M/S GIRIRAJ ENTERPRISES,PUNE vs. DCIT, CENTRAL CIRCLE 1(1), PUNE, PUNE

IT(SS)A Nos.23.PUN/2024 to 25/PUN/2024 filed by the Revenue are directed against the separate orders dated 30.01.2024 of the CIT(A), Pune-11 relating to assessment years 2017-18 to 2019-20, respectively. Since identical grounds have been raised in these appeals, therefore, for the sake of convenience, these appeals were heard together and are being disposed of by this common order.

. Facts of the case in brief, are that the assessee is engaged in the business of dealership in various FMCG products, power generation business through windmills and solar plants. A search and seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) was conducted in the Malpani Group of cases of Sangamner on 17.02.2021 by the Investigation Wing, Pune. The case of the assessee was also covered during the search. The assessee filed its original return of income on 23.11.2015 declaring total loss of Rs.77,57,79,930/-. The return was processed u/s 143(1) of the Act on 09.11.2016. In response to the notice issued u/s 153A of the Act dated 25.10.2021, the assessee submitted its return of income on 17.11.2021 declaring the loss of Rs.77,57,79,930/-. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time.

trading. During the year Assessee has purchased the units of the JM Balanced fund - Dividend option of Rs. 10 crore on 16th and 17th of the October 2014. The all units purchased of Rs. 10 crore has been redeemed on 29th January 2015 for Rs. 8,99,93,198/-. The dividend is declared by the fund of Rs.5.20 per unit on record date 28/01/2015. Assessee has received the dividend of Rs.2,06,68,835/-29th January 2015. As Assessee is dealing in the business of shares and securities the purchases and sales are recorded in the financial statement as purchase and sales. There is no any short term loss in this transaction as it is trading activity. The business loss arises from this transaction was of Rs.1,00,06,802/- arises in this transaction. It is to be noted that Dividend received against the same is exempted u/s 10(35) of the Income tax. The Said fund is require to pay dividend distribution tax u/s 115R of the IT Act 1961 In order to establish the authenticity and genuineness of the said transaction it is respectfully submitted as under:

1. 1. That the assessee has applied for the allotment of units to JM Balanced Funds Dividend option Mutual fund by making a application and making the payment towards purchase of units via Cheque amounting to Rs.5,00,00,000/- on 16/10/2014 and Rs.5,00,00,000/- on 17/10/2014 2. The copy of the bank statement is filed and placed on record as per attachment. The Mutual fund allotted 39,74,776 units to the assessee in physical form.

3. The assessee sold these units on 29-01-2015, 4. All the payments towards sale consideration are received through account payee cheques and duly reflected in the bank account of the assessee and copies of corresponding bank statements are being filed and placed on record.

1. STT was duly charged by the fund which is reflected in the statement received and copies of the same are being submitted and placed on record.

1. The Assessee has received the dividend @ Rs. 5.20 per unit as declared the by fund on 28/01/2015 in his bank account The assessee is a genuine and regular trader in this business and has purchased and sold the units through banking channel There is no evidence that the purchaser was related to the assessee or even in know of the assessee.

Therefore, from the above stated factual propositions, it is crystal clear and duly evident that all the above stated transactions of purchase and sale of units of JM balanced funds divided option has been fully and duly accounted for in the Books of Account, Audited Financial Statements and ITR by the assessee, and all the transactions are fully and duly reflected in the bank statements of the assessee. Therefore, there is no lawful basis, whatsoever, to consider the said genuine and authentic transaction of the assessee, as a fictitious transaction and the statutory onus, as casted upon the assessee, by numerous binding judicial pronouncements of the Hon'ble ITATS and High Courts, regarding the establishment of authenticity and genuineness of the said transaction and the resultant kiss had been fully and completely discharged by the assessee. It is beyond the control of the assessee to verify how the dividend is paid by the fund. These mutual funds are controlled by the SEBI. The transaction carried by the assessee is genuine and transparent. Hence no disallowance of any clam can be made. The Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1950) [37 ITR 151] (SC) had held that no addition can be made on the basis of surmises, suspicion and conjectures in the case of CIT (Central) Kolkata vs Daulat Ram Rawatmull reported in [87 ITR 349], the Hon'ble Supreme Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros Vs CIT (37 ITR 271] held that suspicion however strong, cannot take the place of evidence. Since the transaction from the assessee is genuine no addition or disallowance can be made on this account.”

Balanced Fund- Dividend Option Regular scheme (the "Scheme") of JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus. In the process, the SEBI guidelines have been flouted by the J M Mutual Fund by classifying a portion of capital as distributable surplus and thereafter artificial payout to the Investor in the form of dividend. The conduct of assessee proves without doubt that it was well aware of the nuances of the scheme and knowingly and purposefully indulged in the sham scheme just to avail fictitious loss and exemptible dividend. Sham nature of dividend declared: 4.5 The SEBI vide its circular No. SEBI/IMD/CIR No 18/198647 /2010 dated March 15, 2010, has instructed fund houses as below. “3. Non availability of Unit Premium Reserve for dividend distribution i. The Ninth and Eleventh Schedule of SEBI (Mutual Funds) Regulations provide the accounting policies to be followed for determining distributable surplus and accounting the sale and repurchase of units in the books of the Mutual Fund. In this regard the format for Scheme Balance Sheet (including Abridged) provides for disclosure of Unit Premium Reserve. ii. It is clear from the above regulatory requirements that the Unit Premium Reserve, which is part of the sales price of units that is not attributable to realized gains, cannot be used to pay dividend. However, it is observed that some Mutual Funds are using Unit Premium Reserve for distribution of dividend. It is therefore reiterated that:

1. 1. When units of an open-ended scheme are sold, and sale price is higher than face value of the unit, part of sale proceeds that represents unrealized gains shall be credited to a separate account (Unit Premium Reserve) and shall be treated at par with unit capital and the same shall not be utilized for the determination of distributable surplus.

