Unit wise deduction u/s 80IA is allowed

Facts and Issues of the case

The assessee is a company and besides this, engaged in the business of hotel and also has power generation wind mills. During the reassessment proceedings, the Assessing Officer noted that the assessee has incurred losses from the eligible business of generation of power. The assessee claimed deduction under Section 80IA (iv) of Rs. 1, 06, 84,759/-. The Assessing Officer was of the view that deduction under Section 80IA is allowable only when income is earned (profit is shown) from eligible business.

The Assessing Officer held that the assessee maintained consolidated figure of power generation units and no separate and independent books of account were maintained by the assessee for each and every wind mill, hence, the profit/loss of each wind mill cannot be ascertained from the incomplete record, therefore, deduction under Section 80IA of Rs. 1.068 crore was disallowed.

Observations by the court

The Court has considered the rival submissions of both the parties and have gone through the orders of the authorities below carefully. We find that the Assessing officer disallowed claimed of deduction under Section 80IA of the Act by taking a view that deduction under Section 80IA is allowable only when there is profit from eligible business.

The assessee has nine wind mills out of which in six wind mills, the assessee has shown profit of Rs. 2.369 crore, however, in the remaining three wind mills and the assessee company had incurred losses of Rs. 5.953 crores. Thus, overall effect in the eligible business is loss of Rs. 3.58 crore. As the assessee has not earned any income from eligible business, therefore, it is not eligible for deduction under Section 80IA of the Act. The Assessing Officer held that the assessee maintained consolidated figure of power generation unit and no separate and independent books of account were maintained by the assessee for each and every wind mill, hence, the profit/loss of each wind mill cannot be ascertained from the incomplete record, therefore, deduction under Section 80IA of Rs. 1.068 crore was disallowed.

We find that the CIT (A) while granting relief to the assessee has held that this is an undisputed fact that separate accounts are maintained for each windmill undertaking. Thus, the deduction is to be computed with respect to each unit independently taking into consideration the profit of each unit without clubbing loss of others.

There is no question of adjusting loss of any other business against the business income of eligible undertaking for deduction under Chapter VIA and the deduction under Section 80IA is to be allowed unit wise without deducting incurred loss by the other unit of eligible business and allowed the appeal of assessee.

As per the spirit of Section 80IA of the Act, the assessee is eligible to claim deduction of profit of each undertaking from different period. Thus, each undertaking has to be considered as a separate undertaking and cannot be clubbed in order to compute the deduction under Section 80IA of the Act. In view of the aforesaid factual and legal discussion, we affirm the order of ld. CIT (A) with these additional observations.

Conclusion

The deduction under section 80IA of the Income Tax Act is to be allowed unit wise without deducting loss incurred by the other unit of eligible business.

DCIT-Vs-Gujarat-JHM-Hotels-Ltd.-ITAT-Surat

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