2022 (6) TMI 1125 - HC - Income Tax

Nature of subsidy receipt - value of the MILIEV grant given by the Dutch government as a subsidy for purchase of wind turbine generator - transfer of right by the assessee to another company - Whether it could not be brought to tax in the hands of the assessee u/s.28(iv) when the assessee did not purchase the equipment, but transferred the right to another company? - HELD THAT - ITAT deleted the addition made by the assessing officer, on the ground that the grant was given by the Dutch Government as a matter of policy and it had nexus with the equipment and not with the buyer and hence, it was not possible for the purchaser to transfer the grant and the same was directly disbursed to the manufacturer. It was also pointed out by the appellate authorities that the revenue failed to produce any cogent material to prove that the assessee received over and above the disclosed consideration of Rs.2 crores; and there was no incriminating document made available against the assessee. The Appellate Authorities further noted that as per the agreements entered into the parties, the finance companies were allowed to operate the wind mills on lease and the payment of lease rentals was assured by Wescare and the assessee was to pay operational lease rental calculated as the electricity consumed x TNEB rates 25 paise per unit. We do not find any good reason to disagree with the reasonings so recorded by the appellate authorities. Addition in respect of off set credits alleged to have been received by the respondent / assessee - CIT(A) was of the view that there is absolutely no document on record to indicate with the authority that the assessee did receive offset credits and accordingly, deleted the addition made by the assessing officer, which finding of the CIT(A) was also affirmed by the Tribunal. In the absence of any concrete material, we have no option except to concur with the view taken by the appellate authorities. Electricity charges paid to Wescare - This court is of the opinion that without any substantive material, the respondent / assessee cannot be construed as owner of the wind mills and hence, the payment made by them to Wescare can be treated only as consumption charges for the electricity supplied to them, that too, for business purposes. As such, there is no question of law much less substantial question of law arisen for consideration.

Summary

Issues Involved:
1. Transfer of right by the assessee to another company.
2. No offset credit.
3. Electricity charges paid to Wescare as deduction.

Issue-wise Detailed Analysis:

1. Transfer of Right by the Assessee to Another Company:
The primary issue was whether the value of the MILIEV grant given by the Dutch government as a subsidy for the purchase of wind turbine generators (WTGs) could be taxed under section 28(iv) of the Income Tax Act when the assessee transferred the right to another company, DLWL. The Assessing Officer taxed the entire benefit of Rs.58.85 crores, treating the sale and subsequent transactions as sham, based on the ownership records with TNEB and certain communications. However, the appellate authorities disagreed, noting that the grant was directly disbursed to the manufacturer and not transferable by the purchaser. They found no evidence of the assessee receiving more than the disclosed Rs.2 crores, and the transactions were deemed genuine, focusing on the supply of electricity rather than ownership of WTGs.

2. No Offset Credit:
The Assessing Officer added Rs.33.87 crores for alleged offset credits, claiming the assessee was entitled to benefits from the Dutch government, facilitated by Lockheed Martin. The assessee contended that efforts to obtain such credits did not materialize, and no amount was received. The appellate authorities found no document indicating receipt of offset credits by the assessee and deleted the addition, a view upheld by the Tribunal due to lack of concrete material evidence.

3. Electricity Charges Paid to Wescare as Deduction:
The Assessing Officer disallowed electricity charges paid to Wescare, arguing the assessee was the owner of the wind turbines and received payments from TNEB. The appellate authorities, however, noted that the assessee only purchased some components initially, which were sold to DLWL, and the wind turbines were leased to Wescare. The payments were for electricity consumed for business purposes, and the lease arrangements were genuine. The Tribunal affirmed this, rejecting the Revenue's contention of public policy violation, as the payments were in terms of lease agreements and there was no TNEB policy violation.

Conclusion:
The court found no substantial question of law in the Revenue's appeals. The appellate authorities' findings were based on substantive materials, and the transactions were deemed genuine. The appeals were dismissed, affirming the Tribunal's decisions.