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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether Generation Based Incentive received under the Government scheme formed profits and gains derived from the eligible wind power business for deduction under section 80-IA of the Income-tax Act, 1961.
Analysis: The incentive was quantified on the basis of electricity generated and fed into the grid, and therefore arose only upon carrying on the core power generation activity. The immediate source being a Government scheme did not by itself break the nexus where the receipt was intrinsically connected with the business operations. The condition relating to foregoing accelerated depreciation was treated as a regulatory condition and not as a factor changing the character of the receipt. The reasoning of the lower authorities was distinguished, and the Tribunal followed the principle that where income emanates directly from the eligible business and is inseparably connected with it, the requirement of derivation is satisfied.
Conclusion: The Generation Based Incentive was held to be eligible for deduction under section 80-IA, and the disallowance was deleted.
Ratio Decidendi: A receipt computed directly with reference to the eligible business activity and inseparably connected with that activity is profits derived from the undertaking, even if paid under a Government incentive scheme.
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