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2012 (9) TMI 786 - AT - Income TaxDeduction under section 80HHC AO compute turnover on pro-rata basis. The assessee has two separate business divisions - For both the divisions separate books of accounts are being maintained Held that - The assessee had rightly claimed deduction u/s 80HHC only in respect of business profits of export division. Where the assessee had maintained separate accounts and maintained trading receipts and profit and loss account separately for export sales and domestic sales and had produced sufficient material in support of the claim there is no warrant for disallowing any portion of export earnings pro rata by invoking the provisions of Sec. 80HHC(3)(b). Therefore assessee is entitled to deduction u/s 80HHC on the income of export division only. Appeal decides in favour of assessee Depreciation on P&M - Windmill was ready to use as the same was commissioned on 30.03.2004 - TNEB issued a certificate on 30.03.2004 certifying the commissioning and connection of the windmill AO contended that the said windmill did not generate a single unit of energy till the end of the FY i.e. 31.03.2004 - Held that - Following the decision in case of Orchid Chemicals (2012 (3) TMI 551 - ITAT CHENNAI), it is beyond any dispute that it has been officially recognized by the competent authority that the commissioning of the generators was completed in the impugned assessment year itself. This is the condition which is to be satisfied to claim depreciation on the windmill. Once the said condition is satisfied, the question of actual generation of electricity, perhaps in the next previous year, does not defeat the claim of the assesse, as the assessee is entitled for depreciation on commissioning itself. Therefore, assessee is entitled for depreciation. Appeal decides in favour of assessee.
Issues Involved:
1. Disallowance of Sales Tax 2. Withdrawal of Deduction under Section 80HHC 3. Deduction on Account of DEPB Receipts 4. Separate Books of Accounts for Export and Domestic Business 5. Depreciation on Second Windmill Issue-wise Analysis: 1. Disallowance of Sales Tax: The assessee contested the CIT(A)'s decision to sustain and enhance the disallowance of sales tax from Rs. 56,034/- to Rs. 69,371/-. The Tribunal upheld the CIT(A)'s decision, noting that the sales tax liability for March 2003 should be allowable in the assessment year 2003-04, not 2004-05. The CIT(A) corrected the Assessing Officer's mistake in disallowing the incorrect amount. Thus, ground no.3 of the appeal was dismissed. 2. Withdrawal of Deduction under Section 80HHC: The assessee argued that the CIT(A) erred in directing the withdrawal of the deduction under section 80HHC without proper notice, violating section 251(2). The Tribunal found that detailed facts were missing from the CIT(A)'s order and remitted the matter back to the Assessing Officer for model computation. Grounds related to section 80HHC and DEPB receipts were sent back for reconsideration. 3. Deduction on Account of DEPB Receipts: Similar to the section 80HHC issue, the Tribunal remitted the matter back to the Assessing Officer for model computation due to insufficient details in the CIT(A)'s order. The Tribunal emphasized the need for a comprehensive review and proper computation. 4. Separate Books of Accounts for Export and Domestic Business: The Tribunal addressed the issue of whether the assessee, maintaining separate books for export and domestic businesses, was entitled to full deduction on export profits. The Tribunal upheld the assessee's claim, citing that the business loss of the windmill division should not be set off against the export profits for section 80HHC deductions. The Tribunal referenced several High Court judgments, including CIT Vs. M.Gani and Co., to support this view. Thus, grounds no.6 to 8 of the appeal were allowed. 5. Depreciation on Second Windmill: The Revenue challenged the grant of depreciation on the second windmill, arguing it did not generate energy by the end of the financial year. The Tribunal found that the windmill was commissioned and ready for use on 30.03.2004, supported by certificates from the Tamil Nadu Electricity Board and the Electrical Inspectorate. The Tribunal held that the asset was used for business purposes within the relevant year, entitling the assessee to claim depreciation. The Tribunal cited previous Tribunal decisions and High Court judgments to support this conclusion, dismissing the Revenue's appeal. Conclusion: The Tribunal partially allowed the assessee's appeal and dismissed the Revenue's appeal. The Tribunal upheld the disallowance of sales tax, remitted the section 80HHC and DEPB issues back for reconsideration, allowed full deduction on export profits due to separate books of accounts, and confirmed the assessee's entitlement to depreciation on the second windmill.
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