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TMI Blog2017 (12) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant, during the relevant assessment year, had primarily derived income from consultancy and professional services from sale and installation of wind electricity generators. For this purpose, the appellant had entered into an agreement with their principal company and manufacturer, namely, M/s Vestas Danish Wind Technology, A/s, Denmark. The appellant had also erected and commissioned wind mills statedly for demonstration and sale promotion purposes. The power generated from the said erected and commissioned wind generators was sold to Tamil Nadu State Electricity Board and the appellant had earned income of Rs. 22,92,245/- from the said sale. 4. The appellant had invoked Section 80-IA of the Act in its return of income and had shown the entire receipt of Rs. 22,92,245/- as income from generation of power as exempt under Section 80-IA of the Act. 5. The Income Tax Officer vide assessment order dated 15th February, 1999 noticed that the appellant had net profit from consultancy of over Rs. 2.98 crores. Further, the assessee was entitled to depreciation of over Rs. 3.24 crores on the wind mills erected and commissioned. Accordingly, this depreciation figure was reduced from inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page-14 of the Assessee's paper book would show that there are other common expenses also. To quote a few Audit Fee, for tax matters, rent, rates and taxes etc. The gross receipts from power generation is shown in the profit and loss account at Rs. 22,92,245/-. We shall now confine ourselves to the depreciation expenses which was in controversy before the revenue authorities. It cannot be disputed that even going by the provisions of Section 80-IA(5), that the expenditure incurred in earning the income from the eligible business has to be deducted and only on the net income, deduction under Section 80-IA has to be allowed. The case of the Assessee that the Wind Turbines (wind mill) through which it generated and sold electricity was not primarily meant for such purpose and it was primarily meant only for the purpose of demonstrating to the prospective buyers of power turbines manufactured by the Danish Company for which it acted as consultants and for marketing and sales for their products, cannot be accepted. If one were to act as a marketing and sales agent for manufacturer of a product it is only usual or normal to expect the principal to provide the necessary infrastructure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer was justified in treating depreciation on wind turbines as a deduction from the income of power generation and on that basis holding that there was no income from the eligible business on which deduction under Section 80-IA was to be allowed. The CIT(A) in our view erred in accepting the computation as adopted by the assessee which in our view is against the provisions of Sec. 80-IA and the law laid down by the Honourable Supreme Court in the case of Pandian Chemicals (supra). The appeal of the revenue is allowed and the order of the CIT(A) is reversed and that of the Assessing Officer restored." 8. Learned counsel for the appellant-assessee has drawn our attention to sub-section (7) to Section 80-IA of the Act read with sub-section (5) thereof as applicable to the Assessment Year 1996-97. Counsel for the appellant had also referred to a table relying upon the decision of the Madras High Court in Velayudhaswamy Spinning Mills Private Limited versus Assistant CIT, 2012 (340) ITR 477 (Mad.). 9. We have considered the contention of the appellant-assessee, but in the facts of the present case, which are glaring, do not think we are required to make an in-depth study of and el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that it was no longer res integra as the Apex Court had reflected thereupon in Liberty India [Liberty India v. CIT, (2009) 9 SCC 328 : (2009) 317 ITR 218] and quoted the following passage from the said judgment in support of its aforesaid remarks: "24. Before analysing Section 80-IB, as a prefatory note, it needs to be mentioned that the 1961 Act broadly provides for two types of tax incentives, namely, investment-linked incentives and profit-linked incentives. Chapter VI-A which provides for incentives in the form of tax deductions essentially belong to the category of "profit-linked incentives". Therefore, when Sections 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives. What attracts the incentives under Sections 80-IA/80-IB is the generation of profits (operational profits). XXXXX 27. On analysing Chapter VI-A, we find that Sections 80-IB/80IA are the code by themselves as they contain both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe for "computation of profits of the eligible business". It is evident that Section 80-IB provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. [Distributors (Baroda) (P) Ltd. v. Union of India, (1986) 1 SCC 43 : 1986 SCC (Tax) 159] and in Liberty India [Liberty India v. CIT, (2009) 9 SCC 328 : (2009) 317 ITR 218] has clearly held that the special deduction under Chapter VI-A has to be computed on the gross total income determined after deducting all deductions allowable under Sections 30 to 43-D of the Act and any device adopted to reduce or inflate the profits of eligible business has got to be rejected. Thirdly, this Court in Albright Morarji and Pandit Ltd. [CIT v. Albright Moraji and Pandit Ltd., 1998 SCC OnLine Bom 612 : (1999) 236 ITR 914] , Grasim Industries Ltd. [Grasim Industries Ltd. v. CIT, 2000 SCC OnLine Bom 948 : (2000) 245 ITR 677] and Asian Cable Corpn. Ltd. [CIT v. Asian Cable Corpn. Ltd. (No. 2), 2003 SCC OnLine Bom 1279 : (2003) 262 ITR 537] has only followed the decisions of the Apex Court in Distributors Baroda[Distributors (Baroda) (P) Ltd. v. Union of India, (1986) 1 SCC 43 : 1986 SCC (Tax) 159] . Thus, on analysis of all the decisions referred hereinabove, it is seen that the quantum of deduction allowable under Section 80-IA of the Act has to be determined by computing the gross total income f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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