found to have been received by the assessee is on him. However, if the taxpayer disputes the levy of tax on the same then it is up to him to show either the receipt is not income, or it is exempt from taxation under the provisions of the Act. In the absence of proof, the tax officer is entitled to treat the same as taxable income. Thus, the onus of explaining the source of undisclosed income found during search or survey is on the assessee and not the other way. In other way, the onus of proving that the income detected is not taxable under sections 68, 69, 69A to 69D read with section 115BBE is on the assessee. 21. To sum up, before assessing the surrendered income under sections 68, 69, 69A to 69D and levy of higher rate of tax u/s 115BBE, following factors are required to be considered- * Whether nature of income is clearly explained during the survey or during assessment proceedings. * Whether income can be classified under a particular head of income based on nature so as to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r contended that since the excess stock was found during the survey and it has paid taxes on such additional income, the excess stock should obviously be considered as part of closing WIP. I have considered this contention of the appellant If the claim of the appellant is accepted in that situation, the appellant will be claiming deduction of Rs. 3,11,76,525/- in subsequent assessment years which shall be in contradiction to the provisions of section 115BBE(2) of the Act. The provisions of section 115BBE(2) are quite clear that no deduction is allowed against deemed income added u/s 68 and 69 to 69D. Since, I have already upheld that the additional income corresponding to excess stock is taxable u/s 69B of the Act, therefore, as per provisions of section 115BBE(2), no deduction for this amount can be allowed to the appellant in any assessment year. Accordingly, the contention raised by the appellant is rejected. The grounds no. 8 and 9 raised by the appellant are DISMISSED." 6. Aggrieved with such order of CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1] The learned CIT(A) erred in holding that the additional income of Rs. 3,11,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... while computing the deemed income, no deduction for expenditure or allowance is allowable. The Ld. Counsel for the assessee submitted that it has claimed the excess stock offered to tax as part of the closing stock which is being claimed as an opening stock of the subsequent assessment year i.e. 2016-17 and therefore, the same would be allowed as deduction while computing the income for the succeeding assessment year. He submitted that there is no prohibition in section 115BBE of the Act that the excess stock offered to tax cannot be part of closing stock. 8. Referring to CBDT Circular No.11/2019 dated 19.06.2019, he submitted that there was an amendment to sub-section (2) of section 115BBE of the Act from assessment year 2017-18 wherein the set off of losses was also prohibited against the deemed income taxed u/s 69 to 69D of the Act. Therefore, the CBDT issued circular holding that the set off of losses is prohibited from assessment year 2017-18 onwards. He submitted that as per the circular, what is prohibited under sub-section (2) is set off of any expenditure or allowance or loss against the deemed income. Since the assessee in the instant case has not claimed any deductio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment impounded certain papers which indicated that the actual work in progress was much higher than the work in progress shown in the books. In the statement of Shri L.B. Kunjir, he accepted that there was excess work in progress to the tune of Rs. 3,11,76,525/- which was offered for taxation and the same was included in the closing stock as on 31.03.2015 which has been claimed as opening stock as on 01.04.2015 i.e. for assessment year 2016-17. The assessee has not claimed any deduction, expenditure or allowance out of such additional income declared during the course of search which was declared on the basis of survey. 12. We find provisions of sections 69B and 69C read as under: "69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18. 3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. 4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambigu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... opening WIP for the year under consideration and accordingly, the assessee was entitled to claim deduction of Rs. 3,11,76,525/- while computing the income for the year under consideration. 4] The learned CIT(A) failed to appreciate that the excess WIP declared by the assessee in A. Y. 2015 - 16 would form part of the closing WIP for A.Y. 2015 - 16 and as a natural consequence would be also part of opening WIP for A.Y. 2016 - 17 and accordingly, the assessee was justified in claiming the same as a deduction while computing the income for A.Y. 2016-17. 