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Shreem Capacitors Pvt. Ltd. Versus The Jt. /Dy. Commissioner of Income Tax, Range/Circle – 1, Sangli and The Asstt. Commissioner of Income Tax, Circle – 1, Sangli Versus Shreem Capacitors Pvt. Ltd.

2016 (3) TMI 59 - ITAT PUNE

Eligibility of deduction under section 80IA(5) - profits earned from generation and sale of electricity without setting-off the losses of other units engaged in the same business - Held that:- Every unit constitutes a separate undertaking engaged in the eligible business, losses of one unit need not be set-off against the profits of the another units although engaged in the same business for the purposes of deduction under section 80IA of the Act. Presence of positive ‘Gross Total Income’ after .....

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s of erection and commissioning work, etc. - Held that:- The capital expenditure incidental to the windmill has to be tested on the touchstone of the functional test and the assessee will be entitled to higher rate of depreciation on such incidental expenditure, if it has no other use except for power generation done by the windmill. Accordingly, we hold that the Revenue is misdirected itself in law in making the impugned disallowance of depreciation. - Decided in favour of assessee

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A, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Assessee : Smt. Deepa Khare For The Department : Shri Santosh Kumar ORDER PER PRADIP KUMAR KEDIA, AM : The captioned cross appeals filed by the assessee and the Revenue. Since the common question of law and facts are involved in all the three assessment years for the same assessee, all the appeals were heard together and are being disposed of by this common order. 2. First, we shall take-up the appeal of the Revenue relevant to assessment year 2008-0 .....

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ner of Income Tax[Appeals], Kolhapur erred in allowing the appeal of the assessee claiming deduction u/s 80IA(5) of the LT. Act, on the profits earned from generation & sale of electricity from Satara Unit, in the process ignoring the fact that the assessee company had incurred losses from generation and sale of electricity from Tamil Nadu, Rajasthan and Karnataka Unit which were required to be first set off against the profits earned at Satara Unit in terms of provisions of Section 70 of th .....

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urpose of claiming deduction under section 80IA', as the provisions of Section 80IA of the I.T. Act refers to profits and gains derived by and undertaking or an enterprise from any business referred to in sub section (4) of Section 80IA which in the context of the assessee-company would imply that profit and gains earned by the assessee-company from the eligible business of generation of electricity would be considered for allowing the deduction and not the profits earned by individual units .....

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vacated and that of the Assessing Officer be restored. [5] The appellant craves leave to add, alter, amend or modify or delete any of the grounds of appeal at the time of hearing. 5. In essence, the only issue raised by these grounds are pertaining to eligibility of deduction under section 80IA(5) of the Act on profits earned from generation and sale of electricity without setting-off the losses of other units engaged in the same business. 6. The relevant facts concerning the issue are that the .....

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e of ₹ 1,05,000/-. Thus, the total income of the assessee chargeable to tax was declared at ₹ 7,23,87,710/-. It was noticed by the Assessing Officer that the assessee company had acquired a number of windmills and installed the same in various parts of the country in general and particularly in the State of Maharashtra (Satara), Tamil Nadu, Rajasthan (Soda & Harsh) and Karnataka. It was observed by the Assessing Officer that the assessee has claimed deduction under section 80IA i .....

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sing from eligible unit at Satara. The Assessing Officer took a view that profit/loss in respect of particular industry is required to be considered as a whole separately and if the particular industry has a number of undertakings, the loss incurred by one undertaking is required to be set-off against the income of the another undertaking of the same industry and thereafter if any balance profit is left, the same is eligible for deduction under section 80IA of the Act to the extent of remaining .....

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t section 80IA refers to profits of undertaking or enterprise and not the whole business of the appellant for the purposes of section 80IA(5) of the Act. He, accordingly, reversed the order of the Assessing Officer and held that the assessee is entitled to deduction under section 80IA of the Act as claimed. 8. The Revenue is in appeal against the order of the CIT(A). 9. The only issue for our consideration is whether the assessee is entitled to claim deduction under section 80IA(5) in respect of .....

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on 80IA(5) of the Act.. Therefore, profit from Satara unit is available to the assessee for deduction under section 80IA(5) of the Act. We observe that the assessee is also having positive Gross Total Income after setting-off of brought forward losses and unabsorbed depreciation of the previous years. In the facts of the case, since the Gross Total Income of the assessee includes profits derived by eligible undertaking (Satara unit), the assessee is entitled to deduction under section 80IA(5) wh .....

