2025 (6) TMI 973

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....ed for A.Y. 2016-17. 2. The Assessee has taken the following grounds of appeal:- "1. The learned Principal Commissioner of Income-tax erred in issuing notice and passing an order under section 263 setting aside the Assessment made on 13- 02-2020. 2. The learned Principal Commissioner of Income-tax erred in presuming that while finalizing the assessment u/s 143(3) r.w.s. 144C(3) of the I.T.Act on 13/02/2020, the Assessing Officer has allowed the deduction u/s 80IA of the I.T. Act of Rs. 1,73,58,349/- in respect of Windmills, without verification of the facts which should have been made during the course of assessment proceedings. 3. The learned Principal Commissioner of Income-tax erred in holding that the Asses....

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....r Unit at Mahidad. The AO, in his assessment order, disallowed the entire deduction claimed for Dahej, due to downward adjustments made by the Transfer Pricing Officer (TPO) in order passed under section 92CA(3) dated October 31, 2019, relating to revenue from power and steam supply. However, despite a similar downward adjustment of Rs.29,29,56,563/- by the TPO for Wind Mahidad, the AO only partially disallowed the claim and allowed Rs.1,73,58,349/- under section 80IA, without verifying the appropriateness of the residual claim. Accordingly, a show cause notice under section 263 of the Incometax Act was issued by Principal CIT. The assessee filed response stating that the deduction of Rs.1,73,58,349/- was correctly computed after netting th....

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....000/-, miscellaneous expenses of Rs.27,25,629/-, interest of Rs.21,69,61,434/-, depreciation of Rs.20,20,518/-, and foreign exchange fluctuation loss of Rs.13,79,58,953/-. The ld. counsel for the assessee submitted that the TPO made two specific adjustments impacting the deduction claimed under Section 80IA. First, he reduced the revenue from sale of power by Rs.29,29,56,563/-, thereby reducing the profit eligible for deduction. Second, he disallowed the O&M charges of Rs.4,03,67,698/- by determining their arm's length price at NIL. As per CBDT Circular No. 37/2016 dated 2nd November 2016, such a disallowance is not to be treated as income and hence should not reduce the eligible deduction under Section 80IA. Accordingly, while the revenue ....

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....3 proceedings, which also renders the 263 order as being liable to be set aside. 6. In response, Ld. D.R. placed reliance on the observation made by the Ld. PCIT in the 263 order. 7. On going through the facts of the instant case, we observe that the Assessing Officer had specifically inquired on this issue and vide submission dated 24.12.2019 the assessee had filed a detailed submission on this aspect before the concerned Tax Officer. Accordingly, evidently, this aspect had been inquired by the Assessing Officer during the course of assessment proceedings. However, another aspect which we observe is that in the 263 order, the assessee vide letter dated 17.03.2022, gave detailed submissions on this aspect, however, while passing the 2....