17. The only grievance of the assessee in the grounds raised is regarding the order of the Assessing Officer in not considering the closing work in progress of Rs. 3,11,76,525/- as on 31.03.2015 as the opening work in progress as on 01.04.2015 i.e. assessment year 2016-17. Since while deciding the appeal of the assessee for assessment year 2015-16 vide ITA No.417/PUN/2024, we have already held that the additional income so declared during the course of survey shall form part of the closing stock, therefore, such closing stock as on 31.03.2015 shall be the opening stock of assessment year 2016-17. Therefore, the assessee is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ill project as 'separate undertaking' and thereby allow the claim of deduction u/s. 80IA(4) of the I.T. Act, is untenable. As per assessing officer, the deduction u/s 80IA(4) has to be necessarily computed by considering all Wind Mills of the Assessee as a "single unified project which constitutes "eligible business". The Assessing Officer observed that after considering the losses of power generation business in earlier years, there was an overall loss in Power Generation Business, and he therefore, rejected the claim of the Assessee for deduction u/s. 80IA(4)of the I.T.Act. 8. On the other hand, the appellant has claimed that all the undertakings have been set up at different locations and they function independently from each other. Regarding the issue of notionally carry forwarding the losses of earlier years, the assessee has claimed that the initial asst. year is the year in which the deduction is first claimed by the assessee, as clarified by CBDT vide Circular No. 1 of 2016 dated 15/02/2016. Thus, the unabsorbed losses and depreciation of each windmill which has already been set off against other business income of the assessee, cannot be notionally brought....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at the scheme of the section 80IA(2), it speaks about the "undertaking" or "enterprise" and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results are separately worked out. As per sub-sec.(5) of section 80IA, for computing the deduction u/s 80IA(2), the eligible business is to be treated as the only source of income. Sub- sec.(5) of section 80IA has been explained by the Hon'ble High Court and Kerala in the case of CIT Vs. Accel Transmatic Systems Ltd. 230 CTR 206 (Ker) which has been followed by the Ld. CIT(A). The term "business" used in sub-sec. (5) section 80IA in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction "undertaking" or "Enterprise" as such is to be considered. Sec.80IA(2) is charging sections for determining basic eligibility and there is no mention of word "business". Sub-sec.(5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub sec.(2) of Sec. 80IA. It is well settled principle of interpretation of statuto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it speaks about the "undertaking" or "enterprise" and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results are separately worked out. As per sub-sec.(5) of section 80IA, for computing the deduction u/s 80IA(2), the eligible business is to be treated as the only source of income. Sub-sec. (5) of section 80IA has been explained by the Hon'ble High Court and Kerata in the case of CIT Vs. Accel Transmatic Systems Ltd. 230 CTR 206 (Ker) which has been followed by the Ld. CIT(A). The term "business" used In sub-sec.(5) section 80IA in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction "undertaking" or "Enterprise" as such is to be considered. Sec.80IA(2) is charging sections for determining basic eligibility and there is no mention of word "business". Sub-sec.(5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub-sec.(2) of Sec.80IA. It is well settled principle of interpretation of statutory provision that they are to be interpre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Dy. Commissioner of Income Tax Vs. J-Sons Foundry Pvt. Ltd. (supra) concluded as under: "58. Respectfully following the decision of the Coordinate Bench of the Tribunal cited (Supra) and in absence of any contrary material brought to our notice we hold that each phase of windmill has to be considered as separate undertaking eligible for deduction u/s. 80IA and therefore deduction u/s. 80IA(4) should have been computed independently for each phase and not on consolidated basis. The grounds raised by the assessee on this issue is accordingly allowed." 8. Since, the issue has already been considered by the Tribunal and has held that each unit of windmill has to be considered separately for computing deduction u/s. 80IA(4), we see no reason to deviate from the view already taken. No contrary judgment has been placed on record before us by the Revenue. The Id. DR has pointed that the Department has fifed appeal against the Tribunal's decision in the case of M/s. D.J. Malpani Vs. ACIT (supra), however, no order by the Hon'ble High Court either staying or reversing the aforesaid decision of Tribunal has been furnished by the Id. DR. 9. We do not fin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....try or industries owned by the assessee. This view is confirmed by clause (i) (a) of sub-section (5) of section 80-IA." (emphasis supplied) 10.3 Hon'ble Madras High Court in the case of CIT vs Bannari Amman Sugars Limited [2019] 104 taxmann.com 1 (Madras) held that for the purposes of grant of deduction under section 80IA of the Act, each unit has to be seen independently as separate and distinct from each other. 