Appeal allowed: Deduction for power generation not to be reduced under section 80-IA

The Tribunal allowed the appeal, holding that the deduction under section 80-IA should not be reduced by the expenditure incurred for power generation as the main activity of the assessee was consultancy in wind energy. The Tribunal emphasized that no additional expenditure was incurred for power generation as windmills operated on natural wind resources. It was deemed artificial to allocate expenditure to power generation to reduce the deduction. The authorities were found unjustified in reducing profits from power generation by the incurred expenditure.

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Issues involved:
The judgment involves interpretation of deduction u/s 80-IA of the Income Tax Act in relation to income derived from consultancy in renewable energy and power generation.

Issue 1: Deduction under section 80-IA
The assessee claimed deduction under s. 80-IA for income received from power generation. The AO allowed the deduction after deducting proportionate expenses incurred for earning the income. The CIT(A) upheld this decision, stating that deduction under s. 80-IA is admissible only against the profits of the industrial undertaking and not against gross receipts.

Issue 2: Consistency in treatment
The assessee argued for consistency in allowing deduction without reducing it by any expenditure, citing past assessments. The Departmental Representative contended that each year is independent and past assessments do not bind future decisions. The assessee also raised contentions regarding allocation of expenditure, natural resource utilization, and proportionality of expenses.

Judgment:
The Tribunal held that the main activity of the assessee was consultancy in wind energy, with power generation being incidental. As windmills operated on natural wind resources, no additional expenditure was incurred for power generation. Referring to a Supreme Court judgment, the Tribunal emphasized that expenditure on repairs and maintenance was allowable against consultancy income, and it would be artificial to allocate it to power generation to reduce the deduction under s. 80-IA. The Tribunal concluded that the authorities were not justified in reducing profits from power generation by the incurred expenditure while calculating the deduction under s. 80-IA. The appeal was allowed with no costs.

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