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TMI Blog2012 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 2.3 Having regard to the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (291 ITR 550) the Commissioner of Income Tax(Appeals) ought to have upheld the action of the Assessing Officer. 2.4. The learned Commissioner of Income Tax(Appeals) failed to appreciate that assessment was re-opened within 4 years from the end of the relevant Assessment Year and hence the argument that there was no failure to disclose truly and correctly the facts does not apply." 4. In this ground of appeal, assessee has challenged the reopening of the assessment by the Assessing Officer. The assessee submitted before the Commissioner of Income Tax(Appeals) that the change of opinion would not constitute valid information for assumption of jurisdiction under Section 147 of the Act. The Authorised Representative of the assessee relied on the decision of Delhi High Court reported in 256 ITR 1 affirmed by the Apex Court in 320 ITR 561 and decision of the Madras High Court reported in 287 ITR 25. He further argued before the Commissioner of Income Tax(Appeals) that the decision of the Jurisdictional High Court reported in 289 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Rs. 6,31,000/- which in toto was claimed as deduction under Section 80-IA without taking into account the above depreciation of Rs. 1.21 crores. As per Sec.80 IA(5), for the purpose of determining the quantum, of deduction under Section 80IA,t he profits and gains of this undertaking has to be computed as if the business alone was the source of income of the assessee during the previous year relevant to Assessment Year 2005-06. If this is done the profits of the undertaking will work out as under:- Income from windmill vide Schedule E Rs. 6,31,000 Less: Depreciation as above Rs. 1,20,80,000 Loss from windmill undertaking (-) 1,14,49,000 Since the undertaking has incurred only loss as above and no profit from the undertaking having been included in the gross total income of the assessee, the assessee is not eligible for deduction under Section 80 IA to the extent of Rs. 6,31,000/- claimed. Therefore, the deduction claimed and allowed under Section 143(1) is incorrect. Therefore, income chargeable to tax to the extent of Rs. 6,31,000/- escaped assessment." 7. On appeal, the Commissioner of Income Tax(Appeals) held that the above reopening was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that when the income of the wind energy division results in a loss just by allowing depreciation, the question of profits derived from the eligible undertaking does not arise. Consequently the assessee is not entitled to any relief under Section.80-IA. 3.5. The Ld Commissioner of Income Tax(Appeals) failed to consider the fact that assessee has claimed deduction under Section 80IA on the entire receipts wind energy division of Rs. 6,31,000 The learned Commissioner of Income Tax(Appeals) ought to have seen that thus there is a clear attempt on the part of the assessee to inflate its claim of deduction u/s 80 IA without taking into account the depreciation and other overheads of the wind energy division. 3.6 The Ld Commissioner of Income Tax(Appeals) failed to appreciate that by allowing the assessee's claim 80IA in the above circumstances, the result is that the assessee has the benefit of deduction under Section.80IA in respect of its profit from book publication, which is not the intention of the legislature. 3.7. The Ld Commissioner of Income Tax(Appeals) failed to appreciate that as per s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute itself in its proviso to sec 80IA of the Act empowers or requires the Assessing Officer to compute such profits and gains on such reasonable basis as he may deem fit where the assessee has failed to submit the computation to the expectation of the Assessing Officer. It was submitted that the terms used in this proviso do not impose or envisage any rigid system or method to be adopted for computing the income of the wind power. On the other hand, it speaks of reasonableness on the part of the Assessing Officer, which runs to the rescue of the assessee from any harsh or harassing treatment from the Assessing Officer. The word 'may deem' also gives scope to larger interpretation that may lead to different procedures by different officers. Hence, according to the assessee, an obvious to which the above said proviso to Sec 80IA of the Act leads, is that as the conditions laid down in sec. 80 IA(5) of the Act are neither statutory nor mandatory, the Assessing Officer's ruling that the provisions of Sec.80 IA (5) of the Act over rules all other provisions of the Act, does not appear to be correct. The assessee relied on the decision of Chandigarh Bench of the Tribunal in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee installed only two wind mills for its captive consumption. Excess, if any, could not be sold outside as per the restrictions placed in the Electricity Act. It was ,therefore, contended that in any event, the installation of wind mills should be construed only as an investment duly reflected in the Balance Sheet, formed part of the return of income and going by the 'modus operandi' the assessee, due to statutory compulsions had entered into an agreement with the TNEB. The assessee relied on the decision of the C.I.T. Vs. Hi. Tech Arai [2010] 321 ITR 477 (Mad). It was submitted that though the decision is on the claim of additional depreciation under Section 32(1)(iia) of the Act, the main issue decided there in is that setting up of new wind energy generator cannot be categorised as a separate division, but it is only part of its existing business. The principles laid down by the Madras High Court in the above decision was affirmed in the case of Texmo Precision Castings [2010] 321 ITR 481(Mds.) It was further argued that in any case the provisions of section 80I(5) of the Act are not applicable to the first year of claim namely Assessment Year 2005-06. The provisions of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e special categories of assessee eligible for deduction which are mostly Industrial undertakings or enterprises engaged in infrastructural activities. Though the appellant has produced income which is eligible for deduction under Section. 80 IA of the Act, the Appellant cannot be said to be an assessee engaged in infrastructural activities. It is in this context that the Appellant 's contention that the word 'understanding' has no proper definition in the Act and it will not come within the ambit of the meaning that the Assessing Officer tries to impose on it, assumes more significance. I agree that the Appellant cannot be said to be such special category assessee, to which the conditions as envisaged in 80 IA of the Act are to be applied. It is only during the normal course of its business that the Apt had put up wind mills. As has been held by the Apex Court in the case of Barendra Prasad Ray Vs. ITO (Supra), the Appellant cannot be said to be engaged in the activity of earning income more so when the power generated is used for captive consumption only. As pointed out by the Appellant the provisions of section 80 IA (5) of the Act does not appear to over ride other subsections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the matter should be restored to the file of the Assessing Officer to compute the allowable deduction to the assessee under Section 80-IA of the Act starting from the first year i.e Assessment Year 2005-06 and subsequent year in accordance with the provisions of Section 80-IA(5) of the Act. 15. We have heard the rival submissions and perused the orders of lower authorities and materials available on record. In the instant case, it is not in dispute that the assessee has set up a wind mill unit for generation of power. It is also not in dispute that the income derived from such wind mill unit is eligible for deduction under Section 80-IA of the Act. The contention of the Departmental Representative is that after deducting the depreciation and interest from the receipt of the wind mill unit, there is no positive income and therefore, the assessee is not eligible for any deduction under Section 80-IA during all the four years under consideration. The admitted facts of the case are that the power generated in the assessee's wind mill unit were partly used for captive consumption in its other units and partly sold to TNEB. The assessee has shown the receipt from sale of power to TNE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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