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2018 (6) TMI 1608 - AT - Income TaxAddition u/s 14A - investment out of interest free fund - HELD THAT:- CIT(A) directed the AO to modify the disallowance required to be made u/s. 14A because she found that out of the total investment of ₹ 19,49,122/- a sum of ₹ 4,48,622/- was made out of interest free fund. This amount cannot be considered for making the disallowance thus, CIT(A) has restricted the disallowance required to be made on an investment of ₹ 15,00,500/. The assessee has not challenged this finding of the CIT(A) and after going through the CIT(A)’s order, we do not find any error in the order of the CIT(A) in A.Y. 2010-11 which is confirmed. Similar finding has been recorded in A.Y. 2011-12 and therefore, the ground of appeal raised by the revenue in A.Y. 2011-12 is also rejected. Deduction u/s 80IA - dispute between the assessee and AO is that AO has notionally brought forward business losses and depreciation of earlier years and notionally set off against the income of the windmill - HELD THAT:- As relying on VELAYUDHASWAMY SPINNING MILLS P. LTD. & SUDAN SPINNING MILLS (P.) LTD. & MOHAN BREWERIES [2010 (3) TMI 860 - MADRAS HIGH COURT] it indicated that depreciation already claimed by the assessee and set off against the regular source of income cannot be notionally brought forward and set off against the income of windmill for the current year after selection of initial year for claiming deduction u/s. 80IA(iv). The assessee has been given choice of 10 consecutive years out of 15 years for claiming deduction u/s.80IA(iv). Once assessee has selected initial year then unabsorbed depreciation and losses of that year and subsequent years could be carried forward for set off against the income of those years before computing the deduction admissible u/s.80IA(iv). In the present cases, AO has brought forward the depreciation of A.Y. 2007-08, 2008-09 etc, which has already been set off against the regular income. He brought forward such depreciation on notional basis, which is contrary to the proposition laid down by the Hon’ble Madras High Court. FAA has rightly appreciated the controversy and rightly granted the deduction to the assessee. We do not find any error in the order of the CIT(A) hence, this ground of appeal is rejected in both the years.
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