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TMI Blog2022 (6) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... TCA No.695 of 2009 was admitted on the following substantial questions of law: "1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the value of the MILIEV grant given by the Dutch government as a subsidy for purchase of wind turbine generator, could not be brought to tax in the hands of the assessee u/s.28(iv), when the assessee did not purchase the equipment, but transferred the right to another company? 2. Whether on the facts and circumstances of the case, the Tribunal was right in merely accepting the letter of the broker that no off set credits were given to the assessee, instead of remanding the matter to enable the assessing officer to get the correct facts from the Dutch government through diplomatic channels? 3. Whether on the facts and circumstances of the case, the Tribunal was right in allowing the "electricity charges" paid to Wescare as a deduction, when purchase of electricity from a person other than the electricity board is illegal and contrary to public policy?" 4. By order dated 31.01.2011, Tax Case Appeal Nos.1100 to 1103 of 2010 were admitted on the following substantial questions of law: "1. Whether on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rogramme (subsidy scheme), as per which, a substantial part of the cost of wind mills would be paid by the Dutch Government through NIO Bank as grant for such purchase directly to the supplier of the wind mill viz., LW, Netherlands and the balance cost would be paid to the LW by the assessee by opening letter of credit. Pursuant to the same, a MOU dated 17.02.1997 was entered into among the respondent / assessee, WIPRO and DLWL, whereby WIPRO was to syndicate the lease finance of the project and open the letter of credits in favour of LW. Besides this, another MOU was signed among the respondent/ assessee, WIPRO and Wind Energy System Care India Ltd (Wescare), in and by which, the respondent / assessee took lease operation of 20 MW wind farm at Sankanapuram from Wescare and WIPRO syndicated lease finance for the project. 5.3. On 24.03.1997, a grant agreement was entered into between the NIO Bank and the respondent/assessee, to disburse the Miliev grant to LW on behalf of the Dutch Government, as per which, the respondent/assessee shall not transfer or assign its rights under this agreement to a third party. The amount given under Miliev Grant was NLG 2,56,99,351. The total amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- for additional subsidy granted by NIO Bank to the assessee for meeting various expenses in connection with the installation of the WTGs) towards consideration received by the respondent / assessee for surrendering its rights under EPC contract in favour of DLWL and Rs.33,87,06,625/- for off set credit. Aggrieved over the said assessment order, the respondent/assessee preferred an Appeal before the First Appellate Authority/Commissioner of Income Tax (Appeals) VIII, Chennai, who partly allowed the appeal, vide order 30.03.2007. Challenging the said order of the CIT(A), the appellant/Revenue preferred an Appeal before the ITAT. By order dated 09.01.2009, the said appeal was dismissed. Therefore, the appellant/Revenue is before this court with Tax Case Appeal No.695 of 2009. 5.6. In respect of the assessment years 2000-01, 2001-02, 2002-03 & 2003-04, the respondent/assessee company filed its return of income, declaring the total income of Rs.27,86,23,531/-, Rs.36,63,00,895/-, Rs.46,35,46,246/- & Rs.56,89,60,117/- respectively. They claimed payment of Rs.10,03,20,820/-, Rs.8,06,50,593/-, Rs.7,50,77,615/- and Rs.1,77,65,398/- respectively, for purchase of electricity generated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a capital receipt. On the other hand, in this case, the respondent / assessee had passed on the benefit of the grant to DLWL and no longer used the same for capital purchases and therefore, the said grant should be treated as a benefit received under section 28(iv) and the transfer of the same to a third party is an application of such benefit. Adding further, the learned counsel submitted that the respondent / assessee not only gave up the right of grant for a paltry consideration of Rs.2 crores, but also took the same goods on lease on the enhanced value from the banks / finance companies, which is inconceivable. However, the CIT(A) erred in deleting the said addition made by the assessing officer, which was also upheld by the Tribunal. 6.2. The learned senior standing counsel appearing for the appellant further contended that there were several documents to show that negotiations were on for claiming off set credits and permitting M/s.Lockheed Martin, USA to utilise the same; and M/s.Fremont were the brokers for the same and hence, mere letter from the broker that no off set credits were taken by M/s.Lockheed Martin, is not sufficient evidence and the Tribunal ought to have in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Dutch Government / NIO as ultimate consumer of electricity; and the grant was directly paid to LW and no part of the grant was received by the assessee. For the right transferred to DLWL, the assessee received consideration of Rs.2 crores, which was offered for taxation. Further, the respondent / assessee was not the owner of WTGs and they only purchased some parts of WTGs