ACIT, New Delhi V. M/s. RRB Energy Ltd., New Delhi

ITA 2100/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61662 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 13-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SSH K SAMPATH
• Keywords: Depreciation; Earning of tax free income; Unabsorbed depreciation
• Section: 194C; 27; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI T. S. KAPOOR ITA NO. 2100/DEL/2011 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF IT, VS. M/S. RRB ENERGY LTD., CIRCLE 15(1), GA-1/B1, EXTENSION NEW DELHI. MOHAN CO-OP INDL. ESTATE, NEW DELHI. (PAN: AAACV0109N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUDESH G ARG, CIT(DR) RESPONDENT BY: S/SH.K.SAMPATH & V.RAJA KUMAR, ADV. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 21.01.2011 PASSED FOR ASSESSMENT YEAR 2007-08. GROUND NOS. 1 TO 3 ARE INTER-CONNECTED, THEY READ AS UNDER : 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN ALLOWING THE CLAI M OF DEDUCTION U/S. 80IA AMOUNTING TO RS.87,35,282/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) ERRED IN DIRECTING TO ALLOW TH E DEDUCTION U/S. 80IA AFTER REDUCING FROM IF THE AMOUNT OF DEPRECIAT ION ON WEGS ALLOCATED ON PRO-RATA BASIS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN ALLOWING DEPRECIA TION ON WEGS 2 AT RS.66,10,294 AND DIRECTING TO ALLOW PRO-RATA DEP RECIATION ON WEGS FROM THE PROFITS OF THE NORMAL BUSINESS. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY IS MANUFACTURING WIND ELECTRIC GENERATOR (WEG IN INDIA) FOR PRODUCIN G POWER FROM WIND AT DIFFERENT LOCATIONS IN INDIA. IT HAS FILED ITS RETU RN OF INCOME ON 29.10.2007 DECLARING AN INCOME OF RS.77,38,98,824. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 22 ND SEPTEMBER, 2006. ON AN ANALYSIS OF THE ACCOUNTS, IT REVEALED TO THE ASSESS ING OFFICER THAT ASSESSEE HAD MADE CLAIM UNDER SEC. 80-IA OF THE INCOME-TAX A CT, 1961 AT RS.87,35,282. ACCORDING TO THE ASSESSEE, IT HAS 18 UNITS OF WEGS AT DIFFERENT LOCATIONS. IT IS CLAIMING DEDUCTION IN RESPECT OF P ROFIT GENERATED BY SIX ELIGIBLE UNITS AS THEY ARE OPERATING WITHIN THE PER MISSIBLE PERIOD OF TEN YEARS. ON THE OTHER HAND, ASSESSING OFFICER HAS OBSERVED T HAT THE ASSESSEE HAS TEN UNITS OF WEG INSTALLED AT DIFFERENT LOCATIONS. HOWE VER, LEARNED ASSESSING OFFICER HAS REPRODUCED THE DETAILS IN RESPECT OF SI X UNITS WHERE ASSESSEE HAS CLAIMED DEDUCTION, SUCH DETAILS ARE AVAILABLE ON PA GE 3 OF THE ASSESSMENT ORDER. LEARNED ASSESSING OFFICER HAS OBSERVED THAT DEDUCTION UNDER SEC. 80IA IS AVAILABLE TO AN UNDERTAKING OR AN ENTERPRIS ES ENGAGED IN THE BUSINESS ELIGIBLE FOR SUCH DEDUCTION. IT IS AVAILABLE FOR TE N CONSECUTIVE ASSESSMENT 3 YEARS BEGINNING FROM THE FIRST YEAR OF THE CLAIM. H E OBSERVED THAT ASSESSEE CLAIMED THE DEDUCTION FIRST TIME IN ASSESSMENT YEAR 1996-97. THE TEN CONSECUTIVE YEARS OF THE ASSESSEE LAPSED IN ASSESSM ENT YEAR 2005-06, THUS, IN THIS ASSESSMENT YEAR IT IS NOT ENTITLED FOR ANY DED UCTION. HOWEVER, WITHOUT PREJUDICE TO THE ABOVE CONCLUSION, HE PROCEEDED TO COMPUTE THE ELIGIBLE DEDUCTION ADMISSIBLE TO THE ASSESSEE. ASSESSING OFF ICER HAS OBSERVED THAT THERE ARE SIX UNITS BEARING NO.292/1, 298/1, 394/1, 393/1, 616/1 AND POONA MALLE. THE FIRST YEAR OF THE POWER GENERATION IN TH ESE UNITS ARE 1998-99, 1998-99, 2002-03, 2005-06 AND 2006-07 RESPECTIVELY. ACCORDING TO THE ASSESSING OFFICER, THE UNABSORBED DEPRECIATION IS T O BE THRUST UPON THE ASSESSEE BEFORE COMPUTING THE DEDUCTION ADMISSIBLE UNDER SEC. 80IA. HE WORKED OUT UNABSORBED DEPRECIATION OF TWO UNITS, 61 6/1 AND POONA MALLE AT 15145449. THE ASSESSEE HAS SHOWN TOTAL POWER GENERA TION AT RS.243,37,142.2. ASSESSING OFFICER FURTHER WORKED O UT THE PROPORTIONATE EXPENSES ALLOCABLE TO THESE UNITS OUT OF THE COMMON FUNDS AND SUCH PROPORTION HAS BEEN WORKED OUT AT 0.2% BECAUSE THIS IS PROPORTION OF POWER GENERATION INCOME, VIS--VIS, THE TOTAL INCOME OF T HE ASSESSEE ON OTHER ACTIVITIES. AFTER CONSIDERING THE TOTAL EXPENSES AN D WORKING OUT THE PROPORTIONAL EXPENSES ALLOCABLE TO THE POWER GENERA TION UNITS, LEARNED ASSESSING OFFICER HAS WORKED OUT THE EXPENSES AT RS .8,42,718 WHICH ARE TO 4 BE ALLOCATED BEFORE COMPUTING THE DEDUCTION ADMISSI BLE TO THE ASSESSEE. ASSESSING OFFICER HAS CONCLUDED THAT NORMAL DEPRECI ATION AS PER INCOME-TAX, ON THESE TWO UNITS, NAMELY, 616/1 AND POONA MALLE I S OF RS.25,21,572 AND RS.40,88,722 RESPECTIVELY. THE TOTAL OF THIS IS RS. 66,10,294. ACCORDING TO THE ASSESSING OFFICER, THIS DEPRECIATION PLUS PROPO RTIONAL EXPENSES OF RS.8,42,781 HAS TO BE AGGREGATED AND IT IS TO BE SE T OFF AGAINST THE POWER GENERATION INCOME. IN BRIEF, THE ASSESSING OFFICER HAS TAKEN THREE ITEMS; (I) DEPRECIATION ON THESE TWO UNITS RS.66,10,294 PLUS P ROPORTIONATE EXPENSES RS.8,42,718 AND UNABSORBED DEPRECIATION OF RS.151,4 5,449 WHICH COMES TO RS.225,98,511. THE ASSESSING OFFICER HAS OBSERVED T HAT THE RECEIPT FROM POWER GENERATION ON WHICH SECTION 80IA IS CLAIMED I S OF RS.164,07,430 WHICH ARE LESS THAN THE TOTAL DEPRECIATION AND EXPE NSES DESERVES TO BE SET OFF, HENCE THE ASSESSEE IS NOT ENTITLED FOR ANY DEDUCTIO N. 3. ON APPEAL, LEARNED CIT(APPEALS) HAS OBSERVED THA T DEPRECIATION WOULD BE ALLOCATED AT THE RATE AT WHICH EXPENSES FO R MAINTENANCE ETC. HAS BEEN WORKED OUT BY THE ASSESSING OFFICER ON PROPORT IONATE BASIS. IN OTHER WORDS, LEARNED COMMISSIONER HAS ALLOCATED 0.2% OF T HE TOTAL DEPRECIATION. LEARNED DR WHILE IMPUGNING THE ORDER OF THE LEARNED CIT(APPEALS) SUBMITTED THAT ASSESSEE IS NOT MAINTAINING SEPARATE ACCOUNTS FOR ITS WIND 5 ELECTRIC GENERATION UNITS, THEREFORE, IT WAS NOT PO SSIBLE FOR THE ASSESSING OFFICER TO WORK OUT THE PROFIT DERIVED FROM WEG. HE DREW OUR ATTENTION TOWARDS THE REPORT SUBMITTED IN FORM NO. 10CCB. THE ASSESSEE HAS NOT SPECIFICALLY SPECIFIED AS TO HOW EXPENSES AND THE D EPRECIATION FROM THE POWER GENERATION INCOME HAS BEEN DEBITED OR SET OFF AGAINST SUCH INCOME. HE ALSO RELIED UPON THE ORDER OF THE ASSESSING OFFI CER THAT DEDUCTION UNDER SEC. 80IA IS ADMISSIBLE ON AN ENTERPRISES WHICH IS ENGAGED IN THE BUSINESS ELIGIBLE FOR SUCH DEDUCTION AND IT IS AVAILABLE FOR TEN CONSECUTIVE ASSESSMENT YEARS BEGINNING FROM THE FIRST YEAR OF THE CLAIM. T HE TEN YEARS HAVE EXPIRED IN THE CASE OF THE ASSESSEE, THEREFORE, IT IS NOT E NTITLED FOR DEDUCTION. APART FROM ALL THESE OBJECTIONS, HE POINTED OUT THAT THE ISSUE IN RESPECT OF SETTING OFF THE DEPRECIATION ON THESE UNITS BEFORE COMPUTIN G DEDUCTION UNDER SEC. 80-IA FIRST TIME TRAVELLED UP TO THE ITAT IN ASSESS MENT YEAR 1996-97 AND THE ORDER OF THE ITAT IS REPORTED IN 1 SOT 13. HE PLACE D ON RECORD THE ORDER OF THE ITAT AND POINTED OUT THAT THE ITAT HAS HELD THA T DEPRECIATION HAS TO BE SET OFF AGAINST THE POWER GENERATION INCOME OF THE ASSESSEE AND, THEREAFTER, SUCH DEDUCTION IS TO BE COMPUTED. HE FURTHER POINTE D OUT THAT AGAIN THIS ISSUE HAS BEEN CONSIDERED ELABORATELY BY THE ITAT I N ASSESSMENT YEARS 2000-01 AND 2002-03. THE ITAT AGAIN HELD THAT REPAI R AND MAINTENANCE EXPENSES AS WELL AS DEPRECIATION ARE TO BE REDUCED OUT OF GROSS RECEIPTS ON 6 SALE OF ELECTRICITY IN ORDER TO ARRIVE AT ELIGIBLE PROFIT. LEARNED FIRST APPELLATE AUTHORITY IN THOSE ASSESSMENT YEARS HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER AND THE ITAT HAS UPHELD THE ORDER OF THE LE ARNED CIT(APPEALS). LEARNED DR FURTHER POINTED OUT THAT IN ASSESSMENT Y EAR 2000-01 IN THE CASE OF RRB CONSULTANT & ENGG. PVT. LTD. THE ISSUE REGAR DING THE ALLOCATION OF EXPENSES OUT OF THE TOTAL EXPENSES TOWARDS GENERATI ON OF ELECTRICITY INCOME HAD ARISEN. IN THAT YEAR, THE ITAT HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT REVENUE FAILED TO PIN POINT SPECIFIC PART OF T HE EXPENDITURE, WHICH WAS INCURRED FOR EARNING THE INCOME FROM POWER GENERATI ON. ASSESSING OFFICER HAS ON AN ARTIFICIAL ON PRESUMPTIVE BASIS ALLOCATED CERTAIN EXPENDITURES. IN THIS YEAR, THE ISSUE REGARDING SETTING OFF OF DEPRE CIATION AGAINST THE INCOME FROM ELECTRIC GENERATION WAS NOT INVOLVED. THUS, TH E ASSESSEE CANNOT DRAW ANY BENEFIT FROM THIS ORDER OF THE ITAT BECAUSE IN THE PRESENT YEAR, NOBODY IS CHALLENGING THE PROPORTIONATE ALLOCATION OF EXPE NSES AT RS.8,42,718 WHICH IS 0.2% OF THE TOTAL EXPENSES TOWARDS THE INCOME FR OM ELECTRICITY GENERATION. HE, THEREFORE, SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE TWO ORDERS OF THE ITAT REPORTED IN 1 SOT 13 AND 16 SOT 468. HE PLACED ON RECORD COPIES OF BOTH THE ORD ERS. 4. