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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’NEW DELHI
Challenging the confirmation of rejection of claim of the assessee under section 80IA of the Income Tax Act, 1961 (for short “the Act”) and consequential disallowing depreciation in a sum of Rs.2,70,788/-on the wind electricity generators which were allegedly used for the purpose of business by the learned Commissioner of Income Tax (Appeals)-3, Delhi (“Ld. CIT(A)”) by order dated 21/08/2016 in Appeal No. 7/15-16, for the assessment year 2012-13, M/s Eco-RRB Infra Pvt. Ltd (“the assessee”) filed this appeal.
Brief facts of the case are that the assessee is a company engaged in the business of technical consultancy and professional services relating to wind power generation and derives its income from consultancy fee and service charges and power generation. For the assessment year 2012-13, it has filed its return of income on 27/9/2012 declaring an income of Rs.14,50,81,886/-. Assessee claimed deduction under section 80IA of the Act on the ground that the setting up of new wind electrical generation in any part of India for the purpose of power generation and as per section 80IA(4)(iv) of the Act it meets the intention of the lawmakers to promote investment in power projects.
Learned Assessing Officer observed that the assessee has not debited any of the other expenses like administration overheads to the power generation, and since it cannot be assumed that the power generation units of the assessee are running without any direction from the management, supervision by the administration, financial charges as funds must have been used for the purchase of the machinery and other expenses related to the customers who may be coming to see these demonstration units set up by the assessee. Learned Assessing Officer, therefore, felt that the very basis of debiting very negligible expenses to power generation is intentional and flawed and it does not give correct picture of the profits derived from the business of power generation. He further noted that the assessee has not debited any expenses on account of depreciation by wind energy generators to the power generation unit, and therefore, when the real expenses of the normal business are not debited to the power generation plant, then the real profits cannot be worked out on such basis. According to the learned Assessing Officer, the working of the real income results in a loss on account of power generation business of the assessee and once there are no profits and gains from the business, then there can be no deduction under section 80IA of the Act. On this premise the claim of the assessee for deduction of Rs. 1,78,93,679/-under section 80IA of the Act was disallowed.
Learned Assessing Officer further held that since all the expenses of section 80IA of the Act have to be claimed against the business for determination of the profits, and since it has to be determined on single entity basis that means such expenses cannot be shared with any other sister concern. He observed that if the depreciation is not absorbed in the eligible business, then on the basis of the concept of singular entity business, the depreciation has to be carried forward as unabsorbed depreciation. Learned Assessing Officer, therefore, held that the assessee cannot claim the depreciation on the assets of an 80IA undertaking and if at all, the depreciation does not get adjusted against the assets of the eligible business, the same has to be carried forward as unabsorbed depreciation. Learned Assessing Officer, accordingly, disallowed the claim of the assessee for depreciation in respect of the windmills under section 80IA of the Act to the tune of Rs. 2,70,788/-.
Aggrieved by such an addition assessee preferred an appeal before the Ld. CIT(A). By way of impugned order, Ld. CIT(A) observed that having gone through the assessment order and the material facts on record, the facts involved in this assessment year are similar to the facts involved for the assessment year 2009-10. Following his order in assessee’s own case for the assessment year 2009-10 and 2011-12, Ld. CIT(A) sustained the additions made by the learned Assessing Officer and dismissed the appeal of the assessee. Assessee is, therefore, before us in this appeal challenging the impugned order.
At the outset, Ld. AR brought to our notice that in appeal preferred against the order of the Ld. CIT(A) for the assessment year 2009-10, a coordinate Bench of this Tribunal dealt with this issue and while referring to the orders of the Tribunal for earlier assessment years from 2006-07, 2007- 08 and 2008-09 the conclusion that the issues relating to the rejection of claim under section 80IA of the Act and not allowing the depreciation shall be remitted back to the file of the learned Assessing Officer to decide the same afresh after the Hon’ble High Court pronounces the judgement in respect of the earlier years on such an aspect. Ld. AR prayed that a similar course could be followed for this year also.
Ld. DR does not controvert any of these facts and fairly concedes that these issues are covered by the order of the Tribunal for earlier years.
We have gone through the record in the light of the submissions made on either side. In /Del/ 2011 and 6149 /Del/ 2012 for the assessment years 2006-07 and 2007-08, a coordinate Bench of this Tribunal in its order dated 27/9/2013 observed that a similar question had arisen in the case of RRB Consultants (2007) 112 TTJ 794 (Del) wherein it was observed that,-
“where assessee’s main activity was consultancy infield of Windmill energy and windmills were also used for generation of electricity, expenditure incurred by assessee on repair and maintenance of Windmill energy generators and insurance expenses in respect of generators, was allowable analyst consultancy income and was not to be deducted from the income from our generation while allowing deduction under section 80 IA.”
In the assessment year 2007-08, vide order dated 11/5/2012 in the appeal preferred by the Revenue, a coordinate Bench of this Tribunal considered the orders in the earlier years, namely, assessment year 2000-01 to 2002-03 and reached a conclusion that deduction under section 80-IA is to be computed after setting off of the depreciation relatable to the wind mill against the income earned out of electricity generator which qualified for deduction under sec. 80-IA of the Act.In the assessee’s appeal for the same year, the Tribunal recorded that appeals against such a finding of the Tribunal were pending before the Hon’ble Delhi High Court and, therefore, remanded the matter to the file of the learned Assessing Officer to take a view after the Hon’ble High Court decides the issue, in order to avoid the multiplicity of proceedings.
For the assessment year 2008-09, in by order dated 16/10/2014 and for assessment year 2009-10 in ITA No. 701/Del/2013 by order dated 16/10/2014, the Tribunal followed the view taken in assessee’s appeal for the assessment year 2006-07 and 2007-08 and remanded the matter to the file of the learned Assessing Officer to adjudicate the issue afresh in the light of the decision of the Hon’ble High Court.
In this set of circumstances, in view of the fact that the request of the assessee has not been objected by the other side, we are of the considered opinion that it would be just and proper to remand the matter for this assessment year also to the file of the learned Assessing Officer to adjudicate afresh in tune with the directions in and 6149/Del/2012 by order dated 27/9/2013 and in ITA Nos. 700 and 701 /Del/ 2013 for the assessment years 2008-09 and 2009-10 respectively by order dated 16/10/2014. Grounds of appeal are answered accordingly.
In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the Open Court on 6th January, 2020.