Appeal Partly Allowed: Deduction for Wind Energy Profits Approved, TDS Disallowance Upheld. Sections 80-IA, 80HHC, 80HHD Involved.

The Tribunal partly allowed the appeal. It deleted the disallowance of Rs. 24,000 paid to Veda Bhawan, permitted the deduction under section 80-IA for wind energy profits, and directed the exclusion of excise duty and sales tax from total turnover under section 80HHC. Additionally, it included interest income for the section 80HHD deduction. However, the Tribunal upheld the disallowance of Rs. 36,452 related to TDS credit, agreeing with the CIT (Appeals) that the reversal of entries indicated no TDS was deducted on behalf of the assessee.

---

---

Issues Involved:
1. Disallowance of Rs. 24,000 paid to Veda Bhawan.
2. Disallowance of Rs. 1,43,25,000 under section 80-IA.
3. Inclusion of excise duty and sales tax in turnover for section 80HHC.
4. Exclusion of interest income while computing deduction under section 80HHD.
5. Disallowance of Rs. 36,452 related to TDS credit.

Detailed Analysis:

1. Disallowance of Rs. 24,000 paid to Veda Bhawan:
The assessee contested the disallowance of Rs. 24,000 paid to Veda Bhawan for conducting Vedic education classes for employees. The CIT (Appeals) had upheld this disallowance without independent discussion, relying on previous orders. The Tribunal noted that in earlier years, similar disallowances were deleted by the ITAT, recognizing such payments as welfare activities eligible under section 37(1) of the Act. Given the consistency in facts, the Tribunal allowed this ground of appeal and deleted the disallowance.

2. Disallowance of Rs. 1,43,25,000 under section 80-IA:
The assessee claimed a deduction under section 80-IA for profits derived from wind energy generators (WEGs) installed at its wind farm. The Assessing Officer rejected the claim, arguing that the entire wind farm should be treated as a single undertaking and that the profits must be considered cumulatively. Additionally, the AO contended that the power generated was consumed by the assessee's cement plant, and the transfer prices should reflect the rates at which the Tamil Nadu Electricity Board (TNEB) purchased power. The Tribunal, however, found that each WEG was a standalone unit capable of independent operation and measurement. The Tribunal also noted that the assessee had consistently prepared meter-wise profit and loss accounts, which were audited and not previously objected to by the AO. The Tribunal concluded that the assessee was eligible for the deduction under section 80-IA, and the profits should be computed based on the rate charged by TNEB from the cement plant.

3. Inclusion of excise duty and sales tax in turnover for section 80HHC:
The assessee argued that excise duty and sales tax should be excluded from the total turnover while computing the deduction under section 80HHC. The Tribunal noted that this issue was covered in favor of the assessee by the Supreme Court's decision in CIT v. Laxmi Mills Co. Ltd., which held that excise and sales tax collected in a fiduciary capacity do not include an element of profit and should not be part of the total turnover. Consequently, the Tribunal directed the AO to exclude these amounts from the total turnover.

4. Exclusion of interest income while computing deduction under section 80HHD:
The assessee contended that interest income should be included in the profits of the business while computing the deduction under section 80HHD. The Tribunal referred to its earlier decisions in the assessee's own case, where it was held that interest income, being part of the business income, should not be excluded while computing the deduction. The Tribunal followed its previous rulings and directed the AO to consider interest income for the deduction under section 80HHD.

5. Disallowance of Rs. 36,452 related to TDS credit:
The assessee claimed credit for TDS on commission income wrongly debited by Swiss International Airlines. The CIT (Appeals) disallowed the claim, stating that since the entries were reversed, the commission income did not accrue to the assessee, and thus, the TDS credit could not be claimed. The Tribunal upheld this view, noting that the reversal of entries indicated no TDS was deducted on behalf of the assessee, and any wrongful payment by Swiss International Airlines should be claimed by them, not the assessee. Therefore, the Tribunal rejected this ground of appeal.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the disallowance of Rs. 24,000 paid to Veda Bhawan, allowed the deduction under section 80-IA, directed the exclusion of excise duty and sales tax from total turnover for section 80HHC, and included interest income for section 80HHD deduction. However, it upheld the disallowance of Rs. 36,452 related to TDS credit.

---