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHE R HAND SUBMITTED THAT AS FAR AS ADMISSIBILITY OF DEDUCTION UNDER SEC. 80- IA OF THE ACT ON THE 7 INCOME EARNED FROM GENERATION OF ELECTRICITY ON WIN D ELECTRIC GENERATION IS CONCERNED, THERE IS NO DISPUTE. IN THE OTHER YEAR, THIS CONTENTION OF THE ASSESSEE HAS BEEN ACCEPTED. THE NEXT ISSUE IS ABOUT THE COMPUTATION OF INCOME. HE POINTED OUT THAT EACH WEG IS A SEPARATE UNDERTAKING OR ENTERPRISE. THE ASSESSEE HAS BEEN MAINTAINING DETAI LS OF EACH UNIT AND THESE DETAILS WERE SUBMITTED BEFORE THE ASSESSING OFFICER . ASSESSING OFFICER REPRODUCED THE DETAILS PERTAINING TO EACH UNIT ON P AGE 3 OF THE ASSESSMENT ORDER. ASSESSING OFFICER FOUND THAT UNABSORBED DEP RECIATION AND CURRENT YEAR DEPRECIATION IS MORE THAN THE INCOME, THEREFOR E, ASSESSEE IS NOT ENTITLED FOR DEDUCTION, OTHERWISE HE HAS COMPUTED THE DEDUCT ION. LEARNED COUNSEL TOOK US THROUGH THE DETAILS ON PAGE 3 OF ASSESSMENT ORDER. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD T O THE FACT THAT ASSESSEE COMPANY IS MANUFACTURING WIND ELECTRICAL GENERATOR. IT HAD INSTALLED THE VARIOUS WEG AT DIFFERENT LOCATIONS FOR DEMONSTRATIO N PURPOSES, HOWEVER, THE ELECTRICITY GENERATED FROM THESE UNITS HAD BEEN SOL D TO THE TAMILNADU ELECTRICITY BOARD. THE ASSESSEE HAS CLAIMED DEDUCTI ON UNDER SEC. 80IA OF THE INCOME-TAX ACT, 1961 ON GENERATION OF ELECTRICITY. IN THE PAST, IT HAS RAISED VARIOUS ARGUMENTS FOR OPPOSING THE STAND OF THE ASS ESSING OFFICER THAT DEPRECIATION HAS TO BE ALLOCATED ON THESE UNITS BEF ORE COMPUTING ADMISSIBLE 8 DEDUCTION UNDER SEC. 80IA OF THE ACT. THERE IS NO C HANGE WITH REGARD TO THOSE ASPECTS AND THE ARGUMENTS HAVE BEEN NOTED BY THE ITAT EXTENSIVELY IN ASSESSMENT YEARS 2001-02 AND 2002-03. THEY READ AS UNDER: 2. SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND C IT(A) WERE REITERATED BEFORE US. THE MAIN GROUND ON WHICH SUCH ACTION OF ASSESSING OFFICER HA S BEEN AGITATED BY LD. COUNSEL OF THE ASSESSEE CAN BE SUMMARIZED AS BELOW: 1.THAT THE APPELLANT FALLS WITHIN THE PARAMETERS OF SUB-SECTION (1) TO SECTION 80-IA, IN THAT THE GROS S TOTAL INCOME INCLUDES PROFITS AND GAINS DERIVED FRO M ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING AS DEFINED IN SUB-SECTION (4) THEREIN. 2.THAT IN TERMS OF CLAUSE ( IV ) OF SUB-SECTION (4) OF SECTION 80-IA, THE APPELLAN T HAS SET UP IN INDIA, FOR THE GENERATION OF POWER, AN INDUSTRIAL UNDERTAKING WHICH HAS STARTED GENERATING POWER FROM 1-4-1996, WHICH IS WITHIN THE LIMITS OF THE SPECIFIED PERIOD OF 1-4-1993 TO 31-3-2003. EACH OF THESE 11 WEGS (13 IN THE LATER YEAR) CONSTITUTES AN UNDERTAKING WITHI N THE MEANING OF THE SAID PROVISION. 3.THAT IN TERMS OF THE STIPULATIONS CONTAINED IN SE CTION 80AB, THE DEDUCTION HAS BEEN CLAIMED IN RESPECT OF THE INCOME OF THE PRIORITY INDUSTRY WHIC H IS INCLUDED IN THE GROSS TOTAL INCOME BY TAKING T HE PRIORITY INCOME ON A STAND-ALONE BASIS. 4.THAT SECTION 80-IA ENVISAGES DEDUCTION FOR THE IN COME DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. THE INCOME FROM THE SALE OF ELECTRICIT Y IS CLEARLY AND UNMISTAKABLY RELATED TO THE INDUST RIAL UNDERTAKING GENERATING ELECTRICITY AND SO, IS ELIGI BLE FOR THE EXEMPTION WHICH HAS PARTIALLY BEEN ALLO WED BY THE ASSESSING OFFICER HIMSELF. 5.THAT THE EXPENDITURE ON ACCOUNT OF REPAIR & MAINT ENANCE AND DEPRECIATION IS NOT RELATABLE TO THE 11 INDUSTRIAL UNDERTAKINGS (13 IN THE LATER YEAR), INA SMUCH AS, BOTH EXPENSES ARE INCURRED WHOLLY, NECESSARILY, AND EXCLUSIVELY FOR THE PURPOSE OF DEM ONSTRATION AND SALES PROMOTION OF EACH ASSESSEE. 6.THAT THE INDUSTRIAL UNDERTAKING IS PART AND PARCE L OF THE BUSINESS OF THE APPELLANT, INASMUCH AS, IT IS BOUND BY THE RELATIONSHIPS OF INTERCONNECTION, INTE RDEPENDENCE, AND INTERLACING OF FUNDS AND MANAGERIAL CONTROL WITH THE MAIN BUSINESS OF THE PR ODUCTION AND ASSEMBLY OF WEGS. 7.THAT THE PRINCIPLE OF LAW IS, THAT THE EXPENDITUR E EXCLUSIVELY RELATABLE TO THE PRIORITY UNDERTAKING IS REQUIRED TO BE DEDUCTED AGAINST THE INCOME OF THE P RIORITY UNDERTAKING. THE SUPREME COURT, AND LATER ON, THE RAJASTHAN HIGH COURT HAVE SAID THAT THE DIL UTION OF PRIORITY PROFITS IS NOT PERMISSIBLE THROUG H THE INTERMINGLING OF EXPENSES RELATING TO THE NON-PRIOR ITY SECTOR (REFERENCE WAS MADE TO THE CASE OF CIT V. CANARA WORKSHOPS (P.) LTD. [1986] 161 ITR 320 1 (SC), CIT V. SHARDA GUM & CHEMICALS [2007] 288 ITR 116 (RAJ.). 8.THAT WHERE IN THE CASE OF AN INTEGRATED BUSINESS, EXPENSES ARE INCURRED WHICH RELATE TO DIFFERENT BUSINESSES, THEN, THE EXPENSES NEED NOT BE IDENTIFI ED AGAINST THE EXEMPT INCOME FOR ALLOCATION. IT WIL L SUFFICE IF THE ENTIRETY OF EXPENDITURE IS SET OFF A GAINST THE TAXABLE INCOME. ON THE SAME PRINCIPLE, T HE 9 EXPENDITURE ON REPAIR & MAINTENANCE AND DEPRECIATIO N WOULD HAVE TO BE ALLOCATED TO THE RELEVANT BUSINESS, I.E., DEMONSTRATION OF WEGS IN THE SCHEME OF THEIR SALES . 9.THAT THE ONUS WAS ON THE ASSESSING OFFICER TO EST ABLISH THAT THE ENTIRETY OF THE DEPRECIATION ON THE 11 WEGS (13 IN THE LATER YEAR) PERTAINED WHOLLY AND EXCLUSIVELY TO THE BUSINESS OF POWER GENERATION. THIS, THE ASSESSING OFFICER HAS COMPLETELY FAILED T O DISCHARGE. 10.THAT THE DEPRECIATION WHICH HAS BEEN DEDUCTED FR OM THE POWER GENERATION INCOME DOES NOT PERTAIN TO IT AT ALL. SUCH IS DIRECTLY AND INCONTROVERTIBLY REFERABLE TO THE WEGS ERECTED AND RETAINED FOR DEMONSTRATION PURPOSES ONLY. 11.THAT THE WEGS OPERATE AND GENERATE ELECTRICITY E NTIRELY OUT OF WIND POWER WHICH IS ENTIRELY DUE TO NATURES BOUNTY. THAT INVOLVES NO VISIBLE OR INVISI BLE EXPENDITURE AT ALL, AND IN THAT SITUATION, THE ACT OF THE ASSESSING OFFICER IN LOADING ON TO THIS ACTIVIT Y, THE EXPENDITURE ON REPAIR AND MAINTENANCE AND DEPRECIATION, WAS TOTALLY FALLACIOUS AND ENTIRELY U NCALLED FOR. 12.THAT THE EXPENSES ON ACCOUNT OF REPAIR & MAINTEN ANCE AND DEPRECIATION WERE MOST UNAMBIGUOUSLY AND UNEQUIVOCALLY RELATABLE TO THE ASPECT OF DEMONS TRATION FOR PURPOSES OF SALES PROMOTION, AND WERE, THEREFORE, ALLOCABLE AGAINST THE INCOME FROM THAT H EAD. AFTER SO DOING, IT WAS NOT PERMISSIBLE TO RETU RN BACK TO THE PROFIT & LOSS ACCOUNT TO ALLOCATE THE S AME AGAINST THE INCOME FOR THE PRIORITY SECTOR, FOR TAX LAWS DO NOT CONTEMPLATE DOUBLE DEDUCTION FOR THE SA ME EXPENDITURE, AS HELD IN THE CASE OF ESCORTS LTD. V. UNION OF INDIA [1993] 199 ITR 43 1 (SC). 13.THAT WERE THE BUSINESS IS ONE, AND DIVERSE ACTIV ITIES ARE PURSUED, IF EXPENDITURE IS INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, THEN I RRESPECTIVE OF THE FACT THAT INCOME FROM ONE OR MOR E PART OF THE ACTIVITIES IS NOT LIABLE TO INCOME-TAX, THE ENTIRE EXPENDITURE INCURRED BY THE ASSESSEE IN CONNECTION WITH THE BUSINESS HAS TO BE ALLOWED UNDE R SECTION 37 OF THE ACT. IN THIS CASE, AFTER SO DOING, WITH REGARD TO THE ACTIVITY OF DEMONSTRATION OF WEGS, THE REVENUE CANNOT CONTEND FOR A DEDUCTION OF SUCH EXPENSES AGAINST THE PRIORITY INC OME. [REFERENCE WAS MADE TO THE CASE OF CIT V. C. PARAKH & CO.(INDIA) LTD. [1956] 29 ITR 661 (SC)]. OTHER EXAMPLES ARE DIVIDEND AND AGRICULTURA L INCOMES OUT OF MIXED BUSINESSES. 14.THAT EVEN IF THE INCOME FROM SOME ACTIVITY WAS N OT TAXABLE, THE EXPENDITURE INCURRED IN A CONJOINT BUSINESS IS DEDUCTIBLE AGAINST THE INCOME FROM THE OTHER ACTIVITIES. (REFERENCE WAS MADE TO THE CASE OF PUNJAB STATE CO-OPERATIVE SUPPLY & MARKETING FEDERA TION LTD. V. CIT [1981] 128 ITR 189 1 (PUNJ. & HAR.) AND CIT V. INDIAN BANK LTD. [1965] 56 ITR 77 (SC). 