TaxTMI 
TaxTMI 
2013 (2) TMI 767
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....t. His wife, Mrs. S. Vallinayaki, the other assessee is a Proprietrix of M/s.Narmada Textiles, also having a Dyeing Unit. While completing the assessee for the Asst. Year 2009-10, the Assessing Officer disallowed 50% of water expenses incurred by the assessees for their Dyeing Units. The disallowance was made by the Assessing Officer on the ground that the persons from whom the assessees purchased water were not available in the address provided. The Assessing Officer was also of the view that the assessees have a captive well with water table less than three meters and business premises located in Bhavani river bed. Therefore, he found that the explanation given by the assessees was not an acceptable explanation for the expenses incurred for purchase of water for dyeing units. Against this order, the assessees as well as the Department are in appeal before us. 4. The Counsel for the Assessee submits that the assessees are having Dyeing Units where water is the main ingredient for Dyeing Units. The assessees are having own well from which 70% of water required for the Dyeing Units was consumed from the said well and in view of the shortage of water, assessees are forced to purch....
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....e Tax (Appeals) taking into consideration the percentage of water expenses to the gross receipts, restricted the disallowance to 10% of the assessees claim. Taking into consideration the totality of facts and circumstances of the assessees' case, we restrict the disallowance to 5% of the assessees claim towards water expenses. The grounds raised by the assessees as well as the Revenue are partly allowed. 7. The next common issue in the assessees appeals is that the Commissioner of Income Tax (Appeals) erred in restricting the disallowance of fire wood expenses to 10%. 8. The Assessing Officer, while completing the assessment disallowed fire wood expenses incurred in cash at J.33,69,349/- and J.5,37,422/- representing 25% of total expenses of fire wood purchased from regular dealers. The reason for disallowance was stated to be that the vouchers were self-made, the weigh bridge slips were from Narmada Electronic Computer Weigh Bridge, belonging to assessees' HUF and there was purchase of low quality fire wood by the assessees. On appeal, the Commissioner of Income Tax (Appeals) restricted the disallowance to 10%. 9. The Counsel for the Assessee submits that the disallowance....
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....ong to any organized sector. In my opinion, it is not proper to disallow 100% of the cash purchases of the appellant. During the course of assessment proceedings it was explained to the Assessing Officer that firewood brought by villagers is of inferior quality and hence the cost of firewood is less. The Assessing Officer concluded that the assessee could not explain why such inferior quality was purchased for the boiler and he disallowed 100% of cash purchases. The appellant submitted that because of heavy requirement for boiler all available firewood was purchased. The cash purchases were there for earlier years also. Taking into consideration the firewood expenses of earlier years, I direct the Assessing Officer to disallow 10% of the expenditure claimed by the appellant on cash purchases. Regarding the purchases where parties name and address are given, the Assessing Officer disallowed 25% of firewood purchase on the ground that these were self weighbridge bills. The Assessing Officer has not verified any details and has not disputed the payments made by cheque. The proposal to disallow was not based on any adverse evidences. The Assessing Officer is directed to delete the addi....
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....Wind Energy Ltd, NEPC India Ltd, and Southern Wind Farms Ltd. The Assessing Officer while computing the assessment treated the said compensation received by assessee as revenue receipt as against the claim of the assessee that such compensation is a capital receipt and not exigible to tax. The contention of the Assessing Officer was that the said amount received is only a compensation for loss of profit since the said amount was received for the failure to generate the required units of electricity by the wind mills and therefore is a revenue receipt. Another reason for treating the said compensation as revenue receipt liable for tax was that the assessee claimed depreciation on the total cost of machinery without reducing the suppliers' credit availed at each year by way of compensation. On appeal, the Commissioner of Income Tax (Appeals) rejected the claim of the assessee against which the assessee is in appeal before us. 18. The Counsel for the Assessee submits that wind mill machinery erected by the assessee is a capital asset. The compensation paid by the suppliers is towards deficiency in the performance of the asset and, therefore, the amount received has to be treated as....
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....sation was paid for loss in generation of electricity of the required units per annum as stipulated in the agreement and the amount of compensation is not a lump sum compensation and it is linked to the TNEB rates. The Departmental Representative submits that the compensation was paid for incapacity to generate power and, therefore, it is nothing but loss of profit and is assessable as revenue receipt only. The Departmental Representative relied on the following decisions :- i) CIT v. Manna Ramji & Co. - 86 ITR 29 (SC) ii) Indo Foreign Traders (P) Ltd. v. CIT-166 ITR 308 (Mad) iii) Chemplast Engineers (P) Ltd. v. CIT-234 ITR 23 (Mad) 22. We have heard both sides. Perused the materials on record and the orders of authorities below as well as the case law relied on by the parties. The assessee erected wind electric generation mills. The assessee entered into agreements with the suppliers for supply, erection and commissioning of the wind mills. In the agreement entered into by the assessee with the suppliers, there is a clause containing performance guarantee of the machineries supplied by the suppliers. As per this clause in the agreement, the wind mills shall generate g....
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....revailing TNEB rates which is adjustable against the suppliers credit and the compensation shall not, under any circumstances, be more than J.25 lakhs from the supplier towards generation loss. The performance guarantee clause of agreement clearly suggests that compensation would be paid for generation loss which is linked to TNEB rates and it is not a lump sum compensation paid for non performance of the asset or break down of the asset. The compensation paid to the assessee is only for the loss of generation of electricity and the compensation is for loss of earnings. Had the wind mill generated the guaranteed units of electricity, the assessee would have earned revenue out of such units, which is revenue receipt. 24. In the case of CIT v. Bombay Burmah Trading Corporation (supra), the assessee was given forest for lease for cutting and removing timber. Later, forests were nationalized and the lease agreements were terminated by the Government of Burma, but the compensation was paid to the assessee for residuary rights under lease in the shape of logs. The assessee sold the logs and realized the compensation. The Hon'ble Supreme Court held that the timber received by the a....