2009 (1) TMI 770 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of addition of Rs. 58,85,41,252 under "Income on account of surrendering rights".
2. Deletion of addition of Rs. 33,87,06,625 towards offset credits.
3. Deletion of disallowance of electricity charges claimed by the assessee.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 58,85,41,252 under "Income on account of surrendering rights"

The first issue concerns whether the Commissioner (Appeals) was correct in deleting the addition of Rs. 58,85,41,252 made under the caption "Income on account of surrendering rights to M/s. DLWL". The Revenue argued that the sale by the assessee to DLWL and the subsequent sale of windmills to finance companies were sham transactions. The windmills were listed under the assessee's name in the Tamil Nadu Electricity Board's records, and the finance companies claimed 100% depreciation. The Revenue contended that the Miliev grant, a subsidy from the Dutch Government, was used for profit and thus was of revenue nature and taxable under section 28(iv) of the Act. They argued that the assessee disclosed only Rs. 2 crores as received towards consideration, which was inconceivable for a grant worth Rs. 58.85 crores.

The Tribunal noted that the Miliev grant was meant for environmental protection and economic self-reliance and was not a bare benefit. The Dutch Government did not take action against the breach of grant terms by the assessee. The Tribunal found no evidence that the assessee received any amount over the disclosed Rs. 2 crores. The Commissioner (Appeals) correctly concluded that the transaction was not a sham and upheld the deletion of the addition.

2. Deletion of Addition of Rs. 33,87,06,625 towards Offset Credits

The second issue pertains to the deletion of the addition of Rs. 33,87,06,625 made by the Assessing Officer concerning offset credits. The Assessing Officer alleged that the assessee received offset credits from Lockheed Martin for importing wind turbines from Lagerway, which were not offered for taxation. The Commissioner (Appeals) examined the correspondence and concluded that no adverse inference could be drawn. The Freemont group, which coordinated between the assessee and Lockheed Martin, certified that no offset credit was paid to the assessee. The Tribunal found no evidence to support the claim that the assessee received offset credits and upheld the deletion of the addition.

3. Deletion of Disallowance of Electricity Charges Claimed by the Assessee

The third issue involves the deletion of disallowance of electricity charges claimed by the assessee. The Revenue argued that since the assessee was the owner of the wind turbines, there was no justification for claiming electricity charges. The Tribunal noted that the assessee purchased only some components of wind turbines initially, which were sold to DLWL on a high seas sale basis. The assessee was interested in assured electricity supply, not ownership of the wind turbines. The Commissioner (Appeals) concluded that the assessee was not the owner and allowed the claim for operational lease rentals. The Tribunal upheld this conclusion, agreeing that the electricity charges were paid for business purposes.

Conclusion:

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decisions on all three issues, finding no sufficient evidence from the Revenue to support their claims. The appeal of the Revenue was dismissed.