15.THAT THE ASSESSING OFFICER WRONGLY ASSUMED THAT UNDER SECTION 80-IA(5), THE CLAIM COULD NOT BE ENTERTAINED. THE PURPOSE OF THIS PROVISION HAS BEEN MISINTERPRETED BY THE ASSESSING OFFICER. THE PROVISION IN EFFECT PROVIDES THAT FOR THE PURPOSE O F DETERMINING THE QUANTUM OF TAX HOLIDAY PROFITS UN DER SECTION 80-IA, THE TAXABLE INCOME OF THE ELIGIBLE B USINESS OF THE INDUSTRIAL UNDERTAKING IS TO BE ASCERTAINED AS IF SUCH UNDERTAKING WERE AN INDEPEND ENT UNIT OWNED BY THE ASSESSEE CONCERNED, AND THE ASSESSEE HAD NO OTHER SOURCE OF INCOME. THAT WA S FOR RELATING TO THE PRIORITY INCOME, THE UNABSORBED LOSSES, UNABSORBED DEPRECIATION ETC., PE RTAINING TO THAT INDUSTRY. WHERE IN A CASE THERE WERE NO SUCH ADJUSTMENTS PENDING SET-OFF, THE SECTI ON WOULD HAVE NO APPLICATION. (PLEASE REFER PAGES 112-114 OF THE PAPER BOOK). 10 16.THE ASSESSING OFFICER WRONGLY INTERPRETED THE TE RM PROFIT. THOUGH SUCH HAS TO BE INTERPRETED IN COMMERCIAL TERMS AS THE EXCESS OF RECEIPTS OVER EXP ENDITURE, YET, WHERE THERE ARE NO RECEIPTS AND ONLY EXPENDITURE THAT IS A CASE OF ABSOLUTE LOSS. A ND FOR THE CONVERSE SITUATION, WHERE THERE IS ONLY RECEIPT AND NO EXPENDITURE, IT IS A CASE OF ABSOLUT E PROFITS. SUCH SITUATIONS ARE NOT RULED OUT BY ANY OF THE PROVISIONS OF THE INCOME-TAX ACT. THE ASSESSING OFFICERS INTERPRETATION OF PROFIT IS, THEREFORE, MISCONCEIVED AND ANOMALOUS. 17.THAT THE ASSESSING OFFICER WRONGLY READ THE EXPL ANATORY NOTE TO FINANCE ACT (NO. 2) OF 1980 WITH REGARD TO THE INSERTION OF SECTION 80-AB. THE EXPLA NATORY NOTE ONLY GOES TO SUPPORT THE CONTENTIONS OF THE APPELLANT INSOFAR AS THE DEDUCTIONS ARE REQUIRE D TO BE CALCULATED WITH REFERENCE TO THE NET INCOME . WHERE THERE IS NO EXPENDITURE, THE GROSS INCOME BEC OMES THE NET INCOME. A SITUATION OF THIS TYPE HAS NOT BEEN BARRED BY THE SAID EXPLANATORY NOTE. THE A SSESSING OFFICER HAS PROCEEDED ENTIRELY ON CONJECTURES. THE ASSESSING OFFICER HAS ALSO MISREAD THE SUPREME COURTS DECISION IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 . THE SECOND CRITERIA LISTED THEREIN NECESSITATES THE IDENTIFICATION OF THE TOTAL INCOME WHICH REPRESENTS PROFITS AND GAINS ATTRIBUTABLE TO THE SPECIFIED INDUSTRY. IN THE SUBJECT CASE, INCOME FRO M POWER IS DERIVED FROM THE SPECIFIED INDUSTRY, SO WHATEVER CONDITIONALITY WAS ENVISAGED IN THE CASE R ELIED UPON, IS FULLY AND COMPLETELY SATISFIED IN TH E FACTS OF THE INSTANT CASE. IN FACT, THE REQUIREMENT SPELT BY THE CASE OF DISTRIBUTORS (BARODA (P.) LTD. V. UNION OF INDIA [1985] 155 ITR 120 1 (SC) OF THE INCOME BEING DERIVED FROM THE PRIORITY INDUSTRY IS ALSO FULLY AND COMPLETELY SATISFIED IN THE SUBJECT CASE. 18.THAT THE COMPUTATION AS MADE BY THE APPELLANT IS IN TERMS OF SECTION 80-AB. IT IS A CASE WHERE THE BLADES OF THE WEGS ARE MADE TO ROTATE BY WIND CURRE NTS, FOR WHICH NO PAYMENT IS REQUIRED TO BE MADE TO ANYONE. IT IS FOR FREE FOR AS LONG AS THE WIND C ARES TO BLOW IN SUFFICIENT STRENGTH SO AS TO BE ABL E TO ROTATE THE BLADES, THE TASK IS ACCOMPLISHED. FOR TH E FACT THAT NET INCOME IS REQUIRED TO BE COMPUTED I N TERMS OF THE MANDATE UNDER SECTION 80-AB, NO EXPEND ITURE CAN BE CONJURED AND FICTIONALLY SOUGHT TO BE SET OFF AGAINST THE GROSS INCOME ONLY BECAUSE SECTI ON 80-AB GENERALLY SPEAKS OF THE NET INCOME. THE GROSS BECOMES THE NET INCOME BY VIRTUE OF THE OUTFL OW ON RUNNING EXPENSES BEING NIL. IT IS NOT PERMISSIBLE TO DRAG IN EXPENSES PERTAINING TO OTHER LINES OF BUSINESS, ONLY TO BE ABLE TO SAY THAT THE RE IS A NET REMAINING AFTER SET-OFF OF SUCH EXPENSES A GAINST THE PRIORITY INCOME. THE DECISION IN THE CAS E OF MOTILAL PESTICIDES (INDIA) (P.) LTD. V. CIT [2000] 243 ITR 26 2 (SC) HAS TO BE READ IN THE CONTEXT OF FACTS AS THEY STOOD THEREIN, AND THE RATIO STATED I N TERMS OF THOSE FACTS CANNOT BE EXTENDED OR INTERPOLATED TO ANOTHER FACT SITUATION DISSIMILAR T O THAT CASE. 19.THAT THE ASSESSING OFFICER ERRONEOUSLY READ A CO NTRADICTION IN THE ARGUMENT THAT THE INCOME FROM THE PRIORITY INDUSTRY WAS INCIDENTAL TO THE MAIN AC TIVITY. SUCH IS NOT A RELEVANT CRITERIA FOR THE PUR POSE OF DETERMINATION OF PRIORITY INCOME AND ALLOWANCE OF P RIORITY RELIEF. THE ASSESSING OFFICER HAS NEEDLESSL Y CONFUSED THE ISSUE ON THIS POINT. 20.THAT THE ASSESSING OFFICER FAILED IN HIS DUTY TO IDENTIFY THE EXPENSES RELATABLE TO THE PRIORITY INDUSTRY, AND COMMITTED A DOUBLE-FAULT BY ATTRIBUTI NG EXPENSES INCURRED ON THE NON-PRIORITY UNDERTAKIN G ON TO THAT OF THE PRIORITY UNDERTAKING. SUB-SECTION (4) OF SECTION 80-IA DOES NOT ENVISAGE A CONDITION OF AN INCOME ARISING FROM A MAIN ACTIVITY OR AN INCIDE NTAL ACTIVITY FOR PROVIDING THE PRIORITY DEDUCTION. SO LONG AS POWER IS GENERATED, IRRESPECTIVE OF THE STA TURE OR STATUS OF THE ACTIVITY, THE INCENTIVE IS RE QUIRED TO BE GRANTED TO THE ASSESSEE. 11 21.THAT DESPITE THE STATUTE BEING CLEAR ON THE SUBJ ECT, THE ASSESSING OFFICER HAS TRIED TO BEFUDDLE TH E ISSUE BY READING INTO THE FACTS, CASE LAWS WHICH HA VE NO APPLICATION TO THE FACTS OF THE CASE. THE ASSESSING OFFICER HAS SIMPLY TRIED TO INTERPRET THE PROVISIONS IN A MANNER SO AS TO TAKE AWAY A BENEFI T WHICH THE STATUTE OTHERWISE ENTITLES THE ASSESSEE T O THE RATIO OF THE DECISION IN THE CASE OF CIT V. VASAVI PRATAP CHAND [2002] 255 ITR 517 3 (DELHI) IS RELIED UPON IN THIS REGARD. 22.THAT THE ASSESSING OFFICER HAS MERELY PICKED AND CHOSEN FROM VARIOUS STRAY PROVISIONS OF THE STATUTE RATHER THAN READING THE STATUTE AS A WHOLE, IN ORDER TO UNDERSTAND THE HARMONIOUS IMPLICATION OF THE PROVISIONS. 23.THAT THE ASSESSING OFFICER HAS TRIED TO INTERPRE T THE PROVISIONS OF LAW IN DISREGARD TO THE OBJECT AND PURPORT OF THE EXEMPTION AS VISUALIZED UNDER THE ST ATUTE. 24.THAT THE CIT(A) READ A DICHOTOMY IN THE DIVERSE ACTIVITIES OF THE BUSINESS WHERE THERE WAS NONE. THE CIT(A) FAILED TO APPRECIATE THAT THERE IS NO CL ASSIFICATION UNDER SECTION 80-IA AS MAIN INCOME OR INCIDENTAL INCOME. THE CIT(A) OUGHT TO HAVE APPRECI ATED THAT SO LONG AS THE INCOME INURES FROM THE PRIORITY UNDERTAKING, THE ASSESSEES RIGHT TO CLAIM DEDUCTION UNDER SECTION 80-IA COULD NOT BE INTERFE RED WITH AT ALL. 25.THAT THE CIT(A) FAILED TO APPRECIATE THAT THE, E NTIRE EXPENDITURE ON REPAIR & MAINTENANCE AND DEPRECIATION WAS ATTRIBUTABLE TO THE MANUFACTURING ACTIVITY OF WEGS, AND NO PART OF IT WAS EVEN OBLIQUELY RELATABLE TO THE GENERATION OF ELECTRICIT Y. 26.THAT THE CIT(A) FAILED TO APPRECIATE THAT IT WAS NOBODYS CASE THAT THERE IS A DIFFERENCE BETWEEN INCOME AND PROFITS. IN THE CASE OF THE APPELLANT, O N ACCOUNT OF THE PECULIAR NATURE OF THE ACTIVITY, T HE WIND POWER HAD RESULTED IN THE GENERATION OF ELECTR IC POWER WITHOUT THE INCURRING OF ANY EXPENDITURE, AND HERE, THERE WAS A CASE WHERE THE INCOME ITSELF WAS A PROFIT. IN SUCH A FACT SITUATION, TO APPLY TH E RATIO OF CASES ANSWERED UNDER TOTALLY DIFFERENT AND DISTINCT COMPENDIA OF CIRCUMSTANCES IS ERRONEOUS AND UNCALLED FOR. 27.THAT THE CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEES CASE ALL ALONG HAS BEEN THAT IN THE SUBJEC T CASE, THE INCOME ITSELF IS THE PROFIT, INSOFAR AS, BOTH INCOME AND PROFITS ARE REQUIRED TO BE RELATED TO THE PRIORITY INDUSTRY AND IN A CASE WHERE THERE IS ONLY INCOME AND NO EXPENDITURE, THE INCOME ITSELF BECOMES THE PROFIT. 28.THAT THE AUTHORITIES BELOW COMPLETELY FAILED TO APPRECIATE THAT THE OBJECTIVE OF SETTING UP THESE 1 1 WEGS (13 IN THE NEXT YEAR) WAS FOR THE PURPOSE OF I NCREASING AWARENESS AS TO THIS NOVEL TECHNOLOGY, AND THUS TO GIVE A POSSIBLE BOOST TO ITS SALES. NAT URALLY, ALL EXPENSES RELATABLE THERETO, QUALIFIED F OR SET- OFF AGAINST THE BUSINESS OF SELLING OF THESE WEGS. SUCH HAS NOT BEEN REPUDIATED BY EITHER OF THE AUTHORITIES. 29.THAT THE AUTHORITIES BELOW FAILED TO RECKON THAT THE CHARGES FOR ELECTRICITY GENERATION WERE RECEIV ED NET OF EXPENSES AND WHATEVER EXPENSES THERE BE WERE ON ACCOUNT OF THE PURCHASER OF ELECTRICITY, VIZ., TAMIL NADU STATE ELECTRICITY BOARD. 3. ON THE BASIS OF THE ABOVE SUBMISSIONS IT WAS PLEAD ED BY THE LD. AR THAT RELIEF SOUGHT FOR SHOULD BE GRANTED TO THE ASSESSEE. 