2. When units of an open-ended scheme are sold, and sale price is less than face value of the unit, the difference between the sale price and face value shall be debited to distributable reserves and the dividend can be declared only when distributable reserves become positive after adjusting the amount debited to reserves as per para 2(a) (ix) of Eleventh Schedule of SEBI (Mutual Funds) Regulations." 4.6 Thus, SEBI clearly says that Unit Premium Reserve shall be treated at par with Unit Capital and cannot be utilized to declare dividends and the mutual fund houses cannot distribute dividends from Unit Premium Reserve. It can distribute only from surplus generated by realising the gains on investments or dividends received from equity markets which it had invested. That means it has to invest and make a profit to distribute. However, said direction of the SEBI has not been followed by the mutual fund, as first it has artificially rigged the distributable surplus and then applied said ratio to future allotted units (before the planned dividend distribution date). Chronology of receipt of funds and distributable surplus in the scheme 4.7 The scheme started in April 1995 with AUM of Rs.10,000/- As on 30.09.2014 the AUM was only Rs.3.30 Crores. Within a short span of 2 months (01.08.2014 to 30.09.2014), taking the advantage of low AUM, the distributable surplus has been increased from Rs.7.82/- to Rs.16.13/- per unit by realizing profitable open positions. Needless to mention that said investments have been made long back, resulting in to substantial appreciation. It is to be noted that it won't be easy, if fund's AUM is large. During the period 01.10.2014 to 31.10.2014, mutual fund received an inflow of Rs. 1,310 crores, i.e. in a span of just 14 days. The closing AUM as on 31.10.2014 stood at Rs.1,364 crores. The scheme received another trench of inflow of Rs.427 crores in between 11.12.2014 to 25.12.2014 i.e. in a span of just 11 days. The closing AUM as on 25.12.2014 stood at Rs.1,776.84 crores. The scheme received another inflow of Rs.1517.31 Crores between 10.03.2015 to 25.03.2015 i.e. in a span of just 16 days. In fact, the scheme received an inflow of Rs.1,087.25 crores on 25.03.2015 i.e. on the date of dividend distribution. The AUM reached its peak of Rs.3,021.68 crores on that date. On 25.03.2015, the mutual fund declared dividend of Rs.8.87/- per unit i.e. nearly 40% of the unit value. Total dividend payout works out to Rs.1221.44 Crores. After the payout of dividend, the unit value decreases from Rs.22.02/- to Rs. 13.07/-. 4.8 In the process, the SEBI guidelines regarding crediting portion of capital into unit premium reserve has been violated. 4.9 Further, during the course of survey action, statement of the key persons responsible for the management of the mutual fund was recorded. They in their statements have categorically admitted that due process as mandated by the SEBI has not been followed by them. Summary of their statements recorded is as under: 4.10 Shri Sanjay Chhabaria, fund manager, admitted that there has been no application of mind in managing the fund and as per the advice of Shri Bhanu Katoch, CEO, he has increased the distributable surplus. He further stated that the due process of dividend distribution, as mandated by the SEBI guidelines were not followed in letter and spirit. Merely chain of documents was created so as to impress upon that the guidelines were being followed. 4.11 Shri Suvendu Rakshith, the head of sales team, stated that the sales team had been passing on the hints to the distributors about the prospective dividend distribution, much in advance, to lure the prospective clients. This violated SEBI dividend declaration policy that there should not be any type of communication regarding probable date and amount of dividend by the mutual fund before the decision taken by the trustee company. 4.12 Shri Deepan Doshi, Institutional Sales Head stated that he has never been part of any committee for deciding the dividend amount and has no role in any dividend declaration. 4.13 Mrs. Diana D'sa, the Compliance Head, JM AMC who is responsible for overseeing all the compliance as per SEBI Guidelines admitted that SOP has not been followed and documents are created to show that the SEBI guidelines are followed. 4.14 In view of the above, it can be safely deduced that by deploying unfair and manipulative methods, the mutual fund house has rigged up the distributable surplus, in a planned manner. While accounting the breakup of NAV on the date of investments, the fund house credits the IER (Income Equalization Reserve) account instead of UPR (Unit Premium Reserve), which is strictly against the guidelines specified by SEBI. Immediately after the dividend is declared, since there is not enough money to distribute, the capital amount introduced by the clients is distributed back to them in the form of tax-free dividend. Balance amount is redeemed at a loss, since the NAV falls and the investors book a short- term capital loss which looks genuine but is an actually fictitious and preplanned loss. 4.15 The assessee, in order to reduce its tax liability, entered into these sham transactions and received dividend and Short-Term Capital Loss which has been claimed as business loss. As a result, the dividend is not eligible for deduction u/s 10(35) of the IT Act and short- term loss is also not eligible for adjustment with business/capital gains, being generated on account of sham transaction.

