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2015 (6) TMI 385 - ITAT DELHI

2015 (6) TMI 385 - ITAT DELHI - [2015] 39 ITR (Trib) 206 (ITAT [Del]) - Deduction u/s 80IA -`Excess provision written back’ - CIT(A) allowed the claim - Held that:- This amount represented reversal of excess provision of salary made in the past in respect of pay revision which was implemented during the previous year under consideration. There is hardly any need to emphasize that salary paid by an undertaking is part of expenditure otherwise deductible in computing the income derived from the el .....

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eligible deduction in the computation of profits derived from eligible enterprise. We, therefore, approve the view taken by the ld. CIT(A) on this issue. - Decided against revenue.

Late payment charges - The character of this receipt has not been disputed by the ld. DR. In essence, the late payment charges are nothing, but, part of sale consideration which cannot be viewed differently. Once deduction is available on sale consideration, there can be no reason to deny deduction on such .....

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taking, but, cannot be held as derived from the eligible undertaking - Decided against assesse.

Machines hire charges - Held that:- The assessee received hire charges in respect of certain machines which were given on hire to its contractors who were engaged in the erection and construction of the power generation facility. We fail to appreciate as to how such machine hire charges can be considered as derived from eligible undertaking. These do not have any direct nexus with the eligi .....

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inst assesse.

Sundry Receipts - Held that:- These amounts are in the nature of electricity charges, guest house receipts, subsidized transport and miscellaneous receipts from the employees and contractors. The reasons given by us hereinabove for not allowing deduction in respect of the items mentioned above apply with full force in respect of such sundry receipts as well. These receipts cannot be considered as ‘derived from’ the eligible undertaking - Decided against assesse - ITA Nos .....

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. The Revenue is aggrieved against the allowing of deduction u/s 80IA on the amount of Excess provision written back and Late payment charges . 4. Briefly stated, the facts of the case are that the assessee is a joint venture company of the Government of India and the Government of Uttar Pradesh. It is engaged in the business of generation of hydroelectricity. Apart from the income from the direct generation of power, the assessee also earned income classified as Other incomes detailed as under .....

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from bank to the tune of ₹ 1,01,12,153/- and Profit from sale of assets . It was opined that the other items of income as listed in the above table were derived from independent source of income and did not have any first degree nexus with the generation of power. Relying on the judgment of the Hon ble Supreme Court in the case of Liberty India vs. CIT (2009) 317 ITR 218 (SC), he denied deduction u/s 80IA on the remaining items. The ld. CIT(A) got convinced with the assessee s contention .....

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en rejected by us. We are, therefore, going ahead with the disposal of these appeals ex parte qua the assessee, on merits. 7. It is seen that the entire controversy lies in a narrow compass, as to whether the above items of income qualify for deduction u/s 80-IA. At this juncture, it is relevant to set out sub-section (1) of section 80IA which provides that : Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business re .....

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the profits and gains derived from the eligible business. The expression derived from has received the attention of the Hon ble Apex Court in several cases. In Liberty India (supra), the question was as to whether DEPB/duty drawback is eligible for deduction u/s 80-IB. Repelling such contention raised on behalf of the assessee, the Hon ble Apex Court held that DEPB/duty drawback are incentives which are not profits derived from the eligible business and therefore, fail to form part of net profit .....

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. 80-IA and 80-IB it becomes clear that any industrial undertaking, which becomes eligible on satisfying sub-s. (2), would be entitled to deduction under sub-s. (1) only to the extent of profits derived from such industrial undertaking . In the case of Pandian Chemicals vs. CIT (2003) 262 ITR 278 (SC), the issue was whether the Interest earned by industrial undertaking on deposits with Electricity Board qualifies for relief under s. 80HH. In this section also, the expression used is derived from .....

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Board cannot be said to flow directly from the industrial undertaking itself. Where the words are unequivocal, there is no scope for importing any rule of interpretation as submitted by the appellant . It is discernible from a survey of the above and several other decisions on the point that the expression derived from is narrower in scope vis-à-vis the expression attributable to it. An income to be derived from a particular source, must have a direct and immediate nexus with such source .....

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e construed as derived from the industrial undertaking. I. Excess provision written back: 8. This amount represented reversal of excess provision of salary made in the past in respect of pay revision which was implemented during the previous year under consideration. The claim of the assessee before the ld. CIT(A) was that since the provision was found to be in excess, it was written back in the accounts as Income during the previous year. There is hardly any need to emphasize that salary paid b .....

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ise. In reality, the excess provision written back is not an income in itself, but, a reduced amount of eligible deduction in the computation of profits derived from eligible enterprise. We, therefore, approve the view taken by the ld. CIT(A) on this issue. II. Late payment charges: 9. The ld. CIT(A) has recorded that this receipt represented extra payment received by the assessee from its customers on account of late payment of their dues. The character of this receipt has not been disputed by .....

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ining amounts. I. Interest on employees: 11. The first item is interest which was received against advances to its employees for various purposes, such as, house building, purchase of computer, etc. Even though the employees were engaged in power generation, the fact remains that the interest received by the assessee on loans advanced by the assessee to its employees cannot be characterized as income derived from eligible undertaking. There is no direct nexus of such interest income with the eli .....

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generation facility. We fail to appreciate as to how such machine hire charges can be considered as derived from eligible undertaking. These do not have any direct nexus with the eligible undertaking. The source of such income is hiring of machines, which is step away from the eligible undertaking. The view taken by the ld. CIT(A) on this score is upheld. III. Rent Receipt: 13. The assessee received rent from its employees quarters as well as temporary sheds given to contractors at project sites .....

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