12 4. ON THE OTHER HAND, IT WAS SUBMITTED BY THE LD. DR THAT THE CLAIM OF ASSESSEE IS CONTRADICTORY. HE CONTENDED THAT ACCORDING TO THE PROVISIONS OF SECTI ON 80-IA DEDUCTION IS ELIGIBLE TO AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (4). HE CONTENDED THAT IF ASSESSEE CLAIMS THAT GENERATION OF ELECTRICITY WAS NOT ITS BUSINESS THEN ASSESSEE IS NOT ENTITLED AT ALL TO CLAIM DEDU CTION UNDER SECTION 80-IA AS ACCORDING TO THE SUBMISSIONS OF THE ASSESSEE THE GENERATION OF ELECTRICITY WAS ONLY INCIDENTAL AND WEG WERE INSTALLED FOR DEMONSTR ATION TO PROMOTE THE SALE OF WEG. HE CONTENDED THAT IT HAS BEEN SUBMITTED BY THE LD. AR THAT PRODU CTION OF ELECTRICITY WAS ANCILLARY AND THUS KEEPING IN VIEW THAT SUBMISSION THE ASSESSEE SHOULD NOT BE HEL D TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA AS CLAIMED BY IT AS ACCORDING TO THE REQUIREMENT OF SECTION 80-IA ELIGIBLE INCOME MUST ARISE FROM THE BUSINESS CARRIED ON IN RESPECT OF SPECIFIED ACTIVIT IES. HE FURTHER SUBMITTED THAT ACCORDING TO SECTION 80- IA(5) THE INCOME OF THE BUSINESS IN RESPECT OF WHIC H SUCH DEDUCTION IS CLAIMED SHOULD BE COMPUTED AS IF THE SAID BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT T O THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH DETERMINATION IS TO BE MA DE. THUS HE PLEADED THAT ACCORDING TO THAT SECTION INCOME FROM BUSINESS ON WHICH SUCH DEDUCTIO N IS CLAIMED WAS TO BE COMPUTED ON STAND ALONE BASIS AND THUS STAND OF THE ASSESSING OFFICER THAT DEPRECIATION AND OTHER EXPENSES ARE TO BE REDUCED IS IN ACCORDANCE WITH LAW. HE OBJECTED TO THE ALTER NATIVE SUBMISSION OF THE LD. AR THAT THE ASSESSING OFFICER SHOULD HAVE AT LEAST ALLOCATED PROPORTIONAT ELY DEPRECIATION TO THE TWO BUSINESS ACTIVITIES TO COMPUTE THE ELIGIBLE PROFIT. HE CONTENDED WHEN ACTU AL FIGURE IS AVAILABLE THEN THERE WAS NO QUESTION O F PROPORTIONATE ALLOCATION. 5. HE CONTENDED THAT RELIANCE BY THE ASSESSEE ON THE DECISION IN THE CASE OF RAJASTHAN STATE WAREHOUSING CORPN. V. CIT [2002] 242 ITR 450 1 (SC), IS MISPLACED AS THE FACTS IN THE SAID CASE A ND THAT OF ASSESSEES CASE ARE DISTINGUISHABLE. HE CON TENDED THAT IN THAT CASE ASSESSEE WAS CARRYING ON ONE INDIVIDUAL BUSINESS IN VARIOUS VENTURES BUT IN THE PRESENT CASE THE ASSESSEE HAS IDENTIFIABLE RECEIPTS WITH RESPECT TO GENERATION OF ELECTRICITY ON WHICH DEDUCTION UNDER SECTION 80-IA HAD BEEN CLAIMED AND DEPRECIATION AND REPAIR AND MAINTENANCE EXPENSES ARE SPECIFICALLY ATTRIBUTABLE TO SUCH RECEIPTS. THUS HE PLEADED THAT IT IS NOT A CASE WHE RE ENTIRE DEPRECIATION AND REPAIR AND MAINTENANCE EXPENSES COULD BE HELD AS UNIDENTIFIABLE. 6. HE FURTHER RELIED ON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF WATERFALL ESTATES LTD. V. CIT [1996] 219 ITR 563 2 TO CONTEND THAT ASSES-SING OFFICER WAS RIGHT IN AL LOCATING REPAIR AND MAINTENANCE EXPENSES AND DEPRECIATION RELATING TO W EGS FROM WHICH ASSESSEE HAD EARNED INCOME FROM GENERATION OF ELECTRICITY AND THUS ASSESSING O FFICER WAS RIGHT IN REDUCING DEPRECIATION AND REPAI R AND MAINTENANCE EXPENSES. 7. HE FURTHER REFERRED TO THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF ITO V. CH. ATCHAIAH [1996] 218 ITR 239 1 TO CONTEND THAT UNDER SECTION 4 OF INCOME-TAX ACT ASSESSING OFFICER HAS GOT NO OPTION EXCEPT TO ASSESS ONLY THE RIGHT PERSON IRRES PECTIVE OF CONSEQUENCES. HE CONTENDED THAT AS IT IS THE CONTENTION OF THE ASSESSEE THAT THE WEG USED FO R THE PURPOSE OF GENERATION OF ELECTRICITY WERE RELATING TO BUSINESS ACTIVITY OF SALES OF WEG THE A SSESSEE SHOULD NOT BE HELD TO BE ELIGIBLE FOR ANY DEDUCTION UNDER SECTION 80-IA AS ACCORDING TO THE P ROVISION OF SECTION 80-IA NO SUCH DEDUCTION CAN BE ALLOWED IF THE ASSESSEE IS NOT ENGAGED IN THE BUSIN ESS OF SUCH ACTIVITY. HE CONTENDED THAT IT IS WITHI N THE POWER OF TRIBUNAL TO HOLD THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA AS PER 13 DECISION OF DELHI HIGH COURT DECISION IN THE CASE O F INDIAN MANAGEMENT ADVISORS & LEASING (P.) LTD. V. CIT [2007] 289 ITR 179 2 . 8. THUS HE PLEADED THAT ASSESSEE SHOULD NOT BE HELD T O BE ENTITLED FOR DEDUCTION UNDER SECTION 80-IA AT THE FIRST PLACE AND IF IT IS HELD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80-IA THEN ORDER OF ASSESSING OFFICER AND CIT(A) SHOULD BE CONFIRMED . 9. IN THE REJOINDER THE LD. AR REITERATED THE SUBMISS IONS MADE. HE CONTENDED THAT ASSESSEE CANNOT BE MADE WORSE OFF BY ACCEPTING THE CONTENTION OF LD. D R THAT IT IS NOT ELIGIBLE AT ALL FOR DEDUCTION UNDE R SECTION 80-IA AS THE APPELLANT IN THE PRESENT CASE IS THE ASSESSEE. 10. WE HAVE, CAREFULLY CONSIDERED THE RIVAL SUBMISSION S IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE ASSESSING OFFICER HIMSELF HAS HELD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80-IA AS IT I S EARNING INCOME FROM GENERATION OF ELECTRICITY WHICH IS ONE OF THE ELIGIBLE ACTIVITY OF BUSINESS TO BE ENTITLED FOR DEDUCTION UNDER SECTION 80-IA. UNDER S ECTION 80-IA SUCH DEDUCTION IS NOT ELIGIBLE UNLESS AN UNDERTAKINGS OR AN ENTERPRISES GROSS TOTAL INCOME CONSISTS OF PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4). THUS IF SU CH PROFITS AND GAINS ARE NOT EARNED FROM BUSINESS, UNDERTAKING/ENTERPRISE WILL NOT BE ENTITLED FOR DED UCTION UNDER SECTION 80-IA. IT IS THE CLAIM OF ASSE SSEE THAT GENERATION OF ELECTRICITY WAS ONLY INCIDENTAL TO THE MAIN ACTIVITY OF SELLING WEG. IF SUCH CONTEN TION IS ACCEPTED THAN ASSESSEE WILL NOT AT ALL BE ENTITLED FOR DEDUCTION UNDER SECTION 80-IA AS IN THAT CASE T HE INCOME FROM GENERATION OF ELECTRICITY IS NOT EARNED BY THE ASSESSEE FROM BUSINESS OF ELIGIBLE SPECIFIE D ACTIVITY. HOWEVER, IT IS NOT EVEN THE CASE OF ASSES SING OFFICER THAT ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY AS HE HIMSELF HAS ALLOWED THE DEDUCTION UNDER SECTION 80-IA OF T HE ACT. AT THE SAME TIME CONTENTION OF THE ASSESSEE TH AT GENERATION OF ELECTRICITY IS ONLY INCIDENTAL TO THE ACTIVITY OF SELLING WEG HAS ALSO TO BE REJECTED FOR THE REASON THAT ASSESSEE IS NOT ENTITLED TO GET TW O BENEFITS FROM SUCH POSITION AS THE SAME WILL NOT BE IN ACCORDANCE WITH THE PROVISIONS OF LAW. IN OTHER WORDS, ASSESSEE CANNOT BLOW HOT AND COLD IN ONE BRE ATH BY CONTENDING ON THE ONE HAND THAT IT IS ELIGIB LE FOR DEDUCTION UNDER SECTION 80-IA AS IT IS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY AND ON THE OTHER HAND THAT THE DEPRECIATION RELATING TO WEG FR OM WHERE THE ELECTRICITY IS GENERATED WERE INSTALLE D ONLY FOR THE PURPOSE OF DEMONSTRATION RELATED TO TH E ACTIVITY OF SALE OF WEG. IN THIS MANNER THE ASSES SEE ONLY TRIES TO GET THE BENEFIT OF HIGHER DEDUCTION U NDER SECTION 80-IA AND SUCH COURSE IS NOT AVAILABLE TO THE ASSESSEE PARTICULARLY IN VIEW OF SUB-SECTION (5 ) OF SECTION 80-IA. IT WILL BE RELEVANT TO REPRODUC E RELEVANT PORTION OF SECTION 80-IA : '80-IA. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSE SSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFE RRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. ****** (4)THIS SECTION APPLIES TO ****** (5)NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SE CTION (1) APPLY SHALL, FOR THE PURPOSES OF 14 DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB -SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YE AR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH T HE DETERMINATION IS TO BE MADE.' 11. IT IS CLEAR FROM THE LANGUAGE OF SECTION 80-IA(1) THAT THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION ON LY IF THE PROFIT AND GAINS ARE DERIVED FROM ANY BUSINE SS REFERRED TO IN SUB-SECTION (4). IT HAS ALREADY B EEN POINTED OUT THAT THE ACTIVITY CARRIED ON BY THE ASS ESSEE OF GENERATION OF ELECTRICITY WAS A BUSINESS CARRIED ON BY IT. THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE GENERATION AND SUPPLY OF ELECTRIC ITY WAS NOT A BUSINESS ACTIVITY OF THE ASSESSEE. IT IS ALSO NOT THE CASE OF ASSESSING OFFICER THAT IT WAS NOT A BUSINESS ACTIVITY OF THE ASSESSEE. THUS THE ARGUMEN T OF THE LD. DR THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80-IA AT ALL IS NOT ACCEPTA BLE AND REJECTED. HOWEVER, HIS ARGUMENT THAT ACCORDING TO SUB-SECTION (5) THE PROFIT HAS TO BE C OUNTED ON STAND ALONE BASIS IS DEALT WITH AS UNDER. 