TaxTMI 
TaxTMI 
2016 (3) TMI 271
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....ection 80lA to deny the exemption there under; iv) in misreading the facts and accounts to disallow the alleged expenses and other set-offs against power generation income on erroneous grounds; v) in holding that a sum of Rs. 72,94,218/-was incurred on charges relatable to supervision, erection and commissioning on capital account instead of revenue. All the above actions being arbitrary, erroneous, untenable and illegal must be quashed with directions for relief. 2. Briefly stated, the facts of this case are: order u/s 143(3) of the Act was passed at the book profit of Rs. 6,39,79,655/- u/s 155JB of the Act and consequently notice u/s 148 of the Act along with reasons recorded was served upon the assessee and the assessee has filed objections. Consequent upon the notices issued u/ss 143(2) and 142(1) of the Act, Shri F. A. Shamsi, AR of the assessee company attended the proceedings from time to time. 3. The assessee company is into the manufacturing and installing of wind electric generators (WEGs) in India for harnessing power from wind at different locations in India and claimed deduction u/s 80-IA to the tune of Rs. 22,57,278/- for installation ....
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....pages 60-68 of the Paper book and relied upon the judgement of Hon'ble Jurisdictional High Court cited as RRB Consultants and Engineers (P) Ltd., Vs DCIT, 342 ITR 126 (Del.). 7. However, on the other hand, Ld. D.R. to repel the arguments addressed by Ld. A.R., relied upon the orders passed by the Assessing Officer as well as Ld. CIT(A). 8. We have heard both the authorized representatives and perused the material on record in the light of the facts and circumstances of the case and orders of authorities below. 9. Grounds No.1 ,2 & 3: Undisputedly, the assessment of the assessee, on the basis of return of income filed qua the Assessment Year 2004-05 declaring income of Rs. 93,95,100/- was completed on 31.05.2005 u/s 143(3) of the Act. Thereafter, assessee was served upon a notice dated 30.03.2011 u/s 148 of the Act after recording the reasons by the Assessing Officer. 10. The Assessing Officer recorded the reasons incorporated in Annexure A annexed with the notice served upon the assessee u/s 148 of the Act, the operative part of which is reproduced as under: "Annexure -A Reasons for the Belief that Income has Escaped Assessment in the Case of MI....
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....enses. The business is not run on thin air. 1.2.2. Moreover as per the requirement of the section the books of accounts are to be maintained separately. The assessee was asked to show the separate set of statement of accounts of power generation business during the course of assessment proceedings for AY 2007-08 and 2008-09. However, the assessee was unable to submit any separate set of books of accounts for this business. The assessee seems to be debiting the expenses to the eligible busir.ess in an arbitrary manner as it suits him. The same is not in congruence with the spirit of section. The assessee is bound to have separate books to claim the deduction u/s 80-IA, the assessee therefore is ineligible for deduction on this account." 1.1 As per the records for the AY 2004-05, the assessee should have been claiming depreciation amounting to Rs. 1,03,42,296/- against the WEGs installed for power generation activity (this would be over and above unabsorbed depreciation for earlier years which cannot be quantified at this stage, but would be well over the revenue from power generation, given the huge capital outlay involved in setting up WEGs.) The brought forward d....
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....ing deduction of relevant business expenses - Administrative, Financial, Managerial etc. 2. Without prejudice to the above, it is seen that the assessee has claimed expenditure of Rs. 72,94,218/- to reduce and prevent losses and to ensure the guaranteed output in future, under the head 'Supervision erection and commissioning expenses'. Since this expenditure was incurred to have longtime benefits it was capital in nature and should have been disallowed. Section 37 of Income Tax Act, 1961, provides that any expenditure not being expenditure of capital nature laid out wholly or exclusively for the purpose of business is allowable as deduction in computation of the income chargeable under the head 'Profit and gains of business or profession'. 3. Thus the assessee has failed to disclose all material facts truly and fully that were necessary for assessment. Here it is relevant to mention the explanation 1 in section 147 that states that "production before the AD of account books or other evidence from which material evidence could with the diligence have been discovered by the AD will not necessarily amount to disclosure with the meaning of the....
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....er years. The gross income of these WEGs is Rs. 3,46,77,308/-, which have been claimed to be eligible by the assessee. 3.2) It is relevant to mention here that the first assessment year when the assessee sought deduction u/s BOIA was the year 1996- 97. The provisions of section 80IA(1) stipulates the following. (ix) It is about profits and gains of an undertaking or an enterprise. ex) Income should be from eligible business as per 80IA(4). (xi) Allow deduction of 100%. (xii) It is available for ten consecutive assessment years beginning from the year in which the undertaking or enterprise begins to generate power. 3.3 The above analysis show that deduction is for an undertaking or an enterprise that means one such enterprise engaged in business eligible for deduction u/s 80-IA. The deduction is available for 10 consecutive assessment years beginning from the first year of claim. The assessee is engaged in power generation and qualifies as eligible business u/s 80-IA(4). The first year of claim in A.Y.1996- 97 as evident from form No.10CCS filed by the assessee). The ten consecutive years of the assessee lapse in A.Y.2005-06. 3.4....
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.... and demonstration aids and not for purpose of power generation. Once the declared purpose of the assessee is not power generation then also' the assessee is not eligible for deduction u/s 8o-IA. Therefore the assessee is not eligible for deduction u/s 80IA on the basic consideration. 3.7 It may still be not out of place to mention here that one of the primary requirement for being eligible for deduction under section 80lA is that the boo's of account should be separately maintained Since the assessee does not do so this also disqualifies hi for availing any deduction u/s 80-IA. Therefore the assessee is not eligible for deduction u/s 80-IA of I.T. Act in toto." 10.4 At the time of reassessment, assessee filed comprehensive objections to the reopening of assessment lying at pages 68-70 of the Paper Book raising all the legal and factual grounds against reopening of assessment. It is not in dispute that the issue as to the admissibility of exemption available to the assessee u/s 80-IA of the Act has already been considered by the Revenue for the Assessment Year 2006-07, 2007-08 and returned findings in favour of the assessee. 10.5 Hon'ble Supreme Court in ....
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....ord "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word" opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular o. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147.-A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to belie....