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TMI Blog2025 (1) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... et Singh Ajmani, on VC, Mr. Anjay Kothari (in D.B. Income Tax Appeal No. 1/2012) For the Respondent(s) : Mr. K.K. Bissa (in D.B. Income Tax Appeal No. 1/2012), Mr. Deepak Chopra on VC, Mr. Harpreet Singh Ajmani, on VC, Mr. Anjay Kothari (in Income Tax Appeal No. 13/2012 88/2014) JUDGMENT PER DR. PUSHPENDRA SINGH BHATI, J: 1. The instant Income Tax Appeals have been preferred under Section 260A of the Income Tax Act, 1961 ( hereinafter referred to as Act of 1961 ), claiming the following reliefs: Income Tax Appeal No.1/2012 by Appellant (Assessee) : (i) Allow the instant appeal and set aside or quash the impugned order of the ITAT dated 19.08.2001 in so far as it is against the appellant. (ii) Decide the substantial questions of law in favour of the appellant and against the revenue. (iii) Reframe suitable questions of law, if it is considered necessary, to do justice to the appellant. Any other appropriate relief, as may be considered just and proper, including awarding of the costs may be granted in favour of the appellant. Income Tax Appeal No.13/2012 by Appellant (Revenue) : It is, therefore, prayed that this appeal may kindly be allowed. By an appropriate order or direction the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bered D.B. Income Tax Appeal No.88/2014 (CIT, Udaipur Vs. M/s. Hindustan Zinc Ltd.), while treating the same as a lead case; rival submissions of the parties and the observations of the Court, in the present judgment, would also be based, particularly, on the factual matrix of the lead case. 4. Brief facts of the case are that the assessee company derives income from manufacturing of zinc, lead and its by-products. The original return was filed on 29.10.2004 declaring total income of Rs. 7,04,09,07,690/- which was subsequently revised to Rs.6,92,16,28,570/-. The assessment was completed on 22.12.2006 under Section 143(3) of the Act of 1961 on total income of Rs. 7,33,72,00,910/- wherein the Assessing Officer had allowed the deduction under Section 80-IA of the Act, 1961 of Rs.27,89,49,535/- in respect of the assessee s Captive Power Plant. 4.1. The matter was taken under revisional jurisdiction provided under Section 263 of the Act, 1961 by the Commissioner of Income Tax, Udaipur considering the assessment order passed by the AO to be erroneous and prejudicial to the interest of the Revenue. Therefore, proceedings under Section 263 of the Act of 1961 were initiated. The revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bone of contention in the instant bunch of cases lies in the issue as to whether the profits derived by assessee s power generation unit would be eligible for deduction as a separate undertaking under Section 80-IA. For it to be allowed, all the conditions which are sine qua non for claiming deduction under Section 80-IA are to be fulfilled. 7. As against the case set up by the Revenue, as reflected from the record and noted hereinabove, the case of the assessee is that it has fulfilled the three conditions as prescribed in sub-section (3) of 80-IA of the Act. 7.1. The brief submissions in respect of each of the conditions are as under: i) Profits from Eligible Business : The undertaking is engaged in generation or generation and distribution of power which is an eligible business in terms of Section 80-IA 4(iv)(a). ii) Undertaking is not formed by splitting up or reconstruction of business already in existence :- The power plant was not formed by splitting of or reconstruction of business already in existence. The whole power plants were set upright from scratch and the contract for setting up of power plant was inter alia given to Wartsila for a total consideration of Rs. 69. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have effect as if for the figures, letters and words 31st day of March, 2006 , the figures, letters and words 31st day of March, 2011 had been substituted; (iv) an undertaking which, (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2017; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2017: Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017. Explanation. For the purposes of this sub-clause, substantial renovation and modernisation means an increase in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation. For the purposes of this sub-section, market value , in relation to any goods or services, means (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: . . . 10. This Court observes that upon perusal of Section 80- IA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een stated in paras 8 and 9 of the abovesaid judgment which reads thus: 8. The contention that only whatever power generated from the sale to an outsider or the Electricity Board, and the profit or gain derived by such sale alone can be taken as profits or gains derived by the assessee as mentioned in section 80- IA(1) of the Income-tax Act, has been rejected by the Tribunal in the order impugned. In our considered view, the Tribunal was well justified in having rejected such a stand of the appellant. Having referred to section 80-IA(1) of the Income-tax Act, we are also convinced that what is all to be satisfied in order to be eligible for the deduction as provided under subsection (1) of section 80-IA, 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, falling under sub-section covered by sub-section (4) of section 80-IA of the Income-tax Act, 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. The contention that profit or gain can be claimed by the assessee only if such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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