TaxTMI 
TaxTMI 
2022 (3) TMI 539
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....e orders of Income Tax Appellate Tribunal (ITAT) pertaining to the Assessment Years (AYs) 2002-03 (ITA No.24 of 2009), 2003-04 (ITA No.25 of 2009), 2007-08 (ITA No.1 of 2015), 2008-09 (ITA No.2 of 2015) and 2009-10 (ITA No.3 of 2015). As regards ITA Nos.24 of 2009, 25 of 2009, 1 of 2015 and 2 of 2015 the following question of law has been framed for consideration: "Whether the ITAT was justified in disallowing deduction towards 'power profit' under Section 80-IA (4)(iv) of the Income Tax Act, 1961?" 2. In ITA No.3 of 2015 (for AY 2009-10) the sole question that has been framed for determination is as follows: "Whether the ITAT was justified in disallowing the expenditure incurred by the Assessee on development of periphery of the indus....
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....under Section 80-IA was that the Assessee had not been able to show "any nexus between the impugned interest received by it with interest payable". Holding that the issue was covered by the decision of the Supreme Court in Pandian Chemicals Ltd. v. Commissioner of Income Tax (2003) 262 ITR 278 (SC) followed by this Court in Tata Sponge v. CIT 292 ITR 175, the ITAT held that a sum of Rs. 9 crores was earned by the Assessee from investment of funds in GRIDCO bonds and cannot be considered as income received for late payment of electricity. Accordingly, the deduction of the entire sum of Rs. 24,97,18,456/- for the AY 2002-03 and the sum of Rs. 21,77,36,307/- for the AY 2003-04 was disallowed. Disallowance of deduction under Section 80-IA 6. ....
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....ve any other source of business. Reliance was placed on the decision of the Supreme Court of India in Commissioner of Income Tax v. Meghalaya Steels Ltd. (2016) 6 SCC 747. 8. Countering the above submissions, Mr. Satapathy, learned Senior Standing Counsel for the Department contended that the critical words in Section 80-IA of the IT Act were that the other income must be derived from the business of generation of electricity and not merely 'attributable' to it. In other words, such income should have a direct and active nexus to the main activity. It was contended that the income, profit or gain cannot be said to have been 'derived' from an activity merely because such activities may have helped the Assessee earn income or profit in an in....
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....total income of the assessee, a deduction of an amount equal to hundred percent of the profits and gains 'derived from' such business for ten consecutive assessment years. It must be noted that this is almost similarly worded as Section 80IB and 80IC of the Act. These provisions use the expression 'profits and gains derived from any business'. The deduction of the entire profits and gains is allowed for a certain period of time to encourage the setting up of certain core or essential industries. 11. In the instant case, the Assessee has no other source of income except through generation and sale of power. All its receipts and expenditure relate to a single activity of power generation. There is no dispute that it is an industrial undertak....
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....ect nexus with the essential business activity of the Assessee. 13. In CIT v. Meghalaya Steels Ltd. (supra), the Respondent there was engaged in manufacturing steel and ferro silicon. The interest earned on the subsidies were treated as not income derived from business of the Assessee and therefore, not having a close and direct nexus with the business of the Assessee. The subsidies, according to the Department, did not qualify for deduction. The Assessee's argument on the other hand was that the subsidies were given only in order that the cost of manufacture would be reduced. These subsidies were reimbursement for either the entire or partial costs incurred towards transporting raw materials to the Assessee's factory or finished products ....
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....eimbursed to the assessee by the Government concerned." 15. Extending the same analogy and reasoning to the interpretation of Section 80-IA, this Court is satisfied that on the netting principle, since there is no other activity of the Assessee except power generation, the AO, the CIT(A) and the ITAT, were in error in disallowing the aforementioned sum as deduction under 80-IA of the IT Act. There is merit in the contention of the Assessee that the interest received from the bonds issued by GRIDCO have a direct nexus with its essential business activity and therefore, was income derived from it, thus, making it eligible for such deduction. 16. The question framed by this Court is, therefore, answered in the negative i.e. in favour of the ....