5. The amount of capital loss has been adjusted by the assessee against business income. Assessee is one of the beneficiaries of this arranged Sham Transactions and its claim of dividend income and business loss is required to be disallowed / taxed accordingly as per computation as under:

Particulars Amount (in Rs.) Redeemed Value of MF on 29.01.2015 8,99,93,198/- Add: Dividend Received 2,06,68,835/- Business Loss claimed 1,00,06,802/-

Total Receipts 12,06,68,835/- Less: Initial Investment Cost 10,00,00,000/- Income earned 2,06,68,835/- 6 As seen above in table, the assessee has earned business income of Rs.1,06,62,033/- which needs to be brought to the tax accordingly. Hence, the amount of Rs.1,06,62,033/- is hereby added to the total income. Penal proceedings u/s 271(1)(c) of the Act are initiated. [Rs.2,06,68,835/-]”

11. Referring to the decision of the Hon‟ble Bombay High Court in the case of Karan Maheshwari vs. ACIT & Anr. vide Writ Petition (L) No.37211 of 2022, order dated 08.03.2024, he submitted that the assessee in this case had also invested in J M Balance Fund. The assessee received dividend and thereafter the units were sold which resulted in loss. The loss was allowed and the addition was deleted.

13. Referring to the decision of the Jaipur Bench of the Tribunal in the case of Agencies Rajasthan Pvt. Ltd. reported in 109 taxmann.com 139, he submitted that in this case also the assessee had invested in J M Mutual Fund and had received dividend. Subsequently, the units were sold at a loss. The Assessing Officer held that it was a colourable device. The Tribunal held that there was no evidence to prove the connivance of the assessee with J M Mutual Fund and accordingly the addition was deleted. He accordingly submitted that the addition made by the Assessing Officer and sustained by the CIT(A) is not in accordance with law and therefore, the same should be deleted.

15. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the CIT(A).

“19 In the notice issued under Section 148A(b) of the Act, the Assessing Officer alleges that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus and the investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss. These are allegations against JM Financial and do not implicate petitioner in any manner. There is nothing to indicate that petitioner had participated knowingly in a sham transaction to reduce his tax liability or to earn Gauri Gaekwad 16/17 907.WPL-37211-2022.doc dividend or book short term capital loss. Infact in the notice, in the first paragraph, it says "....... In the course of survey, it was found that JM Balanced Fund-Annual Dividend Option Regular Scheme (the Plan) of JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus ........". In the next paragraph, it says "....... investors, in order to reduce their tax liability, entered into these sham transactions and received dividend and short term capital loss ....... The assessee is one the persons who claimed fictitious short term capital loss .......". In the next paragraph, it says " ....... the assessee is one of the beneficiaries, who have received dividend and claimed fictitious losses in equity / derivative trading in JM Equity Hybrid Fund-Quarterly Dividend of JM Financial Asset Management Limited, to the tune of Rs.3,41,12,651/- during the F.Y. 2015-16 relevant to the A.Y. 2016-17 .......". Therefore, the Assessing Officer is also not clear whether the assessee had booked loss or claimed dividend in the JM Balanced Fund - Annual Dividend Option Regular scheme or JM Equity Hybrid Fund- Quarterly Dividend. This also indicates non application of mind by the Assessing Officer.”

cannot be said that transaction entered into by the assessee is fictitious or sham. With respect to the applicability of provisions of section 94 (7) of the act, the lower authorities have also accepted that the assessee fulfils the condition by which the transaction insecurities cannot be considered for avoidance of tax. Assessee purchased such securities and 17/6/2015 when the record date was 18 June 2015 and securities were sold on 28/3/2016. The lower authorities have denied the exemption of dividend income and allowability of capital loss despite transaction is not falling under section 94 (7) of the act holding it to be sham and fictitious transaction is devoid of any merit. Accordingly on the merits also, orders of the lower authorities are reversed and ground number 4 – 7 of the appeal are allowed.”

IT(SS)A Nos.23/PUN/2024 to 25/PUN/2024 (AYs 2017-18 to 2019-20) (Revenue)

26. During the course of assessment proceedings the Assessing Officer noted that the assessee has claimed deduction of Rs.119,64,11,350/- u/s 80IA(4)(iv)(a) of the Act towards profit earned from the wind power generation of its windmills and also from solar division. The Assessing Officer asked the assessee to explain as to why the said deduction u/s 80IA of the Act should not be disallowed in view of the provisions of section 80IA(5) of the Act. The assessee in response to the same filed a detailed reply justifying the claim of deduction u/s 80IA(4) of the Act. It was submitted that an identical issue has already been decided in the case of ACIT vs. Damodar Jagannath Malpani by the Pune Bench of the Tribunal wherein it has been held that the deduction u/s 80IA(4) of the Act is available to each undertaking separately and the entire power generation business cannot be treated as one undertaking. Relying on various decisions it was submitted that the issue has been decided in favour of the assessee.