10.4 Similar view was taken 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: - 13. Perusal of the above provision shows that it is a distinct and separate deeming provision which lays down the special method of computing the profits and gains entitled to deduction under section 80-IA of the Act. Moreover, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduction u/s 80IA. The co-ordinate bench of ITAT, Mumbai Bench "C" in the case of Punit Construction Co vs JCIT (supra) has considered an identical issue in light of number of windmills and after considering relevant provisions of the Act, including sub section (5) of section 80IA, held that deduction has to be given unit-wise without considering profit or loss of other eligible units. The relevant observations of the Tribunal are as under:- "10. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. We have also carefully considered provisions of section 80IA and case laws relied upon by both parties. The facts with regard to eligibility for claiming deduction under section 80IA has not been disputed by the lower authorities. The tower authorities had admitted that the assessee is eligible for claiming deduction under section 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 tot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng profit or loss of other windmills. There is no dispute with regard to deduction to be given under chapter VIA against gross total income computed from all source of income. Even various decisions of the Hon'ble Supreme Court, including in the case of CIT vs. Liberty India (supra) have clearly held that special deduction under chapter VIA has to be computed on the gross total income and such gross total income has to be computed segment wise business after allowing all the deduction allowable under section 32 to 43D. The Hon'ble Bombay High Court in the case of Plastiblends India Ltd. Vs. ACIT (2009) 185 Taxman 187 after considering the ratio of Hon'ble Supreme Court in the case of Liberty India (supra) held that there has to be profit in the eligible business and such eligible business can be any of the business 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 segments 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r. If you take initial year of claim from the date on which unit two starts claiming deduction, then the assesses may get the benefit for more than 10 years for unit one, if you consider both units as one eligible business and profit or loss of both units is consolidated. This may not be the true intention of the legislature and for that reason the legislature consciously used the word undertaking or unit so as to give a deduction towards eligible units, in a situation where, the assessee is having more than one units in different locations, out of which one unit may be an eligible unit and another unit may not be eligible unit and also one unit may get deduction for different period and another unit may get deduction for different period. This is why the courts and tribunals has consistently 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 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....we are inclined to uphold the findings of Ld. CIT(A) and dismiss appeal filed by the revenue. (emphasis supplied) 12. The above discussion suggests that Hon'ble Courts as well as Hon'ble Tribunal on various occasions have held that each unit should be considered as separate undertaking eligible for deduction u/s 80IA and the deduction should be computed independently for each unit and not on consolidated basis, as done by the assessing officer. Further, as discussed above, in appellant's own case for AYs 2012-13 to 2014-15, the Hon'ble Tribunal has decided the issue under consideration, in favour of appellant. It is incumbent upon me to follow the decision of Hon'ble ITAT in appellant's own case for earlier years. Following the decision of Hon'ble Tribunal in appellant's own case, it is held that each wind-mill should be considered as separate undertaking eligible for deduction u/s 80IA and the deduction should be computed independently for each unit and not on consolidated basis. Accordingly, the addition of Rs. 2,84,42,603/- made by the assessing officer is directed to be deleted. The grounds no. 1 to 7 raised by the appellant are....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the grounds raised by the Revenue be dismissed. 24. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case denied the claim of deduction u/s 80IA of the Act in respect of the profits derived from the windmills on the ground that the deduction u/s 80IA is to be worked out by considering all the windmills as part of one undertaking and that the initial assessment year is to be considered as the year in which the windmill was installed. Further, similar disallowance was made in assessee's own case in the earlier years and therefore, he rejected the claim of deduction. We find the CIT(A) deleted the disallowance made by the Assessing Officer, the reasons of which are already reproduced in the preceding paragraphs. 25. We do not find any infirmity in the order of CIT(A) on this issue. We find the CBDT vide Circular No.1 of 2016 dated 15.02.2016 has clarified that the initial assessment year would mean the year in which the assessee has claimed the deduction....