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TMI Blog2016 (3) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... p for display and not for power generation, the assessee is not entitled for deduction u/s 80-IA of the Act. Following the law laid down by Hon'ble Supreme Court in the judgement cited as Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ), no doubt the Assessing Officer has the powers of reassessment after having reason to believe that the income has escaped assessment but it does not confer powers upon him to reopen the assessment on mere change of opinion. The Assessing Officer has powers to reopen an assessment only on the basis of tangible material sufficient to hold that there has been escapement of income from the assessment. But in the case at hand, the Assessing Officer has apparently exercised the powers to review under the garb of reopening of the issue as to the deduction u/s 80-IA of the Act already decided by him in the original assessment order passed u/s 143(3), which is not permissible u/s 147 of the Act. - Decided in favour of assessee - I.T.A. No.1874/Del/2013 - - - Dated:- 28-1-2016 - SHRI G. D. AGRAWAL, HON BLE VICE PRESIDENT AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Appellant : Shri K. Sampath, Adv. For The Respondent : Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is eligible to claim deduction u/s 80-IA(4) for ten consecutive assessment years beginning from A.Y. 1996-97 and referred form 10CCB, which lapses in A.Y. 2005-06. The assessee claimed deduction on the basis of WEGs installed in Assessment Year 1998-99, (2 Nos.), Assessment Year 2002-03 (3 Nos.) and the earlier period and is trying to claim deduction u/s 80-IA for such WEGs installed by it for the next ten consecutive Assessment Years. The assessee claimed that the plant has been set up for demonstration unit and this fact has also been observed from the audited report dated 28.10.2004 and the assessee gave primary reasons for installation of WEGs to promote their basic business. The Assessing Officer came to the conclusion that energy unit has been set up for educational or demonstration aids and not for the purpose of power generation. When the declared purpose of the assessee is not power generation then assessee is not eligible for deduction u/s 80-IA. 4. The Assessing Officer also observed that the assessee has claimed expenditure of ₹ 72,94,218/- to reduce the prevalent losses and to ensure the guarantee in future under the head supervision of erection and generati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the clause 22 of Form no. 10CCB Report with the qualification that the assessee reserves a right to claim the benefit u/s 80-IA as per either of the two versions These are reproduced as under: . Particulars RS. Rs. 1. Income from Power Generation 3,52,77,308/- 3,52,77,308/- 2. Less: Depreciation as per I. T.'s Rules. 3,52,77,308/- 3,52,77,308/- 3. Less: Maintenance Charges @ ₹ 40,000/- per generator 15 generators claim u/s 80-IA. - 6,00,000/- Claim u/s 80-IA 3,52,77,308/- 3,46,77,308/- 1.1. On the basis of the above working, the assessee is claiming deduction u/s 80-IA at ₹ 3,52,77,308/- without taking into account expenses on power generation, depreciation on WEGs or giving effect to the unabsorbed depreciation or loss of past assessment ears. This is against the spirit of the section. The profits have to be computed as provided under the head business from sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business is only the source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to an including the assessment year for which the determination is to be made. 1.3 Further, as noted above, over and above the depreciation and brought forward loss, the assessee has to deduct expenses attributable to earning of the power generation income before arriving at the deduction u/s 801A. The proportion of the receipts of power generation claimed u/s 80lA to the total receipts is to be worked out and then the expenses are to be worked out in same proportion. This working is required to be done as the assessee is not maintaining separate set of accounts as desired by the section 801A. 1.3.1. The receipts from power generation has to be treated at par with gross profit of the assessee, as assessee is selling WEG's, on which it earns profit. The gross sale is ₹ 2,51,49,79,456/- and material consumed is ₹ 21,67,99,646/-. Therefore the profit on sale of WEG's is ₹ 2,29,81,79,810/-. The Receipts from power generation on which 80-IA is claimed are ₹ 3,52,77,308/-. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me chargeable to tax amounting to ₹ 95,51,496/- (Rs.22,57,278/- + ₹ 72,94,218/-) has escaped assessment in the 'case and the same is to be brought to tax under section: 147/148 of the I.T. Act. Sanction for issue of notice u/s 148 as prescribed u/s 151, to re-assess such income and also any other income chargeable to tax which has' escaped assessment and which comes to the notice subsequently during the course of assessment proceedings, may kindly be accorded. 10.1 In the backdrop of the aforesaid facts and circumstances of the case, the first question arises for determination in this case is, as to whether the Assessing Officer has satisfied the preconditions enunciated u/s 147 for the issuance of reassessment u/s 148 of the Act . In order to decide this question first of all we have to determine as to whether the issue of deduction claimed by the assessee u/s 81A was raised by the assessee and examined by the Assessing Officer at the time of original assessment on the basis of which order dated 31.05.2005 was passed u/s 143(3) of the Act. 10.2 Bare perusal of the assessment order dated 31.05.2005 passed by the Assessing Officer u/s 143(3) lying at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 (2 Nos), A.Y.2002-03(3 No's) and the earlier period. The assessee is trying claim 80-IA deduction for each WEG installed by it for the next ten consecutive assessment years. This will imply that as long as the section 80-IA deduction is there the company shall keep on enjoying the deduction. The deduction is not intended to be made available on rotational basis. It is amply clear that it is available for an enterprise and then beginning from first year of claim continues for ten consecutive years. 3.5 Here it would be relevant to discuss the form No.10CCB (Audit report u/s 80-IA of the LT. Act). The auditors have remarked as per separate report vide clause 22 of form No.10CCB. The relevant portion is The assessee does not deduct any expenditure/depreciation from the power generation income, while deducting the same from its gross income, on the ground that any expenditure/deprecation pertaining to these wind electric generators relate to its basic business activity of manufacture of wind electric generators, for promotion of which the said generators were installed. 3.6 The above claim of the assessee has been examined as per the provisions of section 80IA. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to reopening of the assessment by the Assessing Officer by holding that the Assessing Officer is not empowered to reopen the assessment on the issue which has already been examined by him at the time of original assessment. Operative part of the judgement cited as Kelvinator of India Ltd. (supra) is reproduced as under for ready reference: On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987 reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from: 1st April, 1989), they are given a go-by and only one condition has remained, - viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion'. Other provisions of the new section 147, however, remain the same. 10.6 Perusal of reassessment order passed by the Assessing Officer goes to prove inter alia that he has reopened the assessment to examine the issue as to the admissibility of deduction claimed by the assessee u/s 80- IA which issue has been squarely decided by the Assessing Officer in original assessment vide order dated 31.05.2005 u/s 143(3) of the Act; that after reassessment, the Assessing Officer has withdrew the deduction earlier made available to the assessee u/s 80-IA on the ground that deductions are available under clause (ii) of sub-section (4) of Section 80- IA to the person who is in the business of generation and distribution of power despite the fact that the assessee made a categorical submission that the power plant was set up for demonstration and the primary reason for installation of WEGs was to promote the basic business and to convince the prospective buyers for purchasing the windmills manufactured by the assessee; that the Assessing Officer came to the conclusion that since the windmill was set up for display and not for power generation, the assessee is not entitled for dedu ..... 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