windmill project as 'separate undertaking' of the assessee. Section 80IA envisages only two classification of the business of the assessee viz. eligible business' (as per explicit wording of section 80IA(5) and non eligible business. Regarding assessee's claim on merits treating each of the unit as separate undertaking and not entire power generation business as one undertaking, assessee has also relied on various case laws. However, it is seen that this issue has also not attained finality and Hon'ble Supreme Court has not yet decided the issue on merits. Further, the department in the case of M/s D J Malpani for AY 2013-14 is in appeal before Hon'ble Bombay High Court on similar issue and issue has not been finally adjudicated and still alive. As such, request of assessee to treat each windmill project as separate undertaking and thereby to allow the claim of deduction thereupon u/s 80IA(4) is untenable and accordingly claim of deduction u/s 80IA is required to be disallowed. 4.5.3 As per section 80IA(5) profits and gains from Eligible Business for the purpose of determining the quantum of deduction is required to be computed as if such eligible business were the only source of income of the assessee during the year. During the year assessee from Eligible Business' of Power Generation / Renewable Energy, has gross income which is a Loss of Rs. (-) 105,18,64,000/-. The deduction can be allowed only when there is positive income. Hence, question of allowing deduction u/s 80IA(4) of the Act does not arise. Therefore claim of deduction made u/s 80IA(4) of Rs.119,64,11,350/- is not allowable. In view of the above discussion, entire claim of assessee u/s 80IA(4) of the Act amounting to Rs.119,64,11,350/- is disallowed and is added back to the total income of the assessee. Penalty proceedings u/s 270A(1) of the Act are initiated separately for under reporting of income.”

25. The appellant has further submitted that an identical issue was involved in appellant's sister concern case namely M/s DJ Malpani for earlier assessment years wherein the Hon'ble ITAT, Pune Bench has decided the issue in assessee's favour. The appellant has also relied on various other decisions of different High Courts and ITAT, as mentioned in its written submission.

19 GS Wadi II (MS) 16.80 2014-15 2018-19 No 80IA deduction Wind MW claimed from the year. 20 Hatuniya (MP) 30 MW 2014-15 2018-19 No 80IA deduction Wind claimed from the year. 21 Ameni (MH) 6 MW 2016-17 2018-19 No 80IA deduction Wind claimed from the year. There was a loss of Rs.6,78,42,893/- during the year 22 Dhar (MP) 21 MW 2015-16 - No 80IA deduction Wind claimed from the year. There was a loss of Rs.67,26,42,893/- during the year 23 Tonk Khurd (MP) 22.50 2016-17 2018-19 No 80IA deduction Wind MW claimed from the year. There was a loss of Rs.136,59,47,946/- during the year 24 Vejalpur Morbi I (GJ) 2016-17 2019-20 No 80IA deduction Wind 10.50 MW claimed from the year. There was a loss of Rs.33,58,05,859/- during the year 25 RJ-BAP 33 MW 2012-13 2018-19 No 80IA deduction Solar claimed from the year. 26 MH CSIA-II 0.4121 MW 2016-17 2018-19 No 80IA deduction Solar claimed from the year. There was a loss of Rs.2,37,74,030/- during the year 27 MH Club & Resort-I 2016-17 2018-19 No 80IA deduction Solar (0.0816 MW) claimed from the year. There was a loss of Rs.41,96,829/- during the year 28 MH Dhruv Academy 2016-17 2018-19 No 80IA deduction Solar claimed from the year. There was a loss of Rs.52,34,720/- during the year 29 MH Malpani House 2016-17 2018-19 No 80IA deduction Solar claimed from the year. There was a loss of Rs.14,34,044/- during the year 30 MH-Club & Resort-II 2016-17 2019-20 No 80IA deduction Solar claimed from the year. There was a loss of Rs.7,26,966/- during the year 31 MH-M Food Estate 2016-17 2019-20 No 80IA deduction Solar claimed from the year. There was a loss of Rs.23,05,267/- during the year

27. It is further seen that the assessing officer has accepted that the above- mentioned wind-mills as well as solar plants are otherwise eligible for deduction u/s 80IA(4) of the Act. The only reason for disallowing the claim is that as per

assessing officer, all the above-mentioned units should be aggregated and considered as a single eligible business. The issue as to whether each windmill is required to be treated as 'separate undertaking' or all the windmills should be aggregated, has been examined by the Hon'ble ITAT Pune on various occasions. Some of these decisions are as under. 27.1 In the case of M/s J-Sons Foundry Pvt Ltd in for AY 2008-09, the Hon'ble Tribunal held that each windmill should be considered as separate undertaking eligible for deduction u/s 80IA and the deduction should be computed independently for each unit and not on consolidated basis. The relevant portion of this decision is as under:- 15. Against the decision of the Ld. CIT(A), the Revenue is in appeal before us. We have heard the rival submissions of the parties and perused the record. Admittedly, the assessee is power general through the wind mills at 3 different locations i.e. in Tamilnadu, Panchgani and Satara. The wind mills are commissioned and erected in different assessment years as noted by the authorities below. Assessee is maintaining separate books of accounts in respect of 3 wind mills and working out the profit or losses. Though the first wind mill was erected and commissioned in the A.Y. 2002- 03, there were consistent losses up to the A.Y. 2007-08 and assessee did not opt for claiming the deduction u/s 80IA(2) of the Act. So far as A. Y. 2008- 09 is concerned, assessee opted for claiming the deduction u/s 80IA(2) treating the said assessment year (A. Y.) as an initial assessment year as there was the profit in Satara wind mill but losses in the Tamil Nadu wind mill and Panchgani wind mill. If we look at the scheme of the section 80IA(2), it speaks about the "undertaking" or "enterprise" and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results are separately worked out. As per sub-sec (5) of section 80IA, for computing the deduction u/s 80IA(2), the eligible business is to be treated as the only source of income. Sub- sec (5) of section 80IA has been explained by the Hon'ble High Court and Kerala in the case of CIT Vs. Accel Transmatic Systems Ltd. 230 CTR 206 (Ker) which has been followed by the Ld. CIT(A). The term "business used in sub-sec.(5) section 80IA in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction "undertaking" or "Enterprise" as such is to be considered. Sec. 80IA(2) is charging sections for determining basic eligibility and there is no mention of word "business". Sub-sec (5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub sec. (2) of Sec 80IA. It is well settled principle of interpretation of statutory provision that they are to be interpreted harmoniously to make workable to give intended results. Hence, as rightly held by Ld. CIT(A) term "business" used in sec.80IA(5) is to be construed and understood to mean "business" or "undertaking or enterprise". In our opinion, the Ld. CIT(A) in his well-reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profits. Another unit engaged in the same business for the purpose of computing the deduction u/s 80IA. We find no reason to interfere with the findings of the Ld. CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the revenue are dismissed.