12. ACCORDING TO SUB-SECTION (5), NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THE ACT, THE PROFITS AND GAINS OF ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SECTION (1) APPLIES SHALL, F OR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION UND ER THAT SUB-SECTION FOR ANY ELIGIBLE YEAR OF DEDUCTION TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINE SS WERE ONLY THE SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R. ACCORDING TO THE MANDATE OF THIS SUB-SECTION IT HAS TO BE CONSIDERED THAT BUSINESS OF GENERATION OF ELECTRICITY WAS THE ONLY SOURCE OF INCOME FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER THIS SECTION. IN THIS VIEW OF THE SITUATION, OUT OF GROSS RECEIPT S RECEIVED BY THE ASSESSEE FROM GENERATION OF ELECTRI CITY, THE PERMISSIBLE DEDUCTION AND EXPENSES HAVE TO BE REDUCED FOR THE PURPOSE OF DETERMINING THE QU ANTUM OF DEDUCTION. IN OTHER WORDS, THE GENERATION OF ELECTRICITY HAS TO BE CONSIDERED TO BE THE ONLY SOURCE OF INCOME OF THE ASSESSEE AND EXPENSES RELATING THERETO AND PERMISSIBLE DEDUCTIONS RELATIN G THERETO HAVE TO BE REDUCED TO ARRIVE AT THE QUANT UM OF PROFIT ON WHICH SUCH DEDUCTION WILL BE ELIGIBLE. DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE ON THE WEGS IN ITS BOOKS OF ACCOUNT BUT ACCORDING TO T HE CASE OF ASSESSEE THAT DEPRECIATION DOES NOT PERTAIN TO THE BUSINESS OF GENERATION OF ELECTRICIT Y AS THESE WEGS WERE INSTALLED FOR THE PURPOSE OF DEMONSTRATION TO PROMOTE BUSINESS ACTIVITY OF SALES OF WEG. WE FIND NO FORCE IN SUCH SUBMISSIONS AS THE MOMENT, FROM WHICH THE ASSESSEE STARTED SELLING ELECTRICITY, THE INSTALLATION OF WEGS WERE NO MORE FOR THE PURPOSE OF BUSINESS ACTIVITY OF SELLING WEG S AS ASSESSEE INTENDED TO EARN PROFIT FROM SALE OF ELECTRICITY AS ITS BUSINESS ACTIVITY WHICH MAKES EN TITLE THE ASSESSEE TO CLAIM DEDUCTION UNDER SECTION 80-IA. IT IS ALSO FOR THAT REASON THE CONTENTION OF ASSESSEE THAT AT LEAST THERE SHOULD BE PROPORTIONA TE ALLOCATION OF DEPRECIATION AND EXPENSES HAS TO BE R EJECTED. WEGS FROM WHICH THE ASSESSEE HAS EARNED INCOME FROM GENERATION OF ELECTRICITY CANNOT BE SAID TO BE FOR THE PURPOSE OF DEMONSTRATION FOR PROMOTION OF SALE OF WEGS AS DEMONSTRATION BECAME A NCILLARY OBJECT AT THE POINT OF TIME WHEN ASSESSEE STARTED SELLING ELECTRICITY. ASSESSEE HAS EARNED SUBSTANTIAL RECEIPTS FROM GENERATION OF ELECTRICITY. ALL THE RECEIPTS CANNOT BE CONSIDERED TO BE NET GAIN OF THE ASSESSEE AS DEPRECIATION RELA TING THERETO HAS NECESSARILY TO BE HELD PERTAINING TO TH E ACTIVITY OF GENERATION OF ELECTRICITY. THE REPAIR AND MAINTENANCE ALSO HAS TO BE HELD TO BE EXCLUSIVELY F OR THE PURPOSE OF GENERATION OF ELECTRICITY. THUS KEEPING IN VIEW THE MANDATE OF SECTIONS 80-IA(1), ( 4) & (5), WE ARE OF THE OPINION THAT THE ACTION OF THE ASSESSING OFFICER IN REDUCING THE DEPRECIATION AND REPAIR AND MAINTENANCE EXPENSES OUT OF GROSS 15 RECEIPTS OF SALE OF ELECTRICITY TO ARRIVE AT ELIGIB LE PROFIT WAS QUITE IN ORDER AND HAS RIGHTLY BEEN U PHELD BY CIT(A) 6. SIMILARLY, THIS ISSUE WAS CONSIDERED IN ASSESSME NT YEAR 1996-97 ALSO AND THE FINDINGS OF THE ITAT READ AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. TO APPREC IATE THE RIVAL CONTENTIONS WE HAVE TO NECESSARILY MAKE A REFERENCE TO THE RELEVANT PROVIS IONS OF SECTION 80-IA OF THE ACT. '(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING OR AN ENTERPR ISE REFERRED TO IN SUB-SECTION (4) (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSIN ESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT T O THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMP UTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO. . . . ** ** ** (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB-SE CTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB -SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSE QUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCO ME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVER Y SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMI NATION IS TO BE MADE.' 9. THE PROVISIONS OF SECTION 80AB ARE ALSO RELEVANT A ND THEY READ AS FOLLOWS : '80AB. DEDUCTIONS TO BE MADE WITH REFERENCE TO THE INCOME INCLUDED IN THE GROSS TOTAL INCOME . WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOW ED UNDER ANY SECTION INCLUDED IN THIS CHAPTER UNDER THE HEADING C. - DEDUCTIONS IN RESPECT OF CE RTAIN INCOMES IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION, FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NA TURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DER IVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOME.' 10. A PERUSAL OF SECTION 80-IA(1) MAKES IT VERY CLEAR THAT DEDUCTION IS TO BE ALLOWED ON THE PROFITS AND GAINS OF THE BUSINESS OF GENERATION OF POWER, VIZ. , THE ELIGIBLE BUSINESS. PROVISIONS OF SECTION 80-IA(5) WHICH HAS A NON OBSTANTE CLAUSE EVEN OVERRIDING THE EFFECT OF PROVISIONS OF SECTION 80AB MANDATES THAT THE PROFIT OF THE ELIGIBLE BUSINESS B E COMPUTED AS IF IT WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE. IN THE PRESENT CASE, THE ASSESSEE MAINTAINS A SINGLE SET OF BOOKS OF ACCOUNT. THE ORDER OF THE ASSESSING OFFICER IS SILENT ON THE OTH ER COMMON EXPENSES. PERUSAL OF THE PROFIT AND 16 LOSS ACCOUNT, A COPY OF WHICH IS PLACED AT PAGE 14 OF THE ASSESSEES PAPER BOOK WOULD SHOW THAT THERE ARE OTHER COMMON EXPENSES ALSO. TO QUOTE A FE W, AUDIT FEE, FEE FOR TAX MATTERS, RENT, RATES AND TAXES ETC. THE GROSS RECEIPTS FROM POWER GENERA TION IS SHOWN IN THE PROFIT AND LOSS ACCOUNT AT RS. 22,92,245. WE SHALL NOW CONFINE OURSELVES TO TH E DEPRECIATION EXPENSES WHICH WAS IN CONTROVERSY BEFORE THE REVENUE AUTHORITIES. IT CANN OT BE DISPUTED THAT EVEN GOING BY THE PROVISIONS OF SECTION 80-IA(5), THAT THE EXPENDITURE INCURRED IN EARNING THE INCOME FROM THE ELIGIBLE BUSINESS HAS TO BE DEDUCTED AND ONLY ON THE NET INCOME, DEDU CTION UNDER SECTION 80-IA HAS TO BE ALLOWED. THE CASE OF THE ASSESSEE THAT THE WIND TURBINES (WI ND MILL) THROUGH WHICH IT GENERATED AND SOLD ELECTRICITY WAS NOT PRIMARILY MEANT FOR SUCH PURPOS E AND IT WAS PRIMARILY MEANT ONLY FOR THE PURPOSE OF DEMONSTRATING TO THE PROSPECTIVE BUYERS OF POWER TURBINES MANUFACTURED BY THE DANISH COMPANY FOR WHICH IT ACTED AS CONSULTANTS AND FOR M ARKETING AND SALES OF THEIR PRODUCTS, CANNOT BE ACCEPTED. IF ONE WERE TO ACT AS A MARKETING AND SAL ES AGENT FOR MANUFACTURER OF A PRODUCT IT IS ONLY USUAL OR NORMAL TO EXPECT THE PRINCIPAL TO PROVIDE THE NECESSARY INFRASTRUCTURE TO CARRY ON THE ACTIVITIES BY AN AGENT. THERE IS NO REFERENCE TO AN Y SPECIFIC AGREEMENT BETWEEN THE PRINCIPAL AND THE ASSESSEE THAT THE ASSESSEE WOULD INSTALL WIND T URBINES AT THEIR OWN COST TO DEMONSTRATE TO THE PROSPECTIVE PURCHASERS OF THE PRINCIPALS PRODUCT. IT CANNOT BE DISPUTED THAT THE WIND TURBINES WERE USED IN THE ELIGIBLE BUSINESS. THERE IS NO EVIDENCE ON RECORD TO SUGGEST THAT THE WIND TURBINES WERE USED IN THE BUSINESS OF PROVIDING CONSULTANCY SERVI CE OR SUCH USE WAS NECESSARY FOR THE BUSINESS OF CONSULTANCY SERVICE. IN ANY EVENT, THE USE, IF A NY, OF THESE WIND TURBINES IN THE OTHER BUSINESS OF THE ASSESSEE, VIZ. , CONSULTANCY, MARKETING AND SALE OF WIND TURBINES IN OUR VIEW WAS ONLY INCIDENTAL AND THE PRIMARY PURPOSE WAS TO GENERATE POWER. EVEN GOING BY THE PROVISIONS OF SECTION 80-IA(5), THE ENTIRE DEPRECIATION ON THESE MACHINERY HAS TO B E DEDUCTED FROM THE RECEIPTS GENERATED FROM THE BUSINESS OF GENERATION OF POWER. 