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is squarely covered by the judgement of the Hon ble Supreme Court in the case of Synco Industries Ltd. vs. ACIT, (2008) 299 ITR 444 (SC) and CIT vs. Canara Workshops P. Ltd., 161 ITR 320 (SC) and the decision of the Coordinate Bench of the Tribunal in the case of M/s J-Sons Foundry Pvt. Ltd. vs. DCIT in ITA No.815/PN/2011, order dated 30.01.2013 relied upon by the Ld. Authorized Representative for the assessee. 10. The reliance placed by the Ld. Departmental Representative for the Revenue on th .....

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d. (supra) has no application. In the light of the decisions cited above, wherein it has been held that every unit constitutes a separate undertaking engaged in the eligible business, losses of one unit need not be set-off against the profits of the another units although engaged in the same business for the purposes of deduction under section 80IA of the Act. Presence of positive Gross Total Income after setting of brought forward losses etc. and profits from an eligible undertaking is sufficie .....

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are against the respective orders of CIT(A), Kolhapur, dated 24.09.2013 and 20.11.2013 relating to assessment years 2009-10 and 2010-11 passed under section 143(3) of the Act. 13. In these appeals for subsequent years also, the Grounds of Appeal raised by the Revenue are identical to the appeal of the Revenue in ITA No.2078/PN/2013 relating to assessment year 2008-09 except for the amount of claim of deduction under section 80IA of the Act. For the parity of reasoning, these appeals of the Reve .....

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allowance of depreciation on Wind Mill of ₹ 25,64,925/-. 1.2 The learned CIT(A) failed to appreciate that the issue is covered by jurisdictional ITAT decision in the case of Jsons Pvt. Ltd., and hence needs to be allowed. 1.3 The disallowance of depreciation may please be deleted. 1.4 The A.O. may be directed to allow the depreciation on Wind Mill as claimed by the appellant. 2.1 The learned CIT(A) erred in confirming lump sum disallowance of ₹ 3,00,000/- out of freight tour and trav .....

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ight to add, later, delete, modify all or any of the grounds of appeal. 16. The first Ground relates to disallowance of depreciation on windmill of ₹ 25,64,925/-. 17. The relevant facts concerning the issue are that the assessee company has claimed escalated depreciation @ 80% on the entire cost of windmill including civil work, expenses of erection and commissioning work, etc.. The Assessing Officer held that the assessee is not entitled to the higher rate of depreciation in respect of fo .....

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nt operative para of the aforesaid order is reproduced below for ready reference :- 8. We have carefully considered the orders of the authorities below and submissions made on behalf of the revenue. The only issue for adjudication before us is allowability of similar depreciation rate as applicable to windmills, also to the foundation & civil work and erection & commissioning work executed for these windmills. It is the case of the assessee before the Assessing Officer as well as before .....

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be provided at the rate applicable to windmill. We find that the aforesaid assertions made on behalf of the assessee before the Revenue remains uncontroverted. Accordingly, We are of the firm view that the expenses incurred on erection & commissioning, civil work, etc. being necessary adjunct to the windmill and is not meant for any other purposes other than for operational functioning of wind turbine and therefore cannot be treated differently. Therefore, impugned capital expenditure toward .....

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to higher rate of depreciation on such incidental expenditure, if it has no other use except for power generation done by the windmill. Our view is also supported by another decision of the Co-ordinate Bench of Pune Tribunal in the case of M/s D.J. Malpani vs. ACIT in ITA Nos.1148 to 1154/PN/2013, order dated 30.10.2015. Accordingly, we hold that the Revenue is misdirected itself in law in making the impugned disallowance of depreciation. In the result, Ground No.1 of the assessee s appeal is a .....

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sited China, Algeria, South Korea, USA and Malaysia. It was observed that the assessee company could not furnish any evidence of business purpose involved in respect of visits to Algeria, Malaysia and Germany. After considering the tour programmes, purpose of visit and achievements made in respect of these visits, the Assessing Officer found that all the visits have not been justified by the achievements and therefore 30% of the foreign travelling expenses estimated at ₹ 3,00,000/- were di .....

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