2014 (9) TMI 831 - HC - Income Tax

Claim of deduction u/s 80IB income from power generated by the Wind Mill - Whether the Tribunal was right in holding that the assessee is entitled to the claim of deduction under Section 80IB in respect of the income relatable to the power generated by the Wind Mill that was consumed by the assessee by treating the said income as income derived fromthe eligible undertaking Held that - Following the decision in Tamilnadu Petro Products Ltd. Versus Assistant Commissioner of Income-tax 2010 (11) TMI 645 - MADRAS HIGH COURT - the main requirement for claiming the exemption is that the assessee should have set up an undertaking or an enterprise and from and out of such an undertaking or an enterprise set up, any profit or gain is derived, such profit or gain derived by the assessee can be deducted in its entirety for a period of 10 years starting from the date of functioning of the set up - profit or gain could be obtained by one s own consumption of the outcome of any such undertaking or business enterprise - there is no difficulty in holding that captive consumption of the power generated by the assessee from its own power plant would enable the assessee to derive profits and gains by working out the cost of such consumption of power the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Interpretation of Section 80IB for deduction in respect of income from power generated by wind mills consumed by the assessee.

Analysis:
1. The case involved the interpretation of Section 80IB of the Income Tax Act regarding the eligibility of the assessee to claim a deduction in respect of income from power generated by wind mills consumed by the assessee. The assessee, a manufacturer of boilers engaged in the business of generating electricity through wind mills, had filed its return of income declaring a total income. The Assessing Officer disallowed a portion of the claimed deduction under Section 80IA, leading to an appeal by the assessee. The Commissioner of Income Tax (Appeals) upheld the decision of the Assessing Officer, prompting the assessee to appeal further before the Income Tax Appellate Tribunal.

2. The Tribunal, in its decision, supported the contentions of the assessee, stating that the income derived from the generation of electricity was eligible for deduction. It emphasized that the assessee, instead of receiving cash benefits, was obtaining credits for the units supplied to the Government agency, and thus, the income earned did not fall within the term 'attributable to.' The Revenue, dissatisfied with the Tribunal's decision, filed the present Tax Case (Appeal) before the High Court.

3. The High Court, in its judgment, referred to a previous decision in the case of Tamilnadu Petro Products Ltd. v. Assistant Commissioner of Income Tax, where it was held that profit or gain derived by the assessee through its own consumption of the outcome of any undertaking or business enterprise could be eligible for deduction under Section 80IA. The Court emphasized that the expression 'derived' in the provision made it clear that profit or gain could be obtained through one's own consumption, not just from an external source. Therefore, the High Court concluded that the assessee's captive consumption of power generated by its own plant enabled it to derive profits and gains, making it eligible for the deduction under Section 80IA.

4. Based on the above interpretation and the precedents cited, the High Court ruled in favor of the assessee and against the Revenue. The Court dismissed the Tax Case (Appeal), upholding the decision of the Tribunal and allowing the assessee's claim for deduction under Section 80IA for the income related to the power generated by the wind mills consumed by the assessee. The judgment highlighted the importance of considering captive consumption in determining eligibility for deductions under the Income Tax Act.