amounting to Rs.84,52,700/- in its name, at the initial stage of the wind farm project, which were inturn, sold to DLWL on high sea sale basis and thereafter, no further purchases were made by the assessee. That apart, the WTGs were installed on the land owned by the assessee and were leased to Wescare and the electricity generated was to be supplied to the assessee, which inturn made payment on the basis of the electricity charges per unit produced. After considering those aspects, the CIT(A) rightly allowed the claims of the assessee by deleting the additions made by the assessing officer. The said orders of the CIT(A) were also affirmed by the Tribunal. To substantiate his contentions, the learned counsel placed reliance on various case laws. Therefore, according to the learned counsel, no interferen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the assessing officer, on the ground that the grant was given by the Dutch Government as a matter of policy and it had nexus with the equipment and not with the buyer and hence, it was not possible for the purchaser to transfer the grant and the same was directly disbursed to the manufacturer. It was also pointed out by the appellate authorities that the revenue failed to produce any cogent material to prove that the assessee received over and above the disclosed consideration of Rs.2 crores; and there was no incriminating document made available against the assessee. The Appellate Authorities further noted that as per the agreements entered into the parties, the finance companies were allowed to operate the wind mills on lease and the payment of lease rentals was assured by Wescare and the assessee was to pay operational lease rental calculated as the electricity consumed x TNEB rates - 25 paise per unit. We do not find any good reason to disagree with the reasonings so recorded by the appellate authorities. 10.3. With regard to the second issue, the assessing officer made addition of Rs.33,87,06,625/- in respect of off set credits alleged to have been received by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. The bill of lading and the bill of entry were in the name of DLWL and delivery of the items under such invoices was taken by DLWL and DLWL paid a sum of Rs.2 crores i.e., Rs.2.5 lakhs per wind turbine for 80 wind turbines to the assessee to acquire its right under the EPC contract for the purchase of wind turbines, which was duly accounted and offered to tax; and the assessee was only interested in supply of electricity and not in the ownership of the wind turbines. Considering the same, the CIT(A) noted that various agreements / arrangements / MOU were entered into by the assessee with various parties from time to time with the object to supply of electricity for a long duration at an economical / concessional rate; DLWL was the real owner of the wind farm project and it accounted for the income in relation to the sale of wind turbines to the finance companies; the assessments of the finance companies were completed treating them as the owners of the wind turbines and depreciation was also allowed. It was further pointed out that there is absolutely no evidence to indicate that the assessee did purchase indigenous parts in connection with the erection and commissioning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was dismissed by this court, by holding that "when the finding of fact on the genuineness of the transaction had not been challenged in the manner known to law and the same having attained finality, there exists no ground to interfere with the order of the authorities below rejecting the claim for depreciation". (iii)CIT v. Ganapati Finance Ltd [(2013) 29 taxmann.com 162 (Delhi)], wherein the assessee claimed depreciation on LPG cylinders leased out to Janta Gases and Air Jet Spindle Assembly and Positar disc leased out to Maruti Syntax. The assessing officer disallowed depreciation after forming a view that assessee did not purchase the said assets, but merely financed their purchase. The same was reversed by the CIT(A), which was also affirmed by the Tribunal. However, the Delhi High Court was of the opinion that "the Tribunal ought to have tested the evidence adduced by the assessee in the light of the material gathered by the assessing officer, the conduct of the parties and other surrounding circumstances, whereas the Tribunal seems to have proceeded merely on the basis of the documentary evidence without putting it to rigorous examination in the light of the aspects hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax [(1997) 91 Taxman 351 (SC)], in which, it was observed by the Hon'ble Supreme Court, as follows: "14.The question whether there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity which were added by the ITO while passing the assessment orders in respect of the assessment years under consideration. The AAC was right in deleting the said addition made by the ITO and the Tribunal had rightly held that the claim at the increased rates as made by the assessee - company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the ITO did not represent the income which had really accrued to the assessee-company during the relevant previous years..." (ii)Commissioner of Income Tax Chennai v. Sundaram Finance Ltd. [(2016) SCC Online Mad 3072 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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