27.2 An identical issue was involved in the case of appellant's sister concern namely D.J. Malpani vs ACIT in to 1154/PN/2013 for Ays. 2007-08 to 2010-11 wherein following the decision in the case of J-Sons Foundry (supra), the Hon'ble Tribunal held thatthe deduction should be computed independently for each unit and not on consolidated basis. The relevant portion of this decision for AY 2007-08, is as under- 57. After hearing both the sides, we find the Coordinate Bench of the Tribunal in the case of J-Sons Foundry Pvt. Ltd. (Supra) while dismissing the grounds raised by the Revenue on this issue has observed as under 15. Against the decision of the Ld. CIT(A), the Revenue is in appeal before us. We have heard the rival submissions of the parties and perused the record. Admittedly, the assessee is power general through the wind mills at 3 different locations ie. In Tamilnadu, Panchgani and Satara. The wind mills are commissioned and erected in different assessment years as noted by the authorities below. Assessee is maintaining separate books of accounts in respect of 3 wind mills and working out the profit or losses. Though the first wind mill was erected and commissioned in the A.Y. 2002- 03, there were consistent losses up to the A.Y. 2007-08 and assessee did not opt for claiming the deduction u/s 80IA(2) of the Act. So far as A.Y. 2008-09 is concerned, assessee opted for claiming the deduction u/s 80IA(2) treating the said assessment year (A. Y.) as an initial assessment year as there was the profit in Satara wind mill but losses in the Tamil Nadu wind mill and Panchgani wind mill. If we look at the scheme of the section 80IA(2), it speaks about the "undertaking" or "enterprise" and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results are separately worked out. As per sub-sec. (5) of section 80IA, for computing the deduction u/s 80IA(2), the eligible business is to be treated as the only source of income. Sub-sec. (5) of section 80IA has been explained by the Hon'ble High Court and Kerala in the case of CIT Vs. Accel Transmatic Systems Ltd. 230 CTR 206 (Ker) which has been followed by the Ld. CIT(A). The term "business" used in sub-sec. (5) section 80IA in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction "undertaking" or "Enterprise" as such is to be considered. Sec. 80IA(2) is charging sections for determining basic eligibility and there is no mention of word "business". Sub-sec. (5) of Sec. 80IA speaks of business but same is to be construed as business of "undertaking" or "Enterprise" as referred to in Sub-sec. (2) of Sec.80IA. It is well settled principle of interpretation of statutory provision that they are to be interpreted harmoniously to make workable to give intended results. Hence, as rightly held by Ld. CIT(A) term "business" used in sec. 80IA(5) is to be construed and understood to mean "business" or "undertaking or enterprise. In our opinion, the Ld.CIT(A) in his well reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profits. Another unit engaged in the same business for the purpose of computing the deduction u/s 80IA We find no reason to interfere with the findings of the Ld.CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the Revenue are dismissed."

58. Respectfully following the decision of the Coordinate Bench of the Tribunal cited (Supra) and in absence of any contrary material brought to our notice we hold that each phase of windmill has to be considered as separate undertaking eligible for deduction u/s 80IA and therefore deduction u/s.80IA(4) should have been computed independently for each phase and not on consolidated basis. The grounds raised

by the assessee on this issue is accordingly allowed. (emphasis supplied) 27.3 The above decision has been followed by the Hon'ble ITAT, Pune while deciding appeals in the case of M/s D.J. Malpani for subsequent assessment years ie. AYs 2011-12 & 2012-13 in & 1468/PUN/2015 dated 16.10.2017 and for AY 2013-14 in dated 01/08/2019. Thus, in the case of appellant's sister concern, the issue stands decided in appellant's favour for A.Ys. 2007-08 to 2013-14. 27.4 In the case of M/s LB Kunjir for A.Ys. 2012-13 to 2014-15 in ITA No. 76/PUN/2019, ITA No. 2614/PUN/2017 and ITA No. 07/PUN/2018, the Hon'ble ITAT, Pune Bench has allowed the claim, by observing as under.-

7. The assessee has claimed deduction u/s. 80IA(4) separately for each unit of windmill. It is an undisputed fact that the date of commencement of operation of each windmill is different. The stand of the Revenue is that instead of claiming deduction u/s. 80IA(4) on each windmill as separate unit, the assessee should have computed deduction on all the windmills as single undertaking. We find that the issue whether deduction u/s. 80IA(4) is to be computed on each windmill unit separately or on consolidated basis was considered by the Co-ordinate Bench in the case of M/s. D.J. Malpani Vs. ACIT (supra). The Tribunal after considering the earlier decision rendered in the case of Dy Commissioner of Income Tax Vs. J-Sons Foundry Pvt. Ltd. (supra) concluded as under:

58. Respectfully following the decision of the Coordinate Bench of the Tribunal cited (Supra) and in absence of any contrary material brought to our notice we hold that each phase of windmill has to be considered as separate undertaking eligible for deduction u/s 80IA and therefore deduction uls. 80IA(4) should have been computed independently for each phase and not on consolidated basis. The grounds raised

by the assessee on this issue is accordingly allowed."

