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TMI Blog2007 (7) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... ite identification and wind data on specific sites inIndiain relation to various types of wind energy including controllers, towers, central monitoring equipment, etc. The Danish company was one of the pioneers in wind energy in the world, especially windmills and the assessee was engaged in business as its sole and exclusive consultant inIndia. During the year under consideration, the assessee derived consultancy fees and service charges of Rs. 3,94,69,169 and other income of Rs. 1,35,39,859. Out of the other income, a sum of Rs. 1,27,81,835 was received as power generation income for energy sold to the Tamil Nadu State Electricity Board. In respect of the amount received from the aforesaid electricity board, the assessee claimed deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by him. The CIT(A) agreed with the assessee that s. 80-IA(5) was not applicable to the case but held that the deduction under s. 80-IA was admissible only against the profits of the industrial undertaking and not against the gross receipts. He accordingly held that the AO was right in deducting expenditure aggregating to Rs. 4,15,277 from the income received from TNSEB while granting the deduction under s. 80-IA. He thus confirmed the action of the AO. 3. In the further appeal before us, the learned counsel for the assessee has raised four contentions. He first contended that the deduction was allowed in the earlier years against the income received from the electricity board without reducing the same by any expenditure and the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion from the gross receipts and that to do so would be contrary to the matching principle embodied in s. 80AB of the Act. He did not dispute that the main business of the assessee was that of consultancy, but contended that under s. 80-IA, r/w s. 80AB, the deduction can only be given against the net income after deducting the direct expenditure incurred for earning the income and in this connection submitted that the expenditure on repairs, maintenance and insurance of the wind energy generators represented direct expenditure connected with the functioning of the equipment which was properly deductible He also pointed out that the amount deducted was very reasonable and was just 3 per cent of the total revenues for the year. As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both consultancy business and power generation business. It was held that the profits of both the businesses should be clubbed and the depreciation should be allowed against the aggregate of the profits. The question before the CIT(A) was thus slightly different from the question which has arisen before us for consideration. The order of the CIT(A) for the asst. yr. 1996-97 is therefore not directly on the point and does not directly assist the assessee, though some help can be derived therefrom to the extent that it says that depreciation relating to the windmills cannot be deducted from the profits of the power generation activity alone. In the asst. yr. 1997-98, the assessee derived income of Rs. 45,60,741 from power generation and appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken by the AO. It is therefore somewhat difficult to infer that there was any consistency in the conduct of the Departmental authorities so as to bind them to their past conduct on the basis of the rule of consistency. 7. However, on merits, the assessee's claim needs to be accepted. The main activity of the assessee is that of consultancy in the field of windmill energy. It has put up windmills for the purpose of demonstration to its clients and customers and in connection with the consultancy activity. Incidentally, the windmills are also used for generation of electricity which is sold to the electricity board. No hydel or mechanical power is required to run the windmills. They are run on the natural resource, namely, the winds. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the shifting of the focus from the industry to the assessee was not permissible. The ratio of this decision, in our humble opinion, applies to the present case. There are two activities, the main activity being that of consultancy and the incidental activity being that of power generation. The windmills are required in connection with the main activity and they incidentally produce income for the assessee by generating power. The expenditure on repairs, maintenance and insurance of the windmills is in any case allowable against the consultancy income. It cannot be pinpointed that a part of the expenditure was incurred for earning the income from power generation except by an artificial or presumptive approach. Had the power generatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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