TMI Blog2015 (9) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IA of the Act and we do not find any infirmity in the order of the Ld. CIT(A) and accordingly, we confirm the same. - Decided against revenue. - ITA No. 666/Hyd/2015 - - - Dated:- 28-8-2015 - P. Madhavi Devi, JM And B. Ramakotaiah, AM, JJ. For the Appellant : Mr Ramakrishna Bandi For the Respondent : Mr N V Balaji ORDER Per Smt. P. Madhavi Devi, JM. This appeal filed by the Revenue is directed against the Order of the Ld. CIT(A), Tirupati dated 20th February, 2015 for the A.Y. 2010-2011 and arises out of the assessment completed under section 143(3) of the I.T. Act, 1961. 2. Briefly stated, assessee is a company engaged in the business of generation and supply of power and it filed its return of income on 28.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Ld. CIT(A) ought to have considered that there must be direct nexus, for the application of words, 'derived from' between the profits and gains and the industrial undertaking but not5 any nexus that is not direct but only incidental as held by the Hon'ble Supreme Court. 4. Any other ground that may be urged at the time of hearing. 3. Ground Nos. 1 and 4 are general in nature and therefore, need no adjudication. Now the only question before us is, whether the income generated from sale of sludge/waste oil is part and parcel of income derived from power generation process of the assessee ? If so, the assessee would be entitled for deduction under section 80IA for a sum of ₹ 78,92,132. 4. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration is of very poor quality called sludge/waste oil, which is the outcome of power generation and for this reason only the Ld. CIT(A) came the conclusion that the assessee is entitled for deduction under section 80IA. The Ld. Counsel further submitted that the lubricating oil is used for maintenance of engines to meet the technical requirements and such lube oil passed out frequently. Once the oil looses the lubrication capacity and the same is sold as waste oil/sludge oil, some of local industries might use it for various purposes and such product is the outcome of the power generation. It was further submitted that the assessee company has been availing the deduction under section 80IA in respect of profits of power generation busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be the direct source of profit, and not as means to earn profit. The Ld. Counsel also relied on a decision in the case of Liberty India vs. CIT (2009) 317 ITR 218 to make distinction between the provisions of section 80HH/80I, 80IB. The Ld. Counsel submits that there is no irregularity in the order of the Ld. CIT(A) and submitted that the appeal of the Revenue may be dismissed. 7. We have heard the arguments of both the sides and also perused the relevant material on record. As could be seen from the facts of the case, the assessee company is in the business of power generation with its plant located in Tamilnadu and power supply to Tamilnadu Electricity Board. The claim of the assessee for deduction under section 80IA for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred percent of the profits and gains derived from such business for ten consecutive assessment years. Section 80HH : Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent thereof. 7.1. From the careful perusal of above provisions, it is noticed that section 80HH refers to the profits and gains derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the order of the Ld. CIT(A), we also come to the conclusion that the profits and gains derived from such business considered to include the sale of sludge, which is the product of the business undertaken by the assessee i.e., manufacture of power and the sludge is generated out of such activity and is held to be directly attributable to the business activity of the assessee. Hence, we are of the firm view that the profits and gains derived by the assessee from the sale of sludge/waste oil is eligible for deduction under section 80IA of the Act and we do not find any infirmity in the order of the Ld. CIT(A) and accordingly, we confirm the same. 8. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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