8. Since, the issue has already been considered by the Tribunal and has held that each unit of windmill has to be considered separately for computing deduction u/s. 80IA(4), we see no reason to deviate from the view already taken. No contrary judgment has been placed on record before us by the Revenue. The Id. DR has pointed that the Department has filed appeal against the Tribunal's decision in the case of M/s. D.J. Malpani Vs. ACIT (supra), however, no order by the Hon'ble High Court either staying or reversing the aforesaid decision of Tribunal has been furnished by the Id. DR.

9. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in allowing assessee's claim of deduction u/s. 80IA(4) considering each windmill as separate unit for allowing deduction u/s, 801A(4) of the Act. Hence, the impugned order is upheld and the appeal of Revenue is dismissed. (emphasis supplied) 27.5 Thus, the jurisdictional Tribunal has consistently held that the deduction u/s 80IA should be computed independently for each unit and not on consolidated basis. 28.1 The Hon'ble Karnataka High Court in the case of CIT vs Karnataka Power Corporation Limited 127 taxmann.com 282 (Karnataka) held that the assessee is entitled to deduction u/s 80IA without setting-off of loss of loss-making units, against income of its profit-making units. 28.2 The same principle has been laid down by Hon'ble Bombay High Court in the case of CIT vs Maharashtra Hybrid Seeds Co Ltd [2021] 133 taxmann.com 43 (Bombay) wherein the jurisdictional High Court held that deduction under section 80-IA has to be computed unit-wise and not for business as a whole; therefore, assessee-company was to be allowed deduction under section 80-IA in respect of its two eligible units even if it had claimed loss under head of its total business income. The relevant portion of this judgement is as under:- "Where the gross total income of an assessee includes any prollts and gains derived from any business of an industrial undertaking, there shall be allowed, in computing the total income of the assessee, a deduction from "such profits and gains" of an amount equal to the percentage specified in sub-section (5) and for such number of assessment years specified in sub- section (6). Therefore, it provides for a deduction from "such profits and gains from any business of an industrial undertaking where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking It is quite clear that each industry must be or each unit must be considered on its own working only when adjudging its entitlement to the deduction under section 80-IA. It cannot be allowed to suffer because it keeps company with some other industry or unit in the hands of the assessee. In the application of section 80-IA, the profits and gains earned by an industry mentioned in that section cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. This view is confirmed by clause (i) (a) of sub-section (5) of section 80- IA. (emphasis supplied) 28.3 Hon'ble Madras High Court in the case of CIT vs Bannari Amman Sugars Limited[2019] 104 taxmann.com 1 (Madras) held thatfor the purposes of grant of deduction under section 801A of the Act, each unit has to be seen independently as separate and distinct from each other. 28.4 Similar view was taken by Hon'ble Delhi High Court in the case of CIT vs Dewan Kraft System Pvt Ltd (2007) 160 Taxman 343 (Del), where the Hon'ble Delhi High Court, after considering relevant provisions of the Act, held that for the purpose of deduction u/s 801A, each unit shall be treated as independent unit and same has to be treated as only source of income of the assessee for the purpose of computing deduction u/s 801A of the Act. The relevant findings of the Hon'ble Court are as under:- 13. Perusal of the above provision shows that it is a distinct and separate deeming provision which lays down the special method of computing the profits and gains entitled to deduction under section 80-IA of the Act. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period in which the assessee is entitled to deduction under section 80-IA of the Act, this provision will be applied as if the industrial unit is an independent unit and is the one and only source of income possessed by the 14. It is clear that while computing deduction under section 80-IA of the Income-tax Act, 1961, the profits and gains of Kalamb unit for the purpose of determining the quantum of deduction under section 80-IA(5) of the Act is to be computed if such eligible business of the said unit is the only source of income of the assessee. The Assessing Officer mixed the profits of the Kalamb unit with the profits of units at Delhi and NOIDA and, thus, he erroneously restricted the deduction to the extent of business income and this was done by him in total disregard of the previsions of sub-section (7) of section 80-IA of the Act as mentioned above.

Now the controversy to be resolved is whether the power generation segment of the assessee is an eligible business or each windmill is a separate unit eligible for deduction without considering profit or loss of other windmill. The assessee claims that each windmill shall be considered as an eligible unit for the purpose of determination of deduction. The assessee also cited certain judicial precedents in support of its arguments.

