TaxTMI 
TaxTMI 
2012 (8) TMI 337
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....in sub-section (4), there shall, in accordance with and subject to the provisions of section 80-IA, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such business for ten consecutive assessment years. The Assessee claimed deduction under section 80- IA(4)(iv)(c) of the Act. Those provisions read as follows:- "(4) This section applies to ............. (iv) an undertaking which, ............. "(c) undertakes substantial renovation and modernization of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April 2004, and ending on 31st day of March, 2010. Explanation: for the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004". 4. The Assessee claimed that it had during the previous year relevant to AY 05-06 undertaken substantial renovation and modernization and therefore was entitled to claim deducti....
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....hen an item of expenditure is treated as capital works in progress in the books of accounts it cannot be said to be an increase in the plant and machinery. The situation is that the Assessee has placed orders for purchase of cables and awarded contracts for carrying out civil work for erection of transmission and distribution lines but the work is not complete and is in progress. Hence in the books of accounts the said expenditure (which is a sum of Rs.118.84 crores given in the table in the earlier para of this order) is not capitalized and shown as value of plant and machinery but is shown as capital work in progress. The question is whether Capital Work in Progress can also be considered as book value of plant and machinery for allowing deduction u/s.80-IA(4)( c) of the Act. 7. The case of the Assessee is that the provisions of Sec.80-IA(4)(c) of the Act contemplates deduction to an Assessee who "Undertakes". According to the Assessee by placing order for purchase of cable and transmission lines and entering into contract for carrying out civil work, the Assessee has undertaken substantial renovation and therefore the deduction should be allowed. The case of the revenue is th....
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....ccounting for fixed assets, states that capital work-in-progress for capital expenditure incurred on account of fixed assets during the course of construction or acquisition has to be separately shown under the gross block of fixed assets. The Assessee also relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Karnataka Power Corporation Ltd. 247 ITR 268 (SC) wherein the Hon'ble Supreme Court in the context of relief u/s.80J of the Act held that capital work in progress is to be treated as capital works of fixed assets. 9. The CIT(A) however concurred with the view of the AO. He also held that the decision of the Hon'ble Supreme Court in the case of Karnataka Power Corporation Ltd. (supra) was in the context of the provision of Sec.80J of the Act where deduction was allowed as a percentage of "capital employed in the industrial undertaking" and in that context the Hon'ble Apex Court held that the moment an asset is acquired or purchased it has be considered as employed in business. The CIT(A) held that the aforesaid decision would therefore not be relevant in the present case. 10. Aggrieved by the order of the CIT(A), the Assessee has preferred the presen....
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....ognised based on the work certified only. Progress payments and advances paid to the contractor not so far adjusted to capital work-in-progress should be reflected as capital advances in the financial statements." 12. It was submitted that in case of the assessee, the CWIP had been certified and in view of the aforesaid Accounting Standard, the same was shown as CWIP, but otherwise it implies that there was substantial completion. Apart from the above, it was submitted that the provisions of section 80-IA(4)(iv)(c) talks about the assessee undertaking substantial renovation. The meaning of the word "undertaking" as per the law lexicon was quoted and it says:- "Undertake: To engage to look after or attend to. To endeavor to perform or try, to promise, to finalise, engage, agree or assume an obligation. To lay oneself under an obligation or to enter into stipulation, to perform or to execute, to convenient, to contract." It was therefore submitted that the deduction claimed ought to have been allowed. It was submitted that it was not the intention of the legislature that the entire renovation and modernisation of the existing lines and cable network has to be completed and p....