Section 80-IA – Deduction u/s. 80-IA – Industrial undertaking – Generation of power – Assessee owning three units and claiming deduction in respect of one (eligible) unit – Losses of earlier years of other two units cannot be notionally brought forward and set off against profits of eligible unit – Unit entitled to deduction u/s. 80-IA to be treated as an independent unitSection 80-IA – Deduction u/s. 80-IA – Industrial undertaking – Generation of power – Assessee owning three units and claiming deduction in respect of one (eligible) unit – Losses of earlier years of other two units cannot be notionally brought forward and set off against profits of eligible unit – Unit entitled to deduction u/s. 80-IA to be treated as an independent unit

20

CIT vs. Bannari Amman Sugars Ltd.;
412 ITR 69 (Mad)

Date of order: 28^th
January, 2019

A.Y.: 2004-05

Section
80-IA – Deduction u/s. 80-IA – Industrial undertaking – Generation of power –
Assessee owning three units and claiming deduction in respect of one (eligible)
unit – Losses of earlier years of other two units cannot be notionally brought
forward and set off against profits of eligible unit – Unit entitled to
deduction u/s. 80-IA to be treated as an independent unit

The
assessee manufactured and sold sugar. It operated three power generation units,
two in Karnataka and one in Tamil Nadu with a capacity of 16, 20 and 20
megawatts, respectively. For the A.Y. 2004-05, the assessee claimed deduction
u/s. 80-IA of the Income-tax Act, 1961 for the first time in respect of its 16
megawatts unit in Karnataka. The A.O. set off the losses suffered by the units
in Karnataka and Tamil Nadu against the profits earned by the eligible unit and
held that the assessee had no positive profits after such set-off and hence no
deduction was liable to be granted u/s. 80-IA.

The Tribunal found that independent power purchase
agreements were entered into by the assessee which contained different and
distinct terms and conditions. It held that the provisions of section 80-IA
were attracted only in the case of the specific unit which claimed deduction
and that consolidating the profit and loss of the three units of the assessee
by the lower authorities was untenable.

On appeal by the Revenue, the Madras High Court
upheld the decision of the Tribunal and held as under:

“i)   Section
80-IA(5) provides that in determining the quantum of deduction u/s. 80-IA, the
eligible business shall be treated as the only source of income of the assessee
during the previous year relevant to the initial assessment year and to every
subsequent assessment year up to and including the assessment year for which
the determination is to be made. Thus, each unit, including a captive power
plant, has to be seen independently as separate and distinct from each other
and as units for the purpose of grant of deduction u/s. 80-IA.

ii)   The mere
fact that a consolidated balance sheet and profit and loss account had been
prepared for the entire business would not disentitle the assessee to claim
deduction u/s. 80-IA in respect of only one undertaking of its choice. The
assessee had maintained separate statements and had filed before the
Commissioner (Appeals) detailing separate project cost and source of finance in
respect of each unit. The assessee had exercised its claim before the A.O. for
deduction u/s. 80-IA in respect of only the 16-megawatts unit at Karnataka.
Each unit, including a captive power plant, had to be seen independently as
separate and distinct from each other and as units for the purpose of grant of
deduction u/s. 80-IA.

iii)   In the light of the above discussion, the
questions of law are answered in favour of the assessee and against the Revenue
and the tax case (appeal) is dismissed.”