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TMI Blog2011 (10) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of the principles of natural justice, thereby remanded by the case back to the Central Board of Direct Taxes to reconsider the application after granting time to the petitioner for filing further reply and to pass orders. After granting sufficient opportunity to the petitioner, the Board has now passed the order, rejecting the application filed by the assessee. In so rejecting the prayer, the first respondent herein pointed out that there had been a substantial change in the project verification, number of projects as well as location of projects. Thus, by reason of fresh lease agreements entered into, which were not examined by the Board at the time of grant of approval originally for the period covered namely, 2000-01 to 2002-03, the Board came to the decision that there could be no renewal of the approval granted earlier. The Board pointed out that the assessee did not have any windmill on lease prior to the agreements dated 28.3.2003, 30.3.2003 and 16.3.2002. Hence, the question of considering the petitioner's case as one of renewal did not arise. The Board held that the claim of the assessee had to be considered on the basis of the lease agreements filed and the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val in intimating the changes in the project relating to the supply of the wind farm from Perungudi situated at Radhapuram Taluk to Pazhavoor and Karunkulam in Radhapuram Taluk; reduction in number of WTG from 4 to 3 and the increase in the capacity on generation of electricity. 6. In respect of the application thus made, since there was no reply, it sent a reminder on 27.02.2003. Upon this, at the request of the Board, the petitioner submitted a new application with a detailed report. As regards the lease agreement entered into in respect of the windmill situated at Radhapuram, the Board sought for particulars as regards the lease and other details. The petitioner submitted the details, which are in terms of Rule 2E of the Income Tax Rules. The Board called for a report from the appellate authority. Based on this, the appellate authority sent an Inspector for a visit to the windmills location. After a protracted correspondence on not passing the order on the application, ultimately the Board passed an order on 14.7.2010, rejecting the plea for approval under Section 10(23G) for the assessment year 2003-04 to 2007-08, holding that the petitioner did not satisfy the condition of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry-oriented, the approval for renewal be granted. 8. As already pointed out, the Central Board of Direct Taxes, however, rejected the said contention, on the premise that the petitioner had entered into three lease agreements dated 28.3.2003, 30.3.2003 and 16.3.2002, that the petitioner never had any windmill of its own, but had taken on lease only, a fact which was not there at all for any examination at the time when the original approval was granted for the assessment years 2001-02 to 2003-03. The Board pointed out that a reading of the lease agreement pointed out that the lessor had set up the undertaking at Karungulam Village, Tirunelveli District and the same is in operation. Hence, the argument that the petitioner had set up an undertaking for generation of power was not acceptable. The equipments installed by the petitioner were not new ones and were already in use by the lessor, which makes the claim ineligible under Section 80IA of the Income Tax Act. Thus the case of the assessee was not one of renewal of an existing facility when the renewal could be granted automatically on the same set of facts. 9. Learned counsel appearing for the petitioner, objecting to the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no issue at all as to the assessee taking on lease, the windmill. The issue as regards the assessee taking on lease the windmill already in operation and located in a different places, surfaced only subsequently in the years under consideration. On the admitted fact that the assessee had taken the windmill on lease, which was already in use, the question of granting any relief under Section 80IA, or for that matter, for approval under Section 10(23G), does not arise. 11. Learned Standing Counsel appearing for the Revenue pointed out to sub-clause (iv) and submitted that the Section is concerned about setting up of an undertaking for the generation or generation and distribution of power and hence, has no relevance to the assessee taking up the power plant already in existence. Pointing out to sub-clause (ii) to sub-section (3) that the benefit of Section 80IA will not be available to an assessee if it is formed by the transfer to a new business, of machinery or plant previously used for any purpose, on the admitted fact that the windmill was already in use at the hands of the lessor, the assessee would not be justified in making the claim under Section 80IA read with Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce articles or operates its cold storage plant or a ship is first brought into use, etc. The deduction is available for four assessment years immediately succeeding the initial assessment year. A reading of the provision thus shows that the deduction contemplated therein is to encourage the said member of a new industrial undertaking by offering tax incentives. Thus, in consonance with the object of the said provision, the provision was interpreted in a broad sense and in the context of the purposes in consonance with the aim and object, so as to render effective, the exemption sought to be provided, without doing violence to the language employed. Thus, the emphasis herein is on the establishment of the undertaking and not on the person who establishes or acquires the same afterwards. 15. After the deletion of Section 80J, Section 80IA and Section 80IB were substituted under Section 80 IA under the Finance Act, 1999 with effect from 1.4.2000. The said provision has undergone series of changes thereafter also. 16. Before going into the rival contentions, the provisions under Section 10(23G) and Section 80IA(1), (3), (4)(iv) of the Income Tax Act, need to be seen, which read as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b)such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the assessee. Explanation 2. -- Where in the case of an undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. (4) This section applies to (i) ... (ii) ... (iii) ... (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ending on 31st March, 2011. The proviso states that the deduction under sub-clause (b) would be available only in relation to the profits derived from laying of such network of new lines for transmission or distribution. The third clause relates to renovation and modernisation of the existing network. 19. A reading of the above-said clauses thus makes it clear that as far as deduction under Section 80IA with reference to undertakings which are there for generation and generation and distribution of power is concerned, the qualification is generation or generation and distribution of power. Read with Sub section (3), the undertaking is not formed by splitting up or the reconstruction of a business already in existence or formed by the transfer of plant and machinery used for any purpose to a new business. Thus an enterprise which is engaged in the generation or generation and distribution of power, qualifies for a deduction, subject to satisfying sub-clauses in the Section. Considering the fact that the deduction is with reference to the undertaking generating or generating and distributing power, the deduction would be available at the hands of the lessee assessee, which is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of income. Explanation (1) to Section 10(23G) defines "infrastructure capital company and infrastructure capital fund". As far as infrastructure capital company is concerned, it is defined to mean company, which had made investment by way of acquiring shares or providing long term finance to an enterprise wholly engaged in the business referred to in this clause. It is no doubt true that Section 10(23G), inserted with effect from 01.04.1997, was subsequently omitted from the Statute. As the law then stood, given the definition of an eligible business under the provisions of Section 80IA and the fact that the assessee has taken on lease the windmill, which is infrastructure facility, I have no hesitation in allowing the Writ Petition, thereby quashing the order passed by the Central Board of Direct Taxes. 22. Touching on the scope of Section 84 as it originally stood, later on substituted as Section 80J before its repeal, the Central Board of Direct Taxes, vide F.No15/5/63-IT (AI) dated 13.12.1963, pointed out that "the benefit of Section 84 of the Income Tax Act 1961 (now Section 80J) attaches to the undertaking and not to the owner thereof. The successor will be entitled f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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