TaxTMI 
TaxTMI 
2004 (8) TMI 339
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....(a) that the deduction under s. 80-IA is available from profits of industrial undertaking and the business of consultancy, sales and marketing is not an industrial undertaking. (b) that in an analogous situation, s. 80HHC is available only from export profits and not from profits of a composite business. 4. The order of the AO may be restored and the order of the CIT(A) may be set aside with respect to the above-mentioned grounds." 2. The assessee is a private limited company. The company during the previous year had installed wind turbines (wind-mills) and generated power. The electricity so produced were supplied to Tamil Nadu Electricity Board from which the assessee received an income of Rs. 22,92,245. The assessee had entered into an agreement with M/s Vestas Danish Wind Technology A/s, Denmark, by which they agreed to provide consultancy service to them. M/s Vestas Danish Wind Technology were pioneers in wind energy and the wind turbines manufactured by them were sold in India by the assessee. The assessee among other services would also install, erect, commission Vestas type wind electric generators or assist the principal's personnel in carrying out installation or....
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.... computation Net profit as per P&L a/c 2,93,61,776 2,93,61,776 Add : Dep. as per Companies 54,16,958 54,16,958 Act Travel 11,593 11,593 Business promotion 5,722 54,34,273 5,722 54,34,273 &nbs....
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....; -------------------------------------------------------------- There is loss in respect of industrial undertaking producing electricity. Therefore, no deduction under s. 80-IA is possible. Unabsorbed 3,01,68,975 Less: Income 19,64,824 depreciation from power adjusted generation against Rs. 22,92,245 income exempt under from other s. 80-IA business ....
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....262 ITR 278 (SC), he submitted that the CIT(A) fell into an error in allowing deduction under s. 80-IA on the income derived from the business of consultancy services. According to him, the depreciation was to be fully set off only against the income from the business of generation and distribution of power and the principal use of these wind-mills was only in respect of this business and any use of these wind-mills in the business of consultancy was only incidental or ancillary and therefore depreciation should not be allowed on the income from the business of consultancy services. 7. The learned counsel for the assessee relied on the order of the CIT(A) and reiterated his submission as made before the Revenue authorities. He also placed reliance on several judicial pronouncements: (i) CIT vs. Indian Bank Ltd. (1965) 56 ITR 77 (SC) (ii) Rajasthan State Warehousing Corporation vs. CIT (2000) 159 CTR (SC) 132 : (2000) 242 ITR 450 (SC) (iii) CIT vs. C. Parakh & Co. (India) Ltd. (1956) 29 ITR 661 (SC) (iv) Punjab State Co-operative Supply & Marketing Federation Ltd. vs. CIT (1980) 18 CTR (P&H) 71 : (1981) 128 ITR 189 (P&H). 8. We have considered the rival submissions....
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.... mandates that the profit of the eligible business be 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 AO is silent on the other common expenses. Perusal of the P&L a/c, a copy of which is placed at p. 14 of the assessee's paper book, would show that there are other common expenses also. To quote a few audit fee, fee for tax matters, rent, rates and taxes, etc. The gross receipts from power generation is shown in the P&L a/c at Rs. 22,92,245. We shall now confine ourselves to the depreciation expenses which was in controversy before the Revenue authorities. It cannot be disputed that even going by the provisions of s. 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, deduction under s. 80-IA has to be allowed. The case of the assessee that the wind turbines (wind-mill) through which it generated and sold electricity was not primarily meant for such purpose and it was primarily meant only for the purpose of demonstrating to the prospective buyers of power turbines manufactured by the Dani....