TaxTMI 
TaxTMI 
2010 (5) TMI 605
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....entered between the assessee and the Electricity Board without generating/supplying any power and therefore, the said income cannot be said to be derived from the industrial undertaking." 4. The assessee's claim to deduction under section 80-IA in respect of the income shown on account of deemed generation of power as per the agreement entered into with Haryana Power Generational Corporation Ltd. (in short "HPGCL") for supply of electricity has been disallowed by the Assessing Officer by observing that the income earned by the assessee-company merely on account of terms and conditions of the agreement entered into between the assessee and HPGCL without generating or supplying any power cannot be said to be derived from the undertaking or enterprise within the meaning of section 80-IA of the Act. However, on an appeal, the learned Commissioner of Income-tax (Appeals) allowed the assessee's claim by giving the reasons that the plant was set up for generating and selling electricity, the electricity was sold to HPGCL and in case HPGCL is not in a position to buy the electricity from the assessee, the generation of electricity had to be stopped, and, therefore, in such a situation, ....
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....in this matter. 3.1 Coming to the issue of income from deemed generation, the same arises when HPGCL does not take power from the power plant of the assessee. In such a situation, it is obliged to pay charges to the assessee to keep the plant in ready condition. There is stipulation to that effect in the agreement entered into between the assessee and HPGCL. There is no dispute about these facts also. Thus, the only question left is whether, the aforesaid income is eligible for deduction under section 80-IA. 3.2 We have already mentioned that where the gross total income of an assessee includes any profits and gains derived by an undertaking specified in sub-section (4), it is entitled to deduction under the provision. There is no dispute that an undertaking set up in any part of India for generation or generation and distribution of power is an eligible undertaking for the purpose of the aforesaid deduction, as provided in sub-section (4)(iv)(a). The words used in the aforesaid sub-clause are an undertaking which 'is set up in any part of India for the generation or generation and distribution of power'. There is no dispute that the undertaking of the assessee is set up for ....
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....he conclusion that the deduction was not available. The facts of this case are distinguishable on the simple ground that the receipt of revenue from both streams in this case is in respect of eligible business of generation of power, for which the undertaking was set up. Both streams of revenue are directly linked with the process of sale of power generated by the assessee. 3.4 In the case of CIT v. Sterling Foods [1999] 237 ITR 579 (SC), the question was whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the receipt from the sale of import entitlements could not be included in the income for the purpose of computing relief under section 80HH of the Income-tax Act, 1961. The finding of the court was that the source of import entitlements was not the industrial undertaking of the assessee. The source was the export promotion scheme of the Central Government, under which the export entitlements became available. In order to say that an income is derived from a particular business, there must be a direct nexus between profits and gains and the industrial undertaking. Thus, it was held that the assessee was not entitled to d....
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....ute that the expenditure has to be incurred. It is evident that such income also has a proximate connection with the business of generation of power and the PPA is in connection with purchase of power by HPGCL from the assessee. Therefore, no distinction can be made between income from actual supply or from deemed generation of power as source of both incomes is the business of the assessee and sale of power in terms of the PPA." 10. Respectfully following the aforesaid order of the co-ordinate Bench referred to in the assessee's own case, we are inclined to uphold the order of the Commissioner of Income-tax (Appeals) in allowing the assessee's claim of deduction under section 80-I in respect of the income from deemed generation of power. The order of the Commissioner of Income-tax (Appeals) is, thus, upheld and the ground raised by the Revenue is rejected. I. T. A. No. 4140/Del/2007 : 11. Now, we shall come to the appeal filed by the assessee. Ground No. 1 raised by the assessee is as under : "1. The learned Commissioner of Income-tax (Appeals) has erred both on facts and in law in upholding the action of the learned Assessing Officer in excluding sale of scrap (Rs. 4,....
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.... account of supply of material for earthing purpose and brick work around tank area, civil work at tank farm area, separator room work, bricks etc., supply of boiler and its components, foundation bolt, etc., and work done on boiler respectively. It is not clear when and on what account these expenses were debited in the books of account and credited to the creditor's account or the same were claimed and allowed as revenue expenditure or not. Similarly, there is no evidence on record to say that other items, which has now been written off, are connected to the assessee's business activity of the undertaking itself. With regard to the miscellaneous income, it is also not clear whether the scrap is generated from the operational activity of the industrial undertaking, or whether they are merely incidental to the assessee's business as a whole. We, therefore, restore this matter back to the file of the Assessing Officer for his fresh adjudication after examining all the details thereof. The assessee shall be under obligation to produce and furnish all evidence and materials in support of the assessee's claim that the items claimed under the heads "Credit balances written back" and "Sa....