TaxTMI 
TaxTMI 
TaxTMI 
2021 (2) TMI 645
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....books of accounts is condition precedent for claiming deduction under section 80IA(4)(iv)(c) of the Act on the facts and circumstances of the case? (iii) Whether the provision of section 115JB of the Act is applicable to the appellant company for the impugned assessment year 2005-06 on the facts and circumstances of the case?. 2. The factual background in which the aforesaid substantial question of law arise for consideration in this appeal need mention. The assessee is a public limited company which is wholly owned by the Government of Karnataka and is engaged in the activity of distribution of electricity. The assessee filed the return of income for the Assessment Year 2005-06 on 30.10.2005 declaring NIL income under normal computation of income after claiming deduction of Rs. 141,84,44,170/- under Section 80IA(4)(iv)(c) of the Act and book profits of Rs. 88,46,17,415/- under Section 115JB of the Act. The case was selected for scrutiny and notice under Section 143(2) of the Act was issued. The Assessing Officer passed an order under Section 143(3) of the Act on 31.12.2007 and disallowed the deduction claimed under Section 80IA(4)(iv)(c) of the Act and held that computation as ....
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....work in progress'. The assessee therefore has undertaken and has incurred expenditure in furtherance of the undertaking. 5. Without prejudice to the aforesaid submission, it is further submitted that even if renovation and modernization of only current year is considered, the same is more than 50% of the book value of plant and machinery as on 01.04.2004. It is further submitted that the Assessing Officer has removed the capital in work in progress as well as assets shown in Schedule 7 of the balance sheet. It is pointed out that since the Assessing Officer has not rejected books of accounts of the assessee, therefore, the figures and classifications mentioned in the balance sheet have to be accepted. It is also urged that there is no requirement of a certain item to be capitalized to the books of accounts for benefit of the claimed and had the legislature intended for such a requirement, it would have clearly said so in Section 80IA(4)(iv)(c) of the Act. In this connection, our attention has been invited to Section 35AD of the Act, which contains a requirement that the amount is to be capitalized in the books of accounts of the assessee in order to enable him to claim the be....
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.... eligibility conditions of incentive provisions have to be strictly construed and in case of any ambiguity with respect to eligibility conditions the ambiguity has to be read in favour of the revenue. It is further submitted that since, in order to claim deduction under Section 80IA (4)(iv)(c) of the Act the renovation and modernization work should be complete and the completion should be value addition to the book value of the plant and machinery. It is urged that the aforesaid criteria has not been fulfilled by the assessee for the Assessment Year 2005-06. It is also argued that if contention of the assessee is to be accepted that incentive would be provided on making advances and not in bringing into existence increase in value of plant and machinery, the incentive provision would not be applicable. Without prejudice to the aforesaid contention, it is urged that assessee had been given benefit for a period of 10 years from Assessment Year 2006-07 and on completion of Assessment Year 2006-07 on completion of renovation and modernization on compliance with the conditions in Section 80IA (4)(iv)(c) of the Act. Therefore, the assessee has not been deprived of the benefit of incentiv....
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.... on the 31st day of March, 80: Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation 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 the 31st day of March, 80. 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; 9. Thus, from perusal of the aforesaid provision, it is evident that there are three types of undertaking, which are considered by the Legislature eligible for deduction under Section 80IA of the Act viz., an undertaking which is (i) is set up for generation or generation and distribution of power. (ii) starts transmission or distribution by laying network of new transmission or distribution lines. (iii) under....