9. A similar issue has been considered by Hon'ble Delhi High Court in the case of CIT vs Dewan Kraft System Pvt Ltd (2007) 160 Taxman 343 (Del), where the Hon'ble Delhi High Court, after considering relevant provisions of the Act, held that for the purpose of deduction u/s 80IA, each unit shall be treated as independent unit and same has to be treated as only source of income of the assessee for the purpose of computing deduction u/s 80IA of the Act. The relevant findings of the Hon'ble Court are as under.- "Section 80-IA(7) shows that it is a distinct and separate deeming provision which lays down the special method of computing (he profits and gains entitled to deduction under section 80-IA. Moreover, this provision is of overriding nature providing specifically that during each of the assessment years in the tax holiday, period m which the assessee is entitled to deduction under section 80-IA, this provision will be applied as if the industrial unit is an independent unit and is the one and only source of income possessed by the assessee (Para 13 J If is dear that while computing deduction under section 80-IA, the profits and gains of Kalamb unit for the purpose of determining the quantum of deduction under section 80-IA(5) were to be computed as if such eligible business of the said unit was the only source of income of the assessee. The Assessing Officer mixed (he profits of the Kalamb unit with the profits of units at Delhi and NOIDA and, thus, he erroneously restricted the deduction to the extent of business income and that was done by him in total disregard of the provisions of subsection (7) of section 80-IA. (Para 14] Thus, the Kalamb unit, being the only unit of the assessee eligible for deduction under section 80-IA, was to be treated as an independent unit and the same was to be treated as the only source of income for the assessee for the purpose of computing deduction under section 80- IA. The deduction claimed by the assessee under section 80-IA, thus, was in accordance with said provisions and as such there was no 10. In this view of the matter and being consistent with the view taken by the co-ordinate bench, which is further supported by the decision of Hon'ble Delhi High Court in the case of CIT vs Dewan Kraft Systems Pvt Ltd (supra), we are of the considered view that the Ld. CIT(A) was right in allowing the benefit of deduction u/s 801A in respect of each unit without setting off of loss incurred by other eligible units. Hence, we are inclined to uphold the findings of L.d. CIT(A) and dismiss appeal filed by the revenue. (emphasis supplied) 30. It is further seen that for A.Y. 2013-14 and A.Y. 2014-15 in appellant's own case, the assessing officer has accepted the methodology adopted by the appellant and allowed the claim of deduction u/s 80IA(4) while completing the assessment u/s 143(3) of the Act on 30.03.2016 and 20.12.2017 respectively. It has also been submitted by the appellant that while completing original assessment u/s 143(3) for A.Y. 2017-18 on 28/12/2019 in appellant's own case, the assessing officer allowed the claim of deduction u/s 801A(4) on similar facts and no disallowance was made.

29. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs.119,64,11,350/ on account of disallowance of deduction u/s 80IA(4) of the Act without appreciating the fact that during the year gross income of the assessee from 'Eligible Business' of Power Generation/Renewable Energy was a loss of Rs. (-) 105,18,64,000/- and the deduction can be allowed only when there is positive income.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the combined reading of section 80IA(4) & 80IA(5) of the Act makes it amply clear that the deduction is with reference to the profits derived from eligible business of the assessee and not with reference to the profits derived from every unit engaged in the eligible business.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) decided the appeal in favour of assessee without appreciating the facts that there is no mandate u/s 80IA to treat each windmill project as 'separate undertaking of the assessee and Section 80IA envisages only two classification of the business of the assessee viz. 'eligible business (as per explicit wording of section 80IA(5)) and non-eligible business.

4. The appellant craves leave to add, amend, modify or alter any of the grounds.

31. The Ld. Counsel for the assessee on the other hand while relying on the order of the CIT(A) submitted that similar disallowance was made by the Assessing Officer in assessment years 2013-14 and 2014-15 which has been deleted by the Tribunal in assessee‟s own case as well as in the case of sister concern D J Malpani. Therefore, merely because the Revenue‟s appeal is pending before the Hon‟ble High Court, the same cannot be the basis to deny the claim of deduction u/s 80IA(4) of the Act especially when such order has not been reversed and no adverse decision has been brought on record by the Ld. DR. Further, the Co-ordinate Bench of the Tribunal in the case of M/s. L.B. Kunjir vs. DCIT vide order dated 26.03.2024 for assessment year 2020-21 under identical circumstances has dismissed the appeal filed by the Revenue challenging the order of the CIT(A) in deleting the disallowance made u/s 80IA(4) of the Act.

No. 7 relates to methodology of computation of deduction u/s 801A (4) as adopted by the AO by considering difference phases of windmills as separate undertaking. The Ld. CIT(A) following his order for A.Y.2005-06 held that in a fresh claim made by the assessee unless it is supported by some incriminating material found during the course of search the claim cannot be entertained during proceedings u/s.153A. He accordingly dismissed the above ground raised by the assessee.

55. The Id. Counsel for the assessee referring to the decision of the Pune Bench of the Tribunal in the case of J. Sons Foundry Pvt. Ltd. Vs. DCIT and vice versa vide consolidated order dated 30.01.2013 for A.Y.2007-08 and 2008-09 he submitted that the Tribunal in the said decision held that each windmill is to be considerate as a separate undertaking.

56. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).

57. After hearing both the sides, we find the Coordinate Bench of the Tribunal in the case of J. Sons Foundry Pvt. Ltd. (supra) while dismissing the grounds raised by the Revenue on this issue has observed as under:

