2024 (3) TMI 1255 - AT - Income Tax

Deduction u/s 80IA(4) on wind mills and solar power plants - AO disallowed assessee s claim of deduction on the ground that all wind mills and solar power plants shall be considered as one undertaking whereas assessee had considered each wind mill as separate undertaking for deduction u/s 80IA(4) - HELD THAT - As in earlier years 2019 (8) TMI 1900 - ITAT PUNE A.Y. 2012-13 2013-14 and 2014-15 ITAT has allowed assessee s claim of deduction u/s 80IA(4) treating each wind mill as a separate undertaking and treating solar power plant as a separate undertaking. Accordingly we hold that each wind mill and solar power plant is a separate undertaking for the purpose of calculation of 80IA(4) deduction - Decided against revenue. Profit from eligible business for purpose of deduction u/s 80IA need not be computed after deduction of the notional brought forward losses and depreciation of eligible business even when the same had been set off against income from non-eligible business in earlier years - HELD THAT - As can be seen from the above grounds of appeal raised by the Revenue for A.Y. 2012-13 A.Y. 2013-14 the Revenue has not raised any ground related to set-off of losses of earlier years of eligible undertaking and applicability of section 80IA(5) of the Act though in the assessment orders for A.Y. 2012-13 A.Y. 2013-14 the AO had discussed 80IA(5) and set-off of losses of earlier years of the eligible undertaking. It means Revenue has accepted the decision of ld.CIT(A) and preferred not to file an appeal on the impugned issued before ITAT. Once Revenue has not preferred an appeal on the impugned issue before ITAT for A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 means the impugned issue has attained finality. In these facts and circumstances of the case Revenue cannot raise the impugned issue for A.Y. 2020-21 as Revenue has accepted the decision of ld.CIT(A) for earlier years as discussed above. Therefore Revenue s Ground No.3 is not maintainable. As deciding on merits once the earlier years losses of eligible undertakings have been set-off against the profit from another business then those losses will not be carry forwarded notionally to set-off against the profits of eligible undertakings for the purpose of section 80IA(4) of the Act - Thus respectfully following the case of PCIT Vs. Sterling Agro Industries Limited 2023 (8) TMI 768 - DELHI HIGH COURT it is held that since there were no actual losses for the eligible undertakings during the year i.e.A.Y.2020-21 there was no question of notional set-off. Accordingly assessee is eligible for deduction under section 80IA(4) on the profit earned by each undertaking separately. Accordingly Revenue s Ground No.3 is dismissed.

Summary

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).