11. IF WE WERE TO ACCEPT THE COMPUTATION OF INCOME FOR THE PURPOSE OF SECTION 80-IA AS ADOPTED BY THE ASSESSEE, THEN THAT WOULD AMOUNT TO ALLOWING DE DUCTION ON THE INCOME FROM THE BUSINESS OF CONSULTANCY, MARKETING AND SALES CARRIED ON BY THE ASSESSEE ALSO. THAT WOULD BE AGAINST THE PROVISIONS OF SECTION 80-IA(1), WHICH ALLOWS DEDUCT ION ONLY ON THE PROFITS DERIVED FROM THE ELIGIBLE BUSINESS. THIS WOULD BE AGAINST THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. ( SUPRA ). THE DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE ON THE POINT THAT WHILE ALLOWING DEDUCTION OF EXPEN SES, THE EXPENSES CANNOT BE BIFURCATED AS BETWEEN THE EXEMPT INCOME AND CHARGEABLE INCOME AND DEDUCTION OF EXPENDITURE ATTRIBUTABLE TO CHARGEABLE INCOME CANNOT ALONE BE ALLOWED. THESE DE CISIONS ARE NOT APPLICABLE IN THE CONTEXT OF SECTION 80-IA OF THE ACT ESPECIALLY IN VIEW OF THE SPECIFIC PROVISIONS OF SECTION 80-IA(5) OF THE ACT. WE ALSO DERIVE SUPPORT FOR OUR CONCLUSIONS FROM THE DECISION IN THE CASE OF INDIAN RAYAN CORPN. LTD. V. CIT [2003] 261 ITR 98 1 WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THA T DEDUCTION UNDER CHAPTER VI-A HAS TO BE ALLOWED ONLY ON THE GR OSS TOTAL INCOME AND THEREFORE ONE CANNOT EXCLUDE DEPRECIATION ALLOWANCE WHILE COMPUTING PROF ITS DERIVED FROM NEWLY ESTABLISHED UNDERTAKING FOR COMPUTING DEDUCTION UNDER CHAPTER VI-A. 12. FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW TH AT THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING DEPRECIATION ON WIND TURBINES AS A DEDUCTI ON FROM THE INCOME OF POWER GENERATION AND ON THAT BASIS HOLDING THAT THERE WAS NO INCOME FROM TH E ELIGIBLE BUSINESS ON WHICH DEDUCTION UNDER 17 SECTION 80-IA WAS TO BE ALLOWED. THE CIT(A) IN OUR VIEW ERRED IN ACCEPTING THE COMPUTATION AS ADOPTED BY THE ASSESSEE WHICH IN OUR VIEW IS AGAINS T THE PROVISIONS OF SECTION 80-IA AND THE LAW LAID DOWN BY THE HONOURABLE SUPREME COURT IN THE CA SE OF PANDIAN CHEMICALS LTD. ( SUPRA ). THE APPEAL OF THE REVENUE IS ALLOWED AND THE ORDER OF T HE CIT(A) IS REVERSED AND THAT OF THE ASSESSING OFFICER RESTORED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D. 7. THE LEARNED COUNSEL FOR THE ASSESSEE PUT RELIANC E UPON THE ORDER OF THE ITAT IN ASSESSMENT YEAR 2000-01 WHEREIN ACCORDING T O THE ASSESSEE, THE ITAT UPHELD THE EXCLUSION OF COMMON EXPENSES FROM T HE PROFIT EARNED ON ELECTRICITY GENERATOR WHILE COMPUTING THE DEDUCTION ADMISSIBLE UNDER SEC. 80-IA OF THE ACT. THE FINDINGS OF THE ITAT READ AS UNDER: 7. HOWEVER, ON MERITS, THE ASSESSEES CLAIM NEEDS TO BE ACCEPTED. THE MAIN ACTIVITY OF THE ASSESSEE IS THAT OF CONSUL TANCY IN THE FIELD OF WINDMILL ENERGY. IT HAS PUT UP WINDMILLS FOR THE PU RPOSE OF DEMONSTRATION TO ITS CLIENTS AND CUSTOMERS AND IN C ONNECTION WITH THE CONSULTANCY ACTIVITY. INCIDENTALLY THE WINDMILLS AR E ALSO USED FOR GENERATION OF ELECTRICITY WHICH IS SOLD TO THE ELEC TRICITY BOARD. NO HYDEL OR MECHANICAL POWER IS REQUIRED TO RUN THE WI NDMILLS. THEY ARE RUN ON THE NATURAL RESOURCE, NAMELY, THE WINDS. THE REFORE NO EXPENDITURE IS REQUIRED TO BE INCURRED TO RUN THEM. THE EXPENDITURE ON REPAIRS, MAINTENANCE AND INSURANCE IS IN ANY CASE A LLOWABLE AGAINST THE INCOME FROM CONSULTANCY IN THE COURSE OF WHICH ACTIVITY ALSO THE WINDMILLS ARE REQUIRED TO BE RUN. THE AFORESAID EXP ENDITURE IS ALLOWABLE AGAINST THE CONSULTANCY INCOME AND IT WOU LD BE TOO ARTIFICIAL TO BREAK IT UP AND ALLOCATE A PORTION OF THE SAME T OWARDS THE ACTIVITY OF 18 POWER GENERATION MERELY TO REDUCE THE DEDUCTION ALL OWABLE UNDER SECTION 80-IA. THE REFERENCE MADE BY THE LEARNED CO UNSEL FOR THE ASSESSEE TO THE JUDGMENT OF THE SUPREME COURT IN CA NARA WORKSHOP (SUPRA) IS APPOSITE. IN THAT CASE, THE ASSESSEE RAN TWO PRIORITY INDUSTRIES. THE ASSESSEE EARNED PROFITS FROM ONE OF THEM AND CLAIMED THE DEDUCTION UNDER SECTION 80E AS IT STOOD THEN. F ROM THE OTHER PRIORITY INDUSTRY HE SUFFERED A LOSS. THE INCOME TA X AUTHORITIES ADJUSTED THE LOSS FROM THE PRIORITY INDUSTRY AGAINS T THE PROFITS OF THE OTHER PRIORITY INDUSTRY AND REDUCED THE DEDUCTION A VAILABLE UNDER SECTION 80E. DISAPPROVING THIS ACTION, THE SUPREME COURT HELD THE DEDUCTION ENVISAGED BY THE SECTION IS IN RECOGNITIO N OF THE EFFICIENT FUNCTIONING OF THE INDUSTRY, THAT IT WAS NEVER INTE NDED THAT THE MERIT EARNED BY SUCH INDUSTRY SHOULD BE LOST OR DIMINISHE D BECAUSE OF A LOSS SUFFERED BY ANOTHER INDUSTRY, WHETHER IT IS A PRIOR ITY INDUSTRY OR NOT, THAT THE CO-EXISTENCE OF TWO INDUSTRIES IN COMMON O WNERSHIP WAS NOT INTENDED BY PARLIAMENT TO RESULT IN THE MISFORTUNE OF ONE BEING VISITED ON THE OTHER AND THAT THE SHIFTING OF THE FOCUS FRO M THE INDUSTRY TO THE ASSESSEE WAS NOT PERMISSIBLE. THE RATIO OF THIS DEC ISION, IN OUR HUMBLE OPINION, APPLIES TO THE PRESENT CASE. THERE ARE TWO ACTIVITIES, THE MAIN ACTIVITY BEING THAT OF CONSULTANCY AND THE INCIDENT AL ACTIVITY BEING THAT OF POWER GENERATION. THE WINDMILLS ARE REQUIRED IN CONNECTION WITH THE MAIN ACTIVITY AND THEY INCIDENTALLY PRODUCE INC OME FOR THE ASSESSEE BY GENERATING POWER. THE EXPENDITURE ON RE PAIRS, MAINTENANCE AND INSURANCE OF THE WINDMILLS IS IN AN Y CASE ALLOWABLE AGAINST THE CONSULTANCY INCOME. IT CANNOT BE PINPOI NTED THAT A PART OF THE EXPENDITURE WAS INCURRED FOR EARNING THE INCOME FROM POWER GENERATION EXCEPT BY AN ARTIFICIAL OR PRESUMPTIVE A PPROACH. HAD THE 19 POWER GENERATION ACTIVITY NOT BEEN ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA THERE WOULD HAVE BEEN NO OCCASION OR W ARRANT FOR APPORTIONING A PART OF THE EXPENDITURE TOWARDS THE SAID ACTIVITY. WE DO NOT SEE HOW SUCH APPORTIONMENT CAN BE MADE MERELY B ECAUSE THE INCOME FROM THE SAID ACTIVITY IS ELIGIBLE FOR THE D EDUCTION. THE PROVISIONS OF SEC.80AB CANNOT BE UNDERSTOOD AS AUTH ORIZING AN ESTIMATED OR ARTIFICIAL APPORTIONMENT OF THE EXPEND ITURE; THEY APPLY ONLY WHEN THE EXPENDITURE CAN BE PIN-POINTED TO HAV E BEEN INCURRED FOR THE PURPOSE OF EARNING THE PROFITS FROM THE ELI GIBLE INDUSTRY. 8. FOR THE ABOVE REASONS WE HOLD THAT THE INCOME-TA X AUTHORITIES WERE NOT JUSTIFIED IN REDUCING THE PROFITS FROM THE POWER GENERATION ACTIVITY BY THE EXPENDITURE AGGREGATING TO RS.4,15, 277/- WHILE CALCULATING THE DEDUCTION UNDER SECTION 80IA. IN TH IS VIEW, WE ARE NOT DECIDING THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT THE EXPENDITURE ALLOCATED IS TOO HIGH. 8. AT THE TIME OF HEARING, WE HAVE BEEN INFORMED TH AT WHEN THE APPEALS WERE HEARD BY THE ITAT IN EARLIER YEARS, THE ORDERS PASSED ON DIFFERENT DATES WERE NOT BROUGHT O THE NOTICE OF THE BENCH. THE APP EAL AGAINST THESE ORDERS ARE PENDING BEFORE THE HON'BLE HIGH COURT. THESE AS PECTS PERSUADE US TO TAKE NOTE OF ALL THESE THREE ITAT ORDERS IN DIFFERE NT ASSESSMENT YEARS EXTENSIVELY. AS FAR AS THE ORDER DATED 06.07.2007 P ASSED IN THE CASE OF RRB CONSULTATION & ENGG. PVT. LTD. FOR ASSESSMENT YEAR 2000-01 IS CONCERNED, 20 WE FIND THAT IN THAT CASE, THE ISSUE RELATES TO ALL OCATION OF EXPENDITURE OUT OF REPAIR AND MAINTENANCE WITH THE ELECTRICITY GENERAT ION ACTIVITY WHILE COMPUTING THE DEDUCTION ADMISSIBLE UNDER SEC. 80IA. THIS ISSUE IS NOT INVOLVED IN THE PRESENT YEAR BEFORE US BECAUSE LEAR NED ASSESSING OFFICER HAS WORKED OUT THE PROPORTIONATE EXPENSES AT 0.2% FOR A LLOCATION TOWARDS THE ELECTRICITY GENERATION ACTIVITY. THIS EXPENDITURE H AS BEEN WORKED OUT ON THE BASIS OF TOTAL EXPENDITURE, TOTAL TURNOVER OF THE BUSINESS VIS--VIS THE TURNOVER OF ELECTRICITY GENERATION ACTIVITY. THE EX PENSES HAS BEEN WORKED OUT AT RS.8,42,718. IT HAS BEEN EXCLUDED FROM THE COMPU TATION FOR THE PURPOSE OF SEC. 80IA OF THE ACT. NO ONE HAS CHALLENGED THIS AS PECT BEFORE US. THEREFORE, ASSESSEE CANNOT DRAW MUCH SUPPORT FROM THE ORDER OF THE RRB CONSULTANTS & ENGG. PVT. LTD. (SUPRA). 9. ON AN ANALYSIS OF ALL THESE THREE ORDERS, WE ARR IVE AT A CONCLUSION THAT DEDUCTION UNDER SECTION 80-IA IS TO BE COMPUTED AFT ER SETTING OFF THE DEPRECIATION RELATABLE TO THE WIND MILL AGAINST THE INCOME EARNED OUT OF ELECTRICITY GENERATOR WHICH QUALIFIED FOR DEDUCTION UNDER SEC. 80-IA OF THE ACT. 21 10. THE NEXT OBJECTION OF THE LEARNED DR WAS THAT A SSESSING OFFICER HAS DISALLOWED THE CLAIM OF ASSESSEE ON THE GROUND THAT DEDUCTION ADMISSIBLE UNDER SECTION 80-IA IS ADMISSIBLE ON AN UNDERTAKING OR AN ENTERPRISES AND IT IS AVAILABLE FOR 10 CONSECUTIVE ASSESSMENT YEARS BE GINNING FROM THE FIRST YEAR OF CLAIM. ACCORDING TO THE LEARNED DR, THE FIR ST YEAR OF CLAIM WAS IN ASSESSMENT YEAR 1996-97 AND 10 CONSECUTIVE ASSESSME NT YEARS OF THE ASSESSEE LAPSES ASSESSMENT YEAR 2005-06. 