"15. Against the decision of the Ld. CIT(A), the Revenue is in appeal before us. We have heard the rival submissions of the parties and perused the record. Admittedly, the assessee is power general through the wind mills at 3 different locations ie in Tamilnadu, Panchgani and Satara. The wind mills are commissioned and erected in different assessment years as noted by the authorities below. Assessee is maintaining separate books of accounts in respect of 3 wind mills and working out the profit or losses. Though the first wind mill was erected and commissioned in the A.Y. 2002-03, there were consistent losses up to the A.Y. 2007-08 and assessee did not opt for claiming the deduction u/s 801A(2) of the Act. So far as A.Y. 2008-09 is concerned, assessee opted for claiming the deduction u/s 80IA(2) treating the said assessment year (A.Y.) as an initial assessment year as there was the profit in Satara wind mill but losses in the Tamil Nadu wind mill and Panchgani wind mill. If we look at the scheme of the section 80IA(2), it speaks about the "undertaking or "enterprise and not the business of the assessee. Admittedly, three wind mills at the 3 locations are independently operated and the financial results are separately worked out. As per sub-sec. (5) of section 801A, for computing the deduction u/s 80IA(2), the eligible business is to be treated as the only source of income. Sub-sec.(5) of section 801A has been explained by the Hon'ble High Court and Kerala in the case of CIT Vs. Accel Transmatic Systems Ltd. 230 CTR 206 (Ker) which has been followed by the Ld. CIT(A). The term "business" used in sub-sec.(5) section 801A in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction undertaking" or "Enterprise" as such is to be considered. Sec 80LAC) is charging sections for determining basic eligibility and there is no mention of word business Sub-sec (5) of Sec. 80IA speaks of business but same is to be construed as business of undertaking or Enterprise as referred to in Sub- sec (2) of See 80IA. It is well settled principle of interpretation of slutatory provision that they are to be interpreted Harmoniously to make workable to give intended results. Hence, as rightly held by Ld. CIT(A) term "business" used its sec. 80IA(5) is to be construed and understood to mean "Business" or ITA Νο. 815, 891, 1494 & 1600/PN/2011 Ms. J. Sans Foundry Pvt. Ltd., Sangli 'undertaking or enterprise de our opinion, the Ld. CITIA) in his well reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profit of another unit engaged in the same business for the purpose of computing the deduction u/s 801A. We find no reason to interfere with the findings of the Ld. CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the revenue are dismissed.

by the assessee on this issue is accordingly allowed"

7. Considering the above facts, it is evident that the Tribunal relied on the decision of Coordinate Bench of the Tribunal in the case of J-Sons Foundry Pvt. Ltd Vs. DCIT (supra) for A.Yrs. 2007-08 and 2008-09 order dated 30.01.2013 while grunting relief to the assessee in appeal for the A.Ys. 2007-08 to 2010-11. It is now a settled legal proposition that "every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profit of another unit engaged in the same business for the purpose of computing the deduction u/s 801A Therefore, we are of the opinion that order of the CITA) on this issue is fair and reasonable and it does not call for any interference. Accordingly, ground No. 2 raised by the Revenue in dismissed.

8. The other issue raised in the Ground No. 3 by the Revenue relates to initial assessment year. Regarding this issue, Ld. Counsel submitted that the same issue also stands covered by the order of the Tribunal in the assessee's own case (supra) for A. Yrs 2007-08 to 2010-11 (supra.) Bringing our attention to para 59 to 65 of the order of Tribunal, which is placed at page No. 16 and 18 of the paper book, Ld. Counsel submitted that the Tribunal held the issue in favour of the assessee. As such, the assessee has option to choose the initial assessment year.

9. We have heard both parties and perused the said order of the Tribunal and relevant portion is extracted as under: "

by the assessee are accordingly allowed."

10. Considering the above, it is evident that the initial assessment year for the assessee for claiming deduction u/s.80IA (4) r.w.s (5) is the issue adjudicated by the Tribunal in favour of the assessee. While granting relief in para 65 of the Tribunal order, the Tribunal relied on the decision of Coordinate Bench of the Tribunal in the case of Poonawala Estate Stud & Agro Farm Pvt. Ltd. reported in 136 TTJ (Pune) 236 and also following the judgment of Hon'ble Madras High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd reported in 340 ITR 477. As such, Ld. DR could not bring any contrary decision on the issue under consideration. Thus, the initial assessment year constitutes the assessment year in which the deduction u/s.80IA of the Act is first claimed by the assessee after exercising his option as per the provisions of Section 80IA(2) of the Act. Therefore, we are of the opinion that the relief granted by the CIT(A) on this issue does not require any interference. Accordingly, ground No.3 raised by the Revenue is dismissed.

7. Before us, Revenue has not pointed out any distinguishing feature in the facts of the present case and that of assessee's own case in A.Ys. 2011- 12 and 2012-13 in & 1383/PUN/2015 order dt. 16.10.2017 (supra) nor has placed any material on record to demonstrate that the decision of Pune Tribunal in assessee's own case in A.Ys. 2011-12 and 2012-13 which has been relied upon by Ld.CIT(A) has been set aside / overturned or stayed by the Higher Judicial Forum. In view of the aforesaid facts, we find no reason to interfere with the order of Ld.CIT(A) and thus the grounds of Revenue are dismissed.”

14. Similar view has been taken by the Co-ordinate Bench of the Tribunal in the cases of M/s. J-Sons Foundry Pvt. Ltd. vs. DCIT (supra) and m/s. L.B. Kunjir vs. DCIT (supra) and various other decisions. Since the issue has already been decided in favour of the assessee by the decisions of the Co-ordinate Benches of the Tribunal in assessee’s own case as well as various other decisions, therefore, merely because the Revenue has not accepted the decision of the Tribunal and has challenged the decision before the Hon’ble High Court which is pending, cannot be the basis for taking a contrary view than the view already taken by the Tribunal in the case of the assessee. We, therefore, uphold the order of the CIT(A) and dismiss the grounds raised by the Revenue.”

Order pronounced in the open Court on 17th October, 2024.