11. WE HAVE DULY CONSIDERED THIS ASPECT AND FOUND T HAT ASSESSEE HAS BEEN TREATING EACH WEG AS A SEPARATE UNIT AND CLAIMING T HE DEDUCTION. IN THE CASE OF DALMIA CEMENT IN ITA NO.4342/DEL/06, AN IDENTICA L ARGUMENT AROSE IN THAT CASE. THE ITAT HAS NOTICED THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE AS UNDER: AFTER APPRAISING US WITH THE STATUTORY PROVISIONS, HE POINTED OUT THAT EACH WEGS INSTALLED BY THE ASSESSEE COMPANY IS A STAND ALONE PIECE OF PLANT CAPABLE OF GENERATING ELECTRICAL ENERGY AND IS LIABLE TO BE TR EATED AS A SEPARATE UNDERTAKING SET UP FOR THE GENERATION OF POWER, THE POWER GENER ATED BY EACH OF THEM IS CAPABLE OF BEING MEASURED INDIVIDUALLY. THE ASSESSE E FOR CONVENIENCE OF OPERATION HAD ATTACHED MORE THAN ONE WEG TO A METER AND IS COMPUTING THE PROFIT BASED ON THE METER READING OF EACH OF THE OUTGOING METER CONNECTED TO THE GRID FEEDING THE ELECTRICAL SUB-STATION OF T & EB. THUS, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE AO HAS ERRED IN HOLDI NG THAT ACTIVITY OF ELECTRICITY GENERATION IN EACH WEG IS TO BE CONSIDERED AS A COM MON ACTIVITY AND CANNOT BE BIFURCATED ON THE BASIS OF METER. HE POINTED OUT TH AT EACH OF THE METERS IS REQUIRED 22 TO BE CONSIDERED SEPARATE UNDERTAKING BECAUSE IT SA TISFIES THE CONDITIONS LAID DOWN IN SUB-SECTION (3) OF SEC. 80-IA OF THE ACT. 12. ON AN ANALYSIS OF THE CONTENTIONS OF THE ASSESS EE, THE ITAT HAS OBSERVED AS UNDER: 18. THE OTHER REASONS POINTED OUT BY THE ASSESSING OFFICER IS THAT EACH METER CANNOT BE TREATED AS A SEPARATE UNIT. THE LEARNED C OUNSEL FOR THE ASSESSEE DEMONSTRATED BEFORE US THAT EACH METER MAY NOT AMOU NTS TO A SEPARATE UNIT BUT EACH OF THE WEG INSTALLED BY THE ASSESSEE COMPANY I S A (STAND ALONE), PIECE OF PLANT AND MACHINERY CAPABLE OF GENERATING ELECTRIC ENERGY. THE POWERS GENERATED BY THE EACH OF THEM IS CAPABLE OF BEING MEASURED IN DIVIDUALLY. ANY SINGLE WEG IS SWITCHED OFF OR STOP TO WORK DUE TO CERTAIN MECH ANICAL DEFECT THEN IT WILL NOT EFFECT THE FUNCTIONING OF OTHER WEG. THUS, FOR THE PURPOSE OF MEASUREMENT OF ELECTRICITY GENERATED AS WELL AS FOR CONVENIENCE OF OPERATION, THE ASSESSEE COMPANY HAS ATTACHED MORE THAN ONE WEG TO A METER A ND IS COMPUTING THE PROFIT BASED ON THE METER READING OF EACH OF THE OUTGOING METER CONNECTED TO THE GRID FEEDING THE ELECTRICAL SUB-STATION OF THE TNEB. THE RE IS ONE MORE DIAMETER TO THE DISPUTE I.E. IN THE PAST ASSESSEE HAS BEEN PREPARIN G THE ACCOUNT OF EACH METER. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD C OPY OF THE P & L ACCOUNT RIGHT FROM THE PERIOD ENDING ON 31.3.1994 UP TO THE ACCOU NTING YEAR RELEVANT TO THE ASSESSMENT YEARS. THE ASSESSING OFFICER HAS NOT DOU BTED THE PREPARATION OF SUCH ACCOUNT. THE ACCOUNTS ARE DULY AUDITED BY THE AUDIT ORS AND SUBMITTED IN FORM NO. 10-CCB IN SUPPORT OF THE CLAIM. THE ONLY OBJECTION POINTING OUT BY THE ASSESSING OFFICER IS THAT ALL THE EMPLOYEES ARE TAKING CARE O F ALL THE METERS AND WEGS. THUS, THERE IS A COMMON MANAGEMENT FOR MAINTENANCE ETC. IN OUR OPINION, IT IS ONE OF THE RELEVANT FACTOR TO DECIDE AN ISSUE WHETH ER ALL THE METERS ARE TO BE TREATED AS A SINGLE UNIT OR THEY ARE TO BE TREATED AS A SEPARATE UNIT. IN OUR OPINION, THIS SOLE CIRCUMSTANCE IS NOT SUFFICIENT TO IGNORE THE OTHER EVIDENCE AND THE CONTENTIONS MADE BY THE ASSESSEE. THE ASSESSEE H AS ALLOCATED THE EXPENSES IN A 23 LOGICAL WAY TO EACH WEG. WHEN AN EXPLANATION OF AN ASSESSEE BASED ON A NUMBER OF FACTS SUPPORTED BY EVIDENCE AND CIRCUMSTANCES RE QUIRED CONSIDERATION WHETHER THE EXPLANATION IS SOUND OR NOT MUST BE DETERMINED NOT BY CONSIDERING THE WEIGHT TO BE ATTACHED TO EACH SINGLE FACT IN ISOLATION BUT BY ASSESSING THE CUMULATIVE EFFECT OF ALL THE FACTS IN THEIR SETTING AS A WHOLE . THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF PARIYAR CHEMICALS REFERRE D BY THE ASSESSING OFFICER IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE BEC AUSE IN THAT CASE A COMMON BOILER AND PIPELINE WERE BEING USED BY THE OLD AS W ELL AS THE NEW INDUSTRIAL UNIT AND IN SUCH CIRCUMSTANCES HON'BLE HIGH COURT TREATE D THE FUNCTIONING OF BOTH THE UNITS AS COMMON. IN THE ASSESSEES CASE STOPPAGE OF ONE WEG WOULD NOT AFFECT THE GENERATION OF POWERS BY THE OTHER WEGS. 13. WE FURTHER FIND THAT IN THE COMMENTARY OF SAMPA TH IYENGARS, COMMENTS HAVE BEEN MADE ON AN IDENTICAL ISSUE AND T HE COMMENTS OF THE LEARNED AUTHOR READ AS UNDER: (9 TH EDITION VOL.(4) PAGE 7022) 68. WHETHER EACH UNIT (SAY A WINDMILL) CAN BE SEPA RATE.- IF THE ASSESSEE OPERATES MORE THAN ONE UNIT (SAY MORE THAN ONE WINDMILL) AS A SEPARATE UNDERTAKING WITH EACH SUCH UNIT SATISFYI NG THE REQUIREMENTS OF SEC. 80-IA, THERE IS NO REASON AT ALL WHY IT SHO ULD NOT TREAT EACH SUCH UNIT AS SEPARATE UNDERTAKING, EACH ELIGIBLE FO R RELIEF FOR THE PERIOD AVAILABLE FOR IT UNDER SEC. 80-IA. IN CASE O F A WINDMILL, DEPRECIATION CAN BE WORKED OUT FOR EACH WINDMILL SE PARATELY, BECAUSE THE INCOME OF EACH UNDERTAKING IS REQUIRED TO BE CO MPUTED SEPARATELY AS INDICATED IN SECTION 80-IA(5). IT FOLLOWS THAT B LOCK DEPRECIATION CONCEPT CANNOT COME IN THE WAY OF REQUIREMENT OF CO MPUTATION OF ELIGIBLE RELIEF FOR EACH UNIT AS A SEPARATE UNDERTA KING UNDER SEC. 80- IA(5). HOWEVER, ALL RELIEFS UNDER SEC. 80-IA ARE SU BJECT TO THE CEILING 24 OF GROSS TOTAL INCOME UNDER SEC. 80-IA, SO THAT IF THE DEPRECIATION FOR ALL THE UNITS EXCEED THE PROFITS OF THE YEAR, THERE CAN BE NO DEDUCTION. IN OTHER WORDS, THERE SHOULD BE OVERALL POSITIVE PR OFIT FOR ELIGIBILITY FOR DEDUCTION. 14. IT SUGGESTS THAT EACH WEG CAN FUNCTION AS A STA ND, ALONE UNIT, THEREFORE, THE PROFIT FROM EACH UNIT IS TO BE COMPU TED INDEPENDENTLY FOR THE PURPOSES OF DEDUCTION UNDER SEC. 80-IA OF THE ACT. LEARNED DR HAS POINTED OUT THAT ASSESSEE FAILED TO GIVE THE DETAILS OF EAC H UNIT IN THE ASSESSMENT PROCEEDINGS AND IT IS NOT DISCERNIBLE THAT HOW COMP UTATION HAS BEEN MADE. ACCORDING TO HIM, THE ASSESSEE OUGHT TO HAVE FILED ITS CLAIM UNDER FORM NO. 10CCB AND THE AMOUNTS OF EACH UNIT OUGHT TO BE AUDI TED. WE FIND THAT ASSESSING OFFICER HAS NOTICED THE DETAIL OF EACH UN IT AND IT IS WORTH TO NOTE THE FOLLOWING DETAILS FROM ASSESSMENT WHICH READS A S UNDER: S.NO. WEG NO. FIRST A.Y. OF POWER GENERATION POWER GENERATION DEPRECIATION AS PER I.T.ACT NOTIONAL MAINTENANCE CHARGES NET 1. 292/1 1998-99 1323562 0 40000 1283562 2. 298/1 1998-99 2084120 0 40000 2044120 3. 394/1 2002-03 2813562 0 40000 2773562 4. 393/1 2002-03 1674147 0 80000 1594147 25 5. 616/1 2005-06 3601463 2521572 40000 1039891 6. POONAMALLE 2006-07 154004 4088722 40000 (- )3974718 TOTAL 4760564 15. ASSESSING OFFICER HAS COMPUTED THE DEPRECIATION OF TWO UNITS, NAMELY, 616/1 AND POONA MALLE WHICH IS RS.66,10,294 . THEREAFTER, ASSESSING OFFICER HAS COMPUTED UNABSORBED DEPRECIAT ION OF THESE UNITS ON PAGE 4 OF THE ASSESSMENT ORDER. THIS HAS BEEN WORKE D OUT AT RS.151,45,449. HE ALLOCATED THIS DEPRECIATION OF THESE TWO UNITS A GAINST THE RECEIPT OF ALL THE UNITS AND THEN DENIED THE DEDUCTION TO THE ASSESSEE . ON THE OTHER HAND, LEARNED CIT(APPEALS) HAS OBSERVED THAT DEPRECIATION IS TO BE DISALLOWED BY COMPUTING IT @ 0.2% WHICH WAS WORKED OUT BY THE ASS ESSING OFFICER FOR COMPUTING THE PROPORTIONATE EXPENSES REQUIRED TO BE ALLOCATED. IN OUR OPINION, LEARNED FIRST APPELLATE AUTHORITY HAS ERRE D IN GIVING THIS DIRECTION. THE DEPRECIATION ALLOWABLE TO EACH UNIT WHETHER UNA BSORBED OR PRESENT YEAR HAS TO BE ALLOCATED AGAINST THE PROFIT OF THAT UNIT BEFORE COMPUTING THE DEDUCTION ADMISSIBLE TO THE ASSESSEE UNDER SEC. 80- A. IN ASSESSMENT YEARS, THE ITAT HAS CONCLUDED IN A SIMILAR WAY. THEREFORE, RESPECTFULLY, FOLLOWING 26 THE ORDER OF THE ITAT IN EARLIER YEARS, WE ALLOW TH ESE GROUNDS OF APPEAL AND REMIT THE ISSUE TO THE ASSESSING OFFICER FOR RECOMP UTATION OF DEDUCTION ADMISSIBLE UNDER SECTION 80-IA OF THE ACT. LEARNED ASSESSING OFFICER SHALL DETERMINE THE PROFIT EARNED BY THE ASSESSEE FROM EA CH UNIT ON THE BASIS OF MATERIAL AVAILABLE TO HIM AND THEREAFTER HE WILL AL LOCATE THE DEPRECIATION AGAINST EACH UNIT AND THEN COMPUTE THE ADMISSIBLE D EDUCTION. IN ANY CASE, THE DEDUCTION WOULD NOT EXCEED THE CEILING OF GROSS TOTAL INCOME. WITH THE ABOVE OBSERVATIONS, GROUND NOS. 1 TO 3 ARE ALLOWED FOR STATISTICAL PURPOSES. . 16. IN GROUND NO.4, THE GRIEVANCE OF REVENUE IS THA T LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.123,35,991 WHICH WAS ADDED BY THE ASSESSING OFFICER WITH THE AID OF SECT ION 40(A)(IA) OF THE INCOME-TAX ACT, 1961. 17. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE H AD DEBITED A SUM OF RS.138,60,661 UNDER THE HEAD HIRE CHARGES. LEARNE D ASSESSING OFFICER ON AN ANALYSIS OF THE TDS DETAILS, FOUND THAT THE ASSE SSEE HAD DEDUCTED THE TDS UNDER SEC. 194C OF THE ACT @ 2.2%. THESE PAYMENTS H AVE BEEN MADE BY THE ASSESSEE TOWARDS CRANE HIRE CHARGES. ASSESSING OFFI CER HAS HARBORED A BELIEF THAT ASSESSEE HAS TAKEN A MACHINERY ON HIRE WHICH I S COVERED UNDER SEC. 27 194(1) OF THE ACT AND, THEREFORE, IT SHOULD HAVE DE DUCTED THE TDS @ 20% WHICH IS APPLICABLE TOWARDS PAYMENT OF ANY RENT FOR HIRING OF ANY PLANT AND MACHINERY. SINCE THE ASSESSEE FAILED TO DEDUCT THE TAX @ 20%, ASSESSING OFFICER HAS DISALLOWED THE CRANE HIRE CHARGES PAID BY THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE ACT. 18. ON APPEAL, IT WAS CONTENDED BY THE ASSESSEE THA T IT HAS NOT HIRED THE MACHINERY RATHER IT WAS A SERVICE CONTRACT WHEREBY THE CONTRACTEE RENDERED SERVICES THROUGH THEIR OWN MAN USING THE CRANE AND THE CRANES WERE BROUGHT TO THE RESPECTIVE SITES AND USED BY THEIR OPERATORS THROUGH THEIR OWN STAFF. THE ASSESSEE FURTHER RELIED UPON THE ORDER OF THE I TAT IN THE CASE OF ACIT VS. ACCENTOR SERVICES REPORTED IN 2010 TIOL 618. LE ARNED CIT(APPEALS) HAS DELETED THE DISALLOWANCE. 19. BEFORE US, LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE LEARNED CIT(APPEALS). 20. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. LEARNED FIRST APPELLATE AUTHORITY HAS GONE THROUGH THE INVOICES RAISED BY THE ASSESSEE AND THEREAFTER ARRI VED AT A CONCLUSION THAT 28 CONTRACT WAS FOR RENDERING SERVICES BY THE CRANE OP ERATORS. THE SERVICES WERE RENDERED BY THE CONTRACTEE THROUGH THEIR OWN MAN US ING THE CRANES. THE CRANES WERE BROUGHT TO THE RESPECTIVE SITES AND THE Y OPERATED BY THE STAFF OF THE CONTRACTEE. THUS, ASSESSEE HAS NOT TAKEN ANY MA CHINERY ON HIRE FOR WHICH IT HAS PAID THE RENT. IN THE CASE OF ACIT VS. M/S. NATIONAL CAPITAL POWER IN ITA NO.5885/DEL/2010, WE HAVE CONSIDERED A SIMILAR ISSUE. IN THAT CASE, THE ASSESSEE HAD HIRED BUSES. LEARNED ASSESSING OFFICER CONSTRUED THAT BUSES WERE TAKEN ON LEASE AND SUCH BUSES ARE TO BE CONSTR UED AS PLANT AND MACHINERY. 21. THE DISCUSSION MADE BY THE ITAT IN THIS CASE RE ADS AS UNDER: IN BRIEF, THE SOLITARY ISSUE IS WHETHER ASSESSEE H AS TO DEDUCT TDS UNDER SEC. 194C OR 194I OF THE INCOME-TAX ACT, 1961 ON THE PAYMENTS MADE TO THE TRANSPORTERS WHO HAVE PLIED THEIR BUSSE S FOR TRANSPORTING THE EMPLOYEES AND THEIR WARDS TO DIFFERENT DESTINAT ION AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND THE TRANSPORTERS . X X X X X X X X X X X X X X X X X X X X 4. LEARNED DR WHILE IMPUGNING THE ORDER OF THE LEAR NED CIT(APPEALS) CONTENDED THAT ASSESSEE HAS TAKEN THE BUSSES ON HIRE. IT MEANS THAT THE BUSES WERE TAKEN ON LEASE AND SUCH B USES ARE TO BE 29 CONSTRUED AS PLANT. SINCE THE LEASE PAYMENT WAS MAD E FOR THE HIRING OF THE PLANT, ITS CASE COMES WITHIN THE AMBIT OF EXPLA NATION APPENDED TO SEC. 194 I OF THE ACT. IT PROVIDES THAT ANY RENT PA ID FOR PLANT OR MACHINERY OR EQUIPMENT THEN TDS IS TO BE DEDUCTED A T 10%. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND, SUBMITTED THAT ASSESSING OFFICER HAS MISCONSTRUED THE PROVISIONS. THE ASSESSEE HAS NOT TAKEN THE BUSES ON LEASE. IT HAD ENTERED INTO A CONTRACT OF SERVICE WHEREBY THE TRAVEL AGENCIES WERE REQUIRED TO SUPPLY THE BUSES FOR TRANSPORTATION OF THE PASSENGERS. THE BUSES WERE TO BE PLIED FOR A FIXED NUMBER OF HOURS. THE VEHICLES WOULD REMAIN IN THE POSSESSION OF THE TRAVEL AGENCY. THE AGENCY WOULD PROVIDE ITS DRIVER AND ALSO MAINTAIN THE VEHICLE IN GOOD SHAPE. IN OTHER WORDS, ALL RESPONSIBILITY FOR PLYING THE VEHICLES IS OF THE TRANSPORTERS. THU S, ACCORDING TO THE ASSESSEE, IT WAS A SERVICE CONTRACT OF TRANSPORTING THE PASSENGERS. IT HAS NOT TAKEN THE BUSS ON LEASE AND USED THEM AS PL ANT IN BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTEN DED THAT A SIMILAR ISSUE IN SOMEWHAT DIFFERENT CONTEXT CAME UP BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRASAR BHARTI REP ORTED IN 292 ITR 580. IN THAT CASE, THE FACTS ARE THAT ASSESSEE WAS MAKING CERTAIN PAYMENT TO OUTSIDE PRODUCER FOR PROGRAMS UNDER COM MISSIONED CATEGORY FOR WHICH THE ASSESSEE HAD BEEN DEDUCTING THE TAX AT SOURCE UNDER SEC. 194C BY TREATING THEM AS CONTRACT PAYMEN T. ASSESSING OFFICER ALLEGED THAT IT IS FEE FOR PROFESSIONAL SER VICES OR FEE FOR TECHNICAL SERVICE WITHIN THE AMBIT OF SEC. 194J AND , THEREFORE, ASSESSEE OUGHT TO HAVE DEDUCTED TDS UNDER SEC. 194J OF THE A CT. LEARNED CIT(APPEALS) DISMISSED THE APPEAL OF THE ASSESSEE. THE ISSUE TRAVELLED TO THE ITAT. THE ITAT HAS OBSERVED THAT EXPLANATION 3 OF SECTION 30 194C PROVIDES THE MEANING OF EXPRESSION WORK WHIC H INCLUDES ADVERTISING, BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMING FOR SUCH BROADCASTING AND TELECASTING. ACCORDING TO THE ITAT, A SPECIFIC PROVISION HAS BEEN MADE IN SEC. 19 4C WHICH BRING WITHIN ITS AMBIT THE CONTRACTUAL WORK CONCERNING BR OADCASTING AND TELECASTING, THEREFORE, REVENUE CANNOT APPLY SECTIO N 194J WHICH IS MORE GENERAL TERM. HON'BLE DELHI HIGH COURT HAS UPH ELD THIS VIEW OF THE ITAT. THE LEARNED COUNSEL FOR THE ASSESSEE POIN TED OUT IN THE PRESENT CASE ALSO AT SR. NO.4 OF THE EXPLANATION AP PENDED TO SEC. 194C, MEANING OF EXPRESSION WORK HAS BEEN GIVEN W HICH PROVIDES (A) ADVERTISING; (B) BROADCASTING & TELECASTING INC LUDING PRODUCTION OF PROGRAMS FOR SUCH BROADCASTING AND TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN B Y RAILWAYS; (D) X X X, (E) X X X. ON THE STRENGTH OF HON'BLE DELHI HIGH COURTS DECISION, HE POINTED OUT THAT ONCE SPECIFIC PROVISION HAS BEE N PROVIDED THEN THERE IS NO NEED TO APPLY SECTION 194 I OF THE ACT WHICH IS IN RELATION TO DEDUCTION OF TDS ON PAYMENT OF RENT. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE FIRST DISPUTED PO INT IS WHETHER IT IS A PAYMENT BEING CONTRACT OF SERVICE OR A RENT FOR HIR ING A PLANT. THE EMPHASIS OF THE LEARNED DR WAS THAT ASSESSEE HAS HI RED A BUS WHICH IS AKIN TO TAKING A PLANT ON LEASE, THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO THE TRAVEL AGENCY HAS TO BE CONSTRUED A S A RENT PAID FOR THE BUS. ON THE OTHER HAND, CONTENTION OF THE ASSESSEE IS THAT IT HAS AVAILED THE FACILITY OF TRANSPORTATION FROM THE TRAVEL AGEN CY. IT HAS NOT TAKEN THE BUS IN ITS POSSESSION. ACCORDING TO THE CONTRAC T, THE TRAVEL AGENCY HAS TO PLY THE BUS FOR A FIXED NUMBER OF HOURS. THU S, IT IS A SIMPLICITOR 31 SERVICE CONTRACT FOR TRANSPORTATION OF THE PASSENGE RS AND IT FALLS WITHIN THE AMBIT OF CLAUSE (C), SR. NO.(IV) OF EXPLANATION APPENDED TO SEC. 194C. THE ASSESSEE HAS PLACED ON RECORD COPY OF A L ETTER OF AWARD FOR HIRING OF BUSSES. IT HAS ALSO PLACED ON RECORD COPY OF THE CONTRACT ENTERED ON IST OF FEBRUARY 2008. ON PERUSAL OF THES E DOCUMENTS, IT REVEALS THAT ASSESSEE HAS JUST HIRED THE TRANSPORTA TION FACILITIES WHICH IS AKIN TO HIRING OF A TAXI THOUGH ON REGULAR BASIS FOR A FIXED NUMBER OF HOURS. BEFORE THE LEARNED FIRST APPELLATE AUTHORITY , ASSESSEE HAS MADE A REFERENCE TO CIRCULAR NO. 558 DATED 28.3.1 990 ISSUED BY THE CBDT. IN THE CIRCULAR, BOARD HAS CONSIDERED THIS AS PECT AND WAS OF THE VIEW THAT WHERE A VEHICLE IS GIVEN ON HIRE ALONG WI TH PROVISIONS OF A DRIVER FOR USE OF CARRYING OF THE PASSENGERS FOR FI XED HOURS THAN IT IS A SERVICE CONTRACT FOR CARRYING OUT THE WORK. IT WILL BE COVERED UNDER SEC. 194C OF THE ACT BECAUSE THE VEHICLE HAS BEEN MADE AVAILABLE AS A MATTER OF SERVICE. LEARNED FIRST APPELLATE AUTHORIT Y HAS CONSIDERED THIS ASPECT WHILE OBSERVING THAT IT IS A SERVICE CO NTRACT AND ASSESSEE WAS TO DEDUCT TAX UNDER SEC. 194 C OF THE ACT. CONS IDERING THE ORDER OF LEARNED CIT(APPEALS) AND IN VIEW OF THE ABOVE DI SCUSSION, WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED . 22. THE FACTS AND CIRCUMSTANCES IN THIS CASE ARE AL SO NOT DIFFERENT. THE ASSESSEE HAS AVAILED THE SERVICES OF CRANES WHICH W ERE OPERATED BY THE CONTRACTEE, HENCE, ASSESSING OFFICER HAS ERRED IN C ONSTRUING THAT ASSESSEE HAS PAID RENT AND ITS CASE FALLS UNDER SEC. 194I OF THE ACT. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE LIGHT OF HON 'BLE DELHI HIGH COURTS 32 DECISION IN THE CASE OF PRASAR BHARTI REPORTED IN 2 92 ITR 580, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 23. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 11.05.20 12 SD/- SD/- ( T.S. KAPOOR ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11/05/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR