DCIT 9(2), MUMBAI vs. K.P. POWER P. TD, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. Nos.4518/Mum/2011, 547/Mum/2012 & 1306/Mum/2012 (निर्धारण वर्ा / Assessment Years: 2002-03, 2006-07 & 2007-08) DCIT, Range (9)(2) बिधम/ M/s. K.P. Power Pvt. Ltd. 229-230, 2nd Floor, Arun Aayakar Bhavan, R. No. Vs. Chambers Tardeo, Mumbai- 218, 2nd Floor, M.K. Road, 400034. Mumbai-400020.

आयकर अपील सं/ I.T.A. Nos.173/Mum/2012 & 1385/Mum/2012 (निर्धारण वर्ा / Assessment Years: 2006-07 & 2007-08) बिधम/ M/s. K.P. Power Pvt. Ltd. Additional CIT Range 9(2) Aayakar Bhavan, 2nd Floor, 229/230, 2nd Floor, Arun Vs. Maharishi Karve Road, Chambers Tardeo, Mumbai- Mumbai-400020. 400034. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABCK9495M (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue by: Shri S. K. Bepari Assessee by: Shri Girish Dave सुनवाई की तारीख / Date of Hearing: 07.09.2018 घोषणा की तारीख /Date of Pronouncement: 31.10.2018 आदेश / O R D E R PER AMARJIT SINGH, JM: The revenue as well as the assessee have filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys.2002-03, 2006-07 & 2007-08.

ITA. No. 4518/Mum/2011, 547/Mum/2012 & 1306/Mum/2012 173/Mum/2012 & 1385/Mum/2012 A.Ys. 2002-03, 2006-07 & 2007-08

ITA. NO.1306/M/2012:- 2. The revenue has filed the present appeal against the order dated 30.12.2011 passed by the Commissioner of Income Tax (Appeals)-20, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2007- 08.

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u/s 80-IB(4) of the Act. Feeling aggrieved, the revenue has filed the present appeal before us.

ISSUE NO. 1:-

“6.1 The AO has disallowed the above expenditure incurred under various heads as under: i. Foundation work - Rs.1,05,000/- ii. Miscellaneous expenses - R.s10,93,607/- iii. Road development expenses – Rs.20,55,286/- iv. Site development expenses – Rs.3,55,203/- v. Electrical work internal – Rs. 3,27,000/- 6.2. The appellant challenged the above addition as the same was made without giving sufficient opportunity of being heard and to explain the details being disallowing it. 6.3 This disallowance has been mentioned at page 6 to 8 of assessment of where after giving bifurcation of amounts under different heads as above, the Assessing Officer of the view that the assessee was required to file the purpose of each of these payments along with documentary evidences He was also the view that the appellant was required to give full details of the expenses al-with justification and since it has failed to do so at the time of assessment the same had to be disallowed. 64 The appellant during the appellate proceedings has stated that it had possession all the material evidences which was never caller" upon by the Assessing Officer and therefore, filed additional evidences which were forwarded to Assessing Officer. The details were submitted as follows. - i. Foundation work- 1,05,000/- : This amount was paid to Shri P.K Nagragan site management expenses for Brahmanvel area.

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ii. Miscellaneous expenses – 10,93,607-: These expenses are in the nature payment to local population for use of land for laying of transmission, I development and other expenses at MIDC. MCEB, a detailed statement of expenses was submitted during assessment proceedings (a copy of which attached for perusal) and it was added that relevant supporting can be available at the time of remand proceedings. iii. Road development expanses – Rs. 20,55,286/-: It was submitted that in course of assessment proceedings a detailed statement names of payee purpose for which These payments were made was submitted. All these payment? supported with bills and vouchers which can be produced during remand proceeding. Site. development expenses Rs.3,55,203/-: A detailed statement of expense incurred towards site development al Brahmanvel was submitted during assessee proceedings (a copy of which was attached for perusal). It was added that perusal statement reveal that majority of these expenses were incurred at the Brahmanvel by M/s NEG M1CGN who have recovered from the assesses com; The appellant also offered to produce debit notes raised by M/s. MEG MCON verification. V Electrical Work internal – Rs.3,27,000/-: These expenses were incurred for maintaining the electrical poles supporting with network of transmission lines laid by the assesses They comprise of expenses varying between Rs.2,500/- to Rs.60,000/- paid to various persons and a copy of details/list of payments were submitted during the course of appellate proceedings were also attached The assesses also added that it was in a position to produce supporting for these expenses at remand proceedings, if required. 6.5. As mentioned earlier, all papers and evidences were forwarded to the Assessing Officer. The Assessing Officer in remand proceedings has held that the appellant had furnished self- serving details of various expenses not backed by supporting evidences and in some cases even the addresses of the parties have not been mentioned. 6.6. In response to this, the appellant submitted that it attended the remand proceedings to justify the details forwarded by the CIT(A) and supporting evidences were not asked or called by the Assessing Officer in case he wanted further documents to verify the claim he would have "ailed for the same instead of rejecting it on

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flimsy grounds. It was not the case of the Assessing Officer that when complete details of expenses claimed was filed and he called for further details or supporting documents which assessee could not produce. Only in the case of failure of the appellant to substantiate the claim, the Assessing Officer would have been justified in holding that the appellant has failed to substantiate its disallowance. Since neither any evidence was called in addition to what was produced before the CIT(A) it was not fair on the Assessing Officer's part to reject the expenditures which has been subject to Tax Audit without any adverse inference. Therefore, the appellant sought deletion of the same. 6.7. I have perused the assessment order, remand report as well as counter comments on remand report of the appellant. Since the disallowances were made without bringing any adverse material on record or by carrying out adequate enquiries matter was remanded to the Assessing Officer to conduct enquiry u/s 250(4) on them. 6.8 The appellant in addition to what it had provided during assessment proceedings had offered to produce whatever further evidences required to substantiate its claim which was not called by the Assessing Officer Thus, in spite of having the mandate given by the C1T(A) vide his letter dated 18.11.2010 to examine the records and conduct further enquiry, the Assessing Officer submitted a remand report which is no different from the position as it existed at the assessment stage. The additions and disallowances were made at assessment stage in summary manner without confronting the appellant. At remand stage too, the position remand unchanged. 6.9. On the other hand, the appellant had furnished details of expenditure incurred which prima-facie discharges its onus. However, it is observed that some amounts have been debited under the head miscellaneous expenses without further details except the name of the person to whom payment is made. This is not contradicted by the AR of the appellant and, therefore, even if the same is vouched it cannot be said that they are amenable to cross-verification. In these circumstances it would be fair and reasonable to disallow 15% of Rs.39,36,096/- amounting to Rs.5,90,414/- which will take care of those disallowances which may not be fully substantiated. Accordingly, disallowance to the extent of Rs.5,90,414/- is confirmed and the appellant gets relief of Rs.33,45,682/-. This ground of appeal is partly allowed.”

ITA. No. 4518/Mum/2011, 547/Mum/2012 & 1306/Mum/2012 173/Mum/2012 & 1385/Mum/2012 A.Ys. 2002-03, 2006-07 & 2007-08

ISSUE NOs. 2 to 4:- 5. All these issues are in connection with the allowance of claim of the assessee in view of the provision u/s 80-IA(4) of the I.T. Act, 1961. The Ld. Representative of the revenue has argued that the Ld. CIT has wrongly allowed the claim of the assessee whereas the AO has rightly rejected the claim of the assessee in view of the provision u/s 80-IB(4) of the Act, therefore, the finding of the CIT(A) is not justifiable hence, is liable to be set aside and the order of the AO is liable to be restored in the interest of justice. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: -

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“8. Ground of appeal No 5 relates to claim of deduction u/s 80IA (4)(iv)(b) of the IT Act. 1961, This ground of appeal relates to disallowance of appellant's claim of deduction for laying of new transmission lines amounting to Rs.3,41,50,391/- u/s.80IA(4)(iv)(b) of the IT Act, 1961. It was highlighted that the appellant had earned, a net income of above amount of laying of network of new transmission lines for transmission and distribution of power which is eligible for deduction under the above provisions of chapter VIA. It was contended that the Assessing Officer failed to appreciate that the appellant company was in the business of laying of network of new transmission lines for transmission and distribution of power and carried out that above work and, therefore, was an infrastructure developer eligible for deduction It is observed that the Assessing Officer had disallowed this deduction on the ground that the appellant is a contractor or a liasioning agent who is not eligible for deduction According to the Assessing Officer only developer of infrastructure is eligible fc deduction In doing so, the Assessing Officer has relied on the decision of Mumbai Bench decision in B.T Patil & Sons vs ACIT. As against this, the appellant drew attention to the decision of Hon'ble Bombay High Court in CIT vs ABG Heavy Industries Ltd, 37 DTR (Born) 233 pronounced on 15.02.2010, followed by Pune Bench in Laxmi Civil Engg Pvt. Ltd vide its order dated 08,06.2011. In the light decision of Jurisdictional High Court, it was contended that the decision of BT. Patil & Sons relied by the Assessing Officer was not a good law as it stands impliedly overruled. The appellant also drew attention to the CIT(A)'s order for A.Y.2002-03 dated 30.03.2011 where after examining the provisions of section u/s80IA(4)(iv)(b) has given a clear cut finding that the appellant’s case falls in sub-clause (b) of 80IA(4)(iv) of the given a clear cut finding that the appellant's case falls in sub-clause (b) c (A) (4)(iv) of the l.T Act. 1961 and so the appellant was entitled for deduction profits derived from network of new lines for transmission and distribution of power. 8.1. During the course of appellate proceedings attention of the appellant was drawn to the "without prejudice" findings of the Assessing Officer at pages 21 to 25 the assessment order, whereby the Assessing Officer has held that the appellant ha credited an amount of 78,67,421/- being development charges, lease rent Rs.48.73.600/- as income from operations and claimed deduction u/s,80lA(4)(iv)(b) ON these amounts also though they were not

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directly derived from the profits & gains of eligible business of the appellant. The Assessing Officer was also of the view interest of Rs.1,98,781/- and dividend on mutual funds of Rs.6,78,183/- shown as other income has also been included which is not proper 8.1.1. The appellant clarified that it has claimed deduction u/s.80IA(4)(iv)(b) out of transmission charges income of Rs 5,65,17,629/- and after reducing the expenditure incurred to the cost of laying the new transmission lines, the same was claimed at Rs3.41,50,391/-. The appellant has neither credited Development charges of Rs.78,67,421/- and lease rent of Rs,48,73,600/- nor other incomes like interest/dividend while claiming the above deduction. 8 1 2. In this connection, it drew attention to The Form No.10CCB filed where the total sales of undertaking has been taken at Rs.6,92,58,650/- which includes the Development charges and lease rent but while computing the profit derived from network of transmission lines, they have been excluded and only transmission charges income of Rs.5,65,17,629/- for laying network for transmission of power was taken in computing the net income at Rs.3,41,50,391/- after setting off the expenditure under section 80IA(4)(iv)(b) of the I T. Act, 1961. Thus, it was stated that the Assessing Officer's "without prejudice findings" was not in accordance with the facts and material on record as none of the other incomes even if shown under the head operations in Profit & Loss Account, has been included while claiming deduction u/s.80lA(4)(iv)(b). 8 2. I have perused the assessment order, remand report and written submissions of the appellant This is a recurring issue which has been subject matter of appeal for A.Y 2002-03 as well as for A.Y 2006-07. By order dated 30.03.2011, the appellant's claim of deduction under this section was allowed for A.Y.2002-03. This issue was also examined at length be me while deciding the appeal for A.Y 2006-07 at pages 9 to 17 of the appellate order and the appellant's claim for deduction was allowed in the light of the decision of Hon'ble Bombay High Court in the case of CIT vs ABG Heavy industries Ltd (cited supra) Since the facts and circumstances and the nature of work ^formed by the appellant remained the same, it is held that the appellant is entitled deduction u/s.80IA(4)(iv)(b) of the I.T Act, 1961 as it fulfills all the conditions. This if ground of appeal is allowed in appellant's favor.

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8 2.1. Without prejudice to the above finding, it is observed that the appellant has claimed deduction of Rs.3,41,50,391/- under the above section This amount forms part of Rs.3,46,80,000/- which has been held to be the receipt for immediately preceding A.Y.2006-07 to say that the appellant's claim of offering the above amount in the current year under the head "transmission charges" and claiming corresponding deduction by way of earning a net income of Rs. 3,41.50,391- for laying of network of transmission lines for distribution of power has been negated by Taxation Authorities. It has been there consistent stand that above sum of Rs.3,46,80,000/- belongs to immediately preceding year. 8.2.2 At the appellate stage, the appellant's contention was rejected and the action of the Assessing Officer was upheld. In view of the above, the appellant is not entitled for deduction u/s.80IA(4)(iv)(b) in the current year as advance receipt of Rs.3,46,80,000/- has been taxed in the immediately preceding assessment year. 8.2 3. As per Form No.10CCB computation for claiming deduction u/a 80IA(4)(iv)(b), the appellant had shown income from transmission lines laying at Rs.5,65,17,629/-which includes the sum of Rs.3,46,80,000/-. Once this is excluded the income under this eligible business comes down to Rs.2,18,37,629/- whereas the cost of expenditure of laying of transmission lines as per computation in Form No. l0CCB comes to Rs.2,23,67,238/-. Thus, there is a loss from this eligible business amounting to Rs.5,29,609/-. To sum up, though the appellant is entitled to claim of deduction u/s.801A(4)(iv}(b) but since the sum of Rs.3,46,80,000/- has been taken as receipt for the A.Y.2006-07 and hence loss has occurred for the current year in this eligible business and so no deduction can be claimed. This ground of appeal is decided accordingly.” 6. After due consideration of the argument advanced by the Ld. Representative of the parties and perusing the record, we noticed that the claim of the appellant of deduction for laying of new transmission lines amounting to Rs.3,41,50,391/- was declined by AO in view of the provision u/s 80-IA(4)(iv)(b) of the Act. The CIT(A) in his order dated 30.03.2011 for the A.Y. 2002-03 has allowed the claim. At the time of argument, the

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Ld. Representative of the assessee has also placed reliance upon the decision of the Cochin Bench titled as Kinfra Exports Promotion Industrial Parks Ltd. V. Dy. CIT (2013) 36 taxmann.com 48 (Cochin) in which it was specifically held that the assessee would be entitled for deduction u/s 80-IA of the Act in respect of profit derived from transmission or distribution of power through network of new transmission or distribution of lines. The CIT(A) has also placed reliance upon the decision of Hon’ble Bombay High Court in the case of CIT Vs. ABG Heavy Industries Ltd, 37 DTR (Bom) 233, where in the similar situation the claim of the assessee was allowed u/s 80IA of the Act. Taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.

ITA. NO. 4518/M/2011

ITA. No. 4518/Mum/2011, 547/Mum/2012 & 1306/Mum/2012 173/Mum/2012 & 1385/Mum/2012 A.Ys. 2002-03, 2006-07 & 2007-08

ITA. No. 4518/Mum/2011, 547/Mum/2012 & 1306/Mum/2012 173/Mum/2012 & 1385/Mum/2012 A.Ys. 2002-03, 2006-07 & 2007-08

The claim of the assessee u/s 80-IA of the Act was disallowed and the total income of the assessee was assessed to the tune of Rs.3,70,42,855/- and income to the tune of Rs.3,34,07,252/- under the provision of book profit u/s 115JB of the Act. The assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

ISSUE NO. 1:-

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time u/s 147 of the Act. Prior to that the AO had completed assessment for the A.Y.2003-04 u/s 143(3) on 16.12.2005. The issue of deduction on account of management charges was examined by the AO in that year and the deduction was disallowed for the same reasons as in the case of the current year. Further, The AO also considered the applicability of 40A(2)(b) of the Act to the payment in view of common management of the appellant company and King Prawns. My predecessor vide order dt.05.04.2007 in Appeal No. CIT(A)-IX/ACIT-9(2)/IT-269/2006-07 held that the appellant had utilized services of King Prawns for developing the infrastructural facility for its wind farm activities. She observed that King Prawns had also entered into an agreement with German Partly for technical consultation for the similar project to be set up at Palghar and, therefore, it was engaged in development of such project. However, she observed, that the appellant was under the direct control and supervision of common management and therefore, the human probability of diversion of profit could not be rejected. She also observed that the appellant had not brought on record any material to show as to how the amount in question was reasonable for the type of services rendered by M/s. King Prawns Ltd. She therefore, agreed, with the AO that the provisions of section 40A(2)(b) would be applicable and considering the fact that out of the impugned sum, King Prawns had spend only Rs.12,00,000/- towards the project the CIT(A) considered the impugned expenditure excessive to the extent of Rs.10,00,000/- and ordered deduction only of the balance sum of Rs.20,00,000/-. On Department’s appeal the ITAT Mumbai Bench-H, vide order dt.24.09.2010 in ITA. N. 4807/M/2007 concurred with the aforesaid findings of the CIT(A) and upheld the disallowance restricted to Rs.10,00,000/-. 5.2. It is thus seen that there has been concurrent finding by both the CIT(A) and the ITAT in similar facts and circumstances in the immediately succeeding year to the effect up the wind farm Project at Brahamanwel, Sakri, Dist. Dhule and did render such services to the appellant. In these circumstances I have no hesitation in following the aforesaid appellate orders and hold that appellant is eligible to claim similar deduction in the current year also. However, for the reasons stated in the appellate order of my predecessor, I restricted the disallowance to Rs.10,00,000/-. The appellant gets relief of Rs,26,00,000/-.”

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“10. The AO has disallowed the amount paid to King Prawns Ltd., without fully examining the facts of the case. At para 2.4 pages 3 and 4, the first appellate authority held as follows : “2.4 I have gone through the contention of the appellant as well as that of the AO.From the facts as stated herein before it is seen that the appellant company has utilized the services of the said M/s King Prawns Limited for developing the infrastructure facilities for its wind farm activities. It is not disputed by the AO that the said M/s King Prawn had never rendered any services to the appellant company. The only objection according to him was that the said M/s King Prawn being the company carrying on the business of “Trading and Manufacture of Prawns, Fish and Salt it had no experience in “Generation of Power”. The AO has not brought on record any material to show that said King Prawns had never rendered such services. May it be true that apart from the services of the said King Prawns some other services might have been required, nevertheless it is not a case of the AO that the services actually rendered were only make belief. It may also be true that the said King Prawns was incurring losses but that itself would not be the ground for disallowance of such expenses in the hands of the appellant company. Further AO has not disputed the fact that the principal sanction was given to the said King Prawns for setting up of such project which also indicate that the said King Prawn was having the requisite capabilities to set up such project and therefore the AO should have taken note of such facts which clearly depict the capabilities of the said King Prawns. Further it is also true that the said King Prawn had also entered 6 into an agreement with German Party for technical consultation for the similar project to be set up at Palghar and therefore it is not in dispute that for all practical purpose the said M/s King Prawns was engaged in such project and it is only to facilitate the easy working the project has been transferred to the appellant company and therefore considering these facts I am not inclined to accept the AO’s action in this regard in disallowing the entire amount as expenses. However it is also true that the appellant company is under the direct control and supervision of common management and

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therefore the human probability of diversion of profit could not be rejected. Further the appellant has not brought on record any material to show as to how the amount in question was reasonable for the type of services rendered by the said King Prawns. It is also true that as against Rs.30,00,000/- of payment, the said King Prawn had spent only 12 lakhs which appears to be excessive looking to the type of services rendered. Therefore, I am in agreement with the AO that in the instant case provisions of section 40A(2)(b) would be applicable and hence considering the overall facts of the case I am of the view that disallowance if restricted to 10,00,000/- would meet both the ends of justice. And accordingly the AO is directed to restrict the disallowance at Rs.10 lakhs as against entire sum of Rs.30 lakhs. This ground of appeal is partly allowed. 11. We agree with these findings. The AO has made disallowance u/s 40A(2)(b) and the CIT(Appeals) has restricted the disallowance to Rs.10 lakhs. There is no additional evidence in this case before the first appellate authority. The finding of the AO that M/s King Prawns Ltd. is not in the business of power generation, is not factually incorrect. In fact M/s King Prawns Ltd. on 16th Oct., 2000, entered into MOU with German Firm to set up a Wind farm on its site at Palghar Dist. Thane and this wind farm has to be set up through a subsidiary company of Kings Prawns Ltd. i.e. M/s K.P. Power Pvt. Ltd. The MOU could not materialize. M/s King Prawns Ltd. had entered into agreement with German party for technical consultation for a similar project. It is also true that M/s King Prawns Ltd. has spent about Rs.12 lakhs in respect of its agreement with the assessee. 7 Under these circumstances, we uphold the order of the CIT(Appeals) wherein the disallowance is restricted to Rs.10 lakhs.” 14. Since the matter of controversy has already been adjudicated by the Hon’ble ITAT in the assessee’s own case for the A.Y. 2003-04 in ITA. No. 4807/M/2007 and the Hon’ble CIT has decided the matter of controversy on the basis of the said decision, hence, we are of the view CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.

ISSUE NO. 2:-

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“21. I had asked the AO to examine the evidences furnished by the appellant in support of laying down the transmission lines. He has simply ignored them and still alleges that the appellant failed to provide any evidence He has not made any other enquiry. As per the appellant, its case is covered by sub-clause (b) of clause (iv) of sub-section [4) of 80IA, i e, transmission or distribution of power by laying network of new transmission or distribution lines It has relied in This regard on the letter dt.l9-10-2001 of the MSEB regarding sanction for evacuation of power by erecting single bay transmission line connecting windmill with the MSEB And The letter of Mumbai vide Ref No 34878 dt 16-09-2001. The AO did not call for this communication either in course OF the assessment proceedings or the remand proceedings. The appellant has also not laid this before me by way of additional hence. I, therefore, directed the appellant vide letter dt 1803-2011 to furnish the copy for adjudicating on its claim. I further directed to furnish any communication issued, EB evidencing commissioning of wind mill project at its site at Brahamanwel, Dhule. The Appellant had

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earlier submitted that ii connected the installed by TWEI at the by it lo seven parties who paid the advance case rent of therefore, directed it to furnish such communication from the MSEB wing commissioning of WTGs installed at the sites subleased to these parties. "these requisition; were made in terms of section 250(4) of I.T. Act read with Rule 46A(4). The appellant has responded vide letter dt 25-03-2011 furnishing the following i) A copy oi letter No 34878 dt 18-09-2001 issued by the Chief Engineer (Commercial) Mumbai addressed to the appellant giving NOC u/s 44 of the Electricity (Supply) Act.1948 This is the letter referred to in letter dt 19-10-2001 of the Chief Engineer (NSKZ), Nashik mentioned above. ii) A copy of letter dt.06-05-2002 of the Superintending Engineer. O & M Circle. MSEBP Dhule to the Manager (Wind), MEDA, Pune giving the list of parties 7 parties who had got windmill erected at their sites. The list gives the capacity of the WTGs and their date of commissioning. It is noted here that me letter contains the name of the same parties listed earlier to whom the appellant had sub-leased land and collected total lease rent of Rs.1,19,62,000. 21.2 It is seen that the appellant was issued no. Objection Certificate (NOC) u/s 44 of Electricity Supply Act 1948 by Maharashtra State Electricity Board (MSEB) to install 30 MW Wind Farm Complex (10x600 KW + 1x750 KW) capacity each at Bramanwel district Dhule Maharashtra. The said NOC issued vide letter no. 34878 dt. 18.9.2001 of the Chief Engineer (Commercial) MSEB Bandra , Mumbai. It is seen from the letter that M/s. Gesallchaft Zur Nutzung Erneurerbarer Enerergien URS Mbh (GNEE) had been issued letter of intent (LOI) by Government of Maharashtra (GOM) for development of Wind Operated Electric Generator (WEGs) in Maharashtra State and the GOM had also executed an agreement for the same with GNEE on 29.01.1999. It is mentioned that the appellant signed MOU with GNEE on 29.1.1999. It is mentioned that appellant signed MOU with GNEE on 16.10.2000 for setting up WEG Project at Chatale, Tal- Palghar Dist: Thane in the 200 Acre of land to be provided by the appellant. The appellant vide letter dt. 28.8.2001 applied for 30 MW Project at Ved, Tal-Palghar Dist- Thane and requested to issue NOC. Further vide letter dt. 4.9.2001 the appellant intimated that it will not pursue NOC for 70 MW under the above LOI. It is

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further mentioned that the appellant vide aforesaid letter dt 4.9.2001 and another dt. 6.9.2001 requested to issue the NOC for total 30MW (10X600 KW + 1X750 KW) for site at Bramanwel Taluk- Sakri Dist: Dhule. It is stated that in viw of the aforesaid, the MSEB conveyed consent u/s 44 of Electricity Supply Act 1948 for installationof total 30MW (10X600 KW + 1X750 KW) WEGs with the MSEB grid at Bramanwel Tal-Sakri, Dist- Dhle. Before commissioning concerned Electrical inspector and other statutory authorities, if any etc. The temporary evacuation arrangement if not finalized, was to be finalized by the appellant in consultation with SE Dhule. The cost of temporary evacuation arrangement was to construct the sub transmission lines from project switchyard to MSEB EHV sub-station/HV tap point and install the allied equipment at its cost as per MSEB specification in consultation with SE Dhule. The appellant was to execute the total work of EHV (HV for evacuation of power & connections of WEGs to MSEB grid as per MSEB specification by paying supervision charges as advised by SE O&M Circle, MSEB Dhule. It was stipulated that MSEB in no way would be responsible if the said WEGs were not connected to MSEB grid before expiry of validity of this NOC. The NOC was valid for a period of one year from the date of issue of the NOC (i.e. up to 17.9.2002) before which WEGs should be commissioned & connected to MSEB grid. The powr was to be sold to MSEB till third party was identified. 21.3 Cluase 18 of the terms and conditions of the NOC clarifies that the NOC is issued subject to availability of infrastructure of evacuation/wheeling of power. It is mentioned that the operation of windmill will depend on availability of infrastructure of evacuation/wheeling of power and accordingly, operation will be regulated by SE Dhule. Subsequently, the Chief Engineer Nasik MSEB wrote to the Chief Engineer (Tr-PI) vide his letter on 9794 dt. 19.10.2001 with reference to the NOC issued to the appellant seeking sanction for estimate for erection of 33 KV D/C line (suspension type) from Sakri Sub-station to Bramanwel Wind Farm consisting of 37 km of 33KV D/C line with 2 numbers of 33 KV bays at Sakri Sub- station. As per the letter, the total estimate came to Rs.5.09 crores with 15% supervision charges at Rs.76.35 lakhs. The letter mentions that as per the NOC with the line and bay work was to be carried out by the appellant under supervision of Superintending Engineers (O&M) Dhule by making payment of 15% supervision charges. The letter further mentons that appellant

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had requested vide application dt. 15.10.2001 to allow it to construct only single circuit and with only one bay. The Chief Engineer, therefore, sought approval and sanction so that necessary demand of supervision charges could be made. 21.4 Subsequently, the appellant entered into the Cooperation Agreement with TWEI on 5-11-2001 which is shown to be engaged in the business of assembling, sale, commissioning and maintenance of wind turbine and turn-key wind power plans The agreement refers to the NOC for 30MW issued by Govt. of Maharashtra to the appellant whereby it was allowed right To install and develop on turn-key basis Wind Farm (project) including overhead lines from The project site in Bramanwel lo the MSEB designated point of interconnection The agreement also mentions that for (his purpose The applicant had already been granted land by MIDC at Survey no 176 admeasuring 750 acres at Bramanwel. As per the scope of work, TWEI was to a) Supply, install and commission Wind Turbine Generators (WTG) in accordance with the contract entered into between TWEl and the final customers. b) provide all technical assistance and documentation require lot obtaining NQC from the relevant electricity board and c) provide such other maintenance and operating facilities as may be required for the operation and maintenance of the commission WTG. The scope of work for the appellant includes a) procuring suitable land for The project, b) to carry out civil works including access roads to the project site and internally m The wind farm, and c) to carry out the complete electricity work and the over head line from in wind farm to the ignited point of interconnection with the MSEB grid. clause 3 the agreement, terms of the agreement was to commence on 5-11-2001to clause 14(f) terminate on the dale of installation of 30MW Wind farm at The site or 31 -12-2001 whichever was earlier.

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21.5 As per Transmission line plan approved by Electrical Inspector Nasik, a Total of 13 of different capacities were to be installed and erected to The MSEB grid as seen from the dt.06-05- 2002 of The SE, O&M circle, Dhule erection of windmills of different capacities was completed at the sites sub-leased to seven different parties named earlier. Out of them windmills at the sites of four parties were commissioned on 30-03-2002 Regarding three others. The letter of the SE. Dhule mentions That wind mills had been and were ready for connection to SEB grid on 31-03-2002 but could be connected only on 14-04-2002 as per the NOC the transmission lines connecting these wind mills were to be laid by the appellant has been mentioned earlier that the CE, IMSEB Nasik sought sanction vide letter dt. 19-10-2001 for estimate of Rs509 crores for erection of 37 KrnTs 33 KV D/C line suspension type) from Sakri sub-station To Bramanwel Wind Farm for evacuating power from the wind farm complex. The windmills of the even parties were commissioned by providing connection to MSE8 Grid They could not have been connected to the MSEB Grid without laying the network of transmission lines from These Windmills to the MSEB grid. 21 6 Sub-section (4) of section 80IA as relevant here is extracted below ' (4) This section applies to— {a) art undertaking which,— (b) starts transmission by laying network of new transmission 01 distribution beginning on flic 1st day ot Apr it. 1999 and ending on the deduction under this section to an undertaking tinder sub- clause (b) shall ho allowed only in rotation to the points front faying of such network of new fines for transmission or distribution, (c) undertakes substantial renovation and the existing network o! transmission or distribution fines at any time during the period beginning on the 1st day of April 2004 and ending on the 31st day of March, 2011. Explanation —For the purposes of this sub-clause, plant and machinery in the network o! transmission or distribution lines by

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at Seas! fifty pet cent of the book value of such plant and machinery as on the 1st day of April, 2004. Sub-clauses (a), (b) and (c) of s 80IA(4)(iv} provide for deduction in the cases of three of undertakes ViZ tne one which is engaged m generation or generation and of power second, which start transmission or distribution lines, and the third, undertakes substantial renovation and modernization of the existing network of transmission or distribution lines All these three clauses deal with the Three different categories o' The undertaking These three Types of undertakings referred To the said sub clause (a) (b) and (c) are different and independent of each other Thus while dealing with V , if one duty-'clause, inference need not and cannot be drawn from the other sub-clause CBDT Circular Wo 779 dt 14-09- 1999 is on The Explanatory Notes on provisions relating to Direct Taxes introduced by Finance Act. 1999 Clause 393 extracted below explains The newly introduced provisions u/s 80IA(4)(iv)(b) "39 3 Tax benefits for generation of power or generation distribution of power to be extended to any undertaking laying new transmission and distribution lines for transmission activates 39.3 1 Under the provisions of section a five year tax holiday and B deduction of 25% (30% in the case of companies) of subsequent five years is allowed, to an undertaking engaged in the business of generation, or generation and distribution of power, provided it commences generation of powers between 1.4.93 and 31.3 2003. 39 3 2 To urgent transmission and of power in the country, similar benefits are also extended to undertakings setting tip new transmission or distribution lines on or after 1.4.1999 on profits derived there from, as nor available for generation or generation and distribution of power. The prof/is thereof steal be eligible for deduction if the undertaking sets tip network of new transmission or distribution on or after 1 4 1999 hut before 31 3 2003 under provisions of section 30 IA of the 1 T Act The shall be confined to the profits derived from transmission o: distribution of power the new network 39 3 2 This amendment will come into force with effect from 1st April. 2000 and will accordingly, apply relation to Assessment Yam 2000-01 subsequent years [Section 50}'

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21 .8 The AO has tried to point out the intention of the legislature by referring to the Explanation below sub-section 13 of section 80- IA to infer that intention is to provide benefit lo the generator! of electricity only and not for executing a works contract since the nature of work performed by the appellant is only a civil or works contract On perusal of these provisions. I agree with the plea of the appellant that its case falls in sub-clause [b) and the legislative intent inferred by The AO with reference to the said Explanation is superfluous. just like there is generation or generation and distribution of power there is transmission or distribution of power by laying a network of new transmission or distribution lines too Therefore, there is no basis whatsoever for drawing distinction between The Two or a room for any confusion between the two propositions. 21 9 I therefore, hold that the appellant is entitled to deduction of profit derived from laying of network of new lines for transmission or distribution of power The appendant is seen to have commissioned windmills al locations of four out of seven windmill owners in the current year It is. therefore, entitled this year to deduction of profits derived from laying of transmission lines connecting These (our windmills only These no dispute on the quantum of profit of Rs 12,64,750 showed in the Audit Report in Form No 10CCB. I, therefore, direct the AO to deduction of the said sum u/s 80-IA(4)(iv)[b}.” 16. On appraisal of the above mentioned finding, we noticed that after the examination of relevant document, the CIT(A) was of the view that the transmission line connecting to the wind mills was to be laid by the appellant (contractor) which was the part and parcel of the business, therefore, the assessee was entitled for deduction of profit derived from laying of transmission line connecting 4 wind mills out of 7 wind mills which were working u/s 80IA(b) of the Act. At the time of argument, the Ld. Representative of the assessee has also placed reliance upon the decision of Hon’ble ITAT titled as Kinfra Exports Promotion Industrial Parks Ltd. V. Dy. CIT (2013) 36 taxmann.com 48 (Cochin) Tribunal in

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which the claim u/s 80-IA of the Act was allowed by the CIT(A) in the similar circumstances. The relevant finding is hereby reproduced below: -

“4. We have heard the rival contentions and perused the record. The controversy in the first issue surrounds around the provisions of sec. 80IA(4)(iv) of the Act. Hence, it is necessary to refer to the said provision and for the sake of convenience, we extract the relevant portions of the same below:-

"80IA (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the 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. ..... (4) This section applies to--- (i) .... (ii) ..... (iii) ...... (iv) an undertaking which, - (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2009 (amended later as 2011) (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2009 (amended later as 2011) Provided that the deduction under this section to an undertaking under sub-clause

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(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 2011. 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". 5. The case of the assessee is that it is covered by clause (b) of sec. 80IA(4)(iv), since it is transmitting or distributing electricity by laying a net work of new transmission or distribution lines. There is no dispute with regard to the fact that that the assessee has laid the net work of transmission or distribution lines during the time period specified in the above said section. The assessing officer took the view that the assessee has to cumulatively comply with clauses (a) to (c) of sec. 80IA(4)(iv) in order to become eligible for deduction u/s 80IA of the Act. Since the assessee is not generating power as specified in clause (a), the has taken that view that the assessee becomes ineligible to claim deduction u/s 80IA of the Act, since there is a failure on the part of the assessee to comply with clause (a). Accordingly, the assessing officer rejected the claim made by the assessee. The Ld CIT(A), however, held that the clauses (a) to (c) of sec. 80IA(4)(iv) are mutually exclusive and accordingly he did not agree with the view entertained by the assessing officer. However, the Ld CIT(A), by placing reliance to the proviso under clause (b) of sec. 80IA(4)(iv) of the Act, held that the deduction u/s 80IA has to be restricted to the profits derived from laying of such network of new lines of transmission or distribution. Accordingly, the Ld CIT(A) held that the mere distribution of power does not make the assessee to be eligible to claim deduction u/s 80IA of the Act within the meaning of sec. 80IA(4)(iv) of the Act. Since the assessee has claimed deduction u/s 80IA in respect of profit derived from sale of electricity purchased from Kerala State

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Electricity Board, the Ld CIT(A) also rejected the claim of the assessee. 6. Before us, the Ld D.R supported the view taken by the AO and accordingly contended that the assessee can claim deduction u/s 80IA only if it complies with all the three clauses, viz., Clauses (a), (b) and (c) of sec. 80IA(4)(iv) of the Act. Now the question that arise for our consideration is whether the three clauses enumerated in sub section 4(iv) of section 80-lA are mutually exclusive. In this regard, it is worth referring to the budget speech rendered by the then Finance Minister in Parliament on 27.02.1999, (236 ITR (St.) 25), which reads as under:-

"The financial condition of most of State Electricity Boards is extremely precarious. Many of the State Electricity Boards wish to remedy the situation by unbundling generation, transmission and distribution activities to separate companies. I propose to treat the activities of transmission and distribution of power, set up after 1.4.1999, as eligible activities for fiscal incentives available to infrastructure units. I am sanguine that this proposal will facilitate the restructuring and rehabilitation of the State Electricity Boards." Thus it is seen that the legislative intention was to afford the tax benefit to all undertakings which were engaged in any of the three activities. We also notice that the clauses (a) and (b) of sub. Sec. 4(iv) to sec. 80IA was introduced with effect from 1.4.2000 and clause (c) was introduced only with effect from 1.4.2005, i.e., they were not introduced in one go. Accordingly, in our view, the three clauses, referred above are mutually exclusive to each other. Our view finds support from the decision of the Jaipur Bench of the Hon'ble ITAT in the case of DCIT Vs. Maharaja Shree Umaid Mills Ltd., reported in (2009) 29 SOT 278, wherein the has observed as under:-

"These three types of undertakings referred to in the said sub- clauses (a), (b) and (c) are different and independent of each other. Thus while dealing with one sub-clause, inference need not and cannot be drawn from the other sub- clause."

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Accordingly, we uphold the view taken by Ld CIT(A) that clauses (a), (b) and (c) of sec. 80IA(4)(iv) are mutually exclusive. 7. The next issue relates to the interpretation of clause (b) of sec. 80IA(4)(iv) of the Act. The Ld CIT(A) has taken the view that the said clause provides exemption only to the profit derived from laying a network of new transmission or distribution lines. Since the assessee was deriving income from sale of electricity, the Ld CIT(A) has held that the assessee is not eligible for deduction u/s 80IA in respect of profit derived from distribution of power. For arriving such a conclusion, the Ld CIT(A) has placed reliance on the proviso to clause (b) of sec. 80IA(4)(iv) of the Act. 8. At the cost of repetition, we extract below clause (b) and the proviso there under to sec. 80IA(4)(iv) of the Act. (iv) an undertaking which,----

(a) .......; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2009 (amended later as 2011) 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; A plain reading of clause (b) suggests that an undertaking which starts transmission or distribution by laying a network of new transmission or distribution lines during the time period specified above shall be eligible for deduction u/s 80IA of the Act. However, the confusion starts on reading of the proviso. A plain reading of the proviso suggests that the deduction shall be allowed in relation to the profits derived from laying of such network of new lines for transmission or distribution. 9. For an undertaking, which has started the activity of distribution of power, the expenditure incurred on laying a network of new transmission or distribution lines would be a capital expenditure

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and hence the question of making any profit there from shall not arise. Hence, in order to understand the legislative intention and also the view of the revenue, we may refer to the Circular issued by the Central Board of Direct Taxes (CBDT). The Ld Counsel for the assessee invited our attention to Circular No.779 dated 14.9.1999 issued by the CBDT, which is reported in (1999)(240 ITR (St.) 3). Paragraph 39.3.2 of the said circular explains the amendment brought in by Finance Act, 1999 by inserting sec. 80IA of the Act. For the sake of convenience, we extract below the relevant portions of the Circular, referred above.

"39.3.2 To augment transmission and distribution of power in the country, similar benefits are also extended to undertakings setting up new transmission or distribution lines on or after 1-4-1999 on profits derived there from, as are available for generation or generation and distribution of power. The profits thereof shall be eligible for deduction if the undertaking sets up network of new transmission or distribution lines on or after 1-4-1999 but before 31-3-2003 under the restructured provisions of section 80-IA of the Income-tax Act. The deduction shall be confined to the profits derived from transmission or distribution of power through the new network". As per the Circular, the intention of the proviso is to restrict the deduction u/s 80IA only in respect of profit derived from transmission or distribution of power through the new network of transmission or distribution lines. 10. We shall also try to understand the meaning of the proviso to clause (b), extracted above. Sub-sec. (1) of sec. 80IA provides that the profits and gains derived by an undertaking referred to sub- section (4) are eligible for deduction u/s 80IA of the Act. Clause (iv) of sub-section (4) of sec. 80IA includes an undertaking which starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the time period specified in that clause. Hence profits and gains derived by such kind of undertaking are eligible for deduction under sub-sec. (1) of sec. 80IA of the Act upon satisfying the main condition that the transmission or distribution was carried out by laying a network of new transmission or distribution lines. The proviso, however, states that the deduction shall be allowed only in relation

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to the profits derived from laying of such network of new lines for transmission or distribution. The proviso appears to throttle down the benefit given by the main enactment. 11. At this stage, we feel it pertinent to discuss about the implications of a "proviso" inserted to an enactment. It is a well established rule of construction that a "proviso" cannot enable something to be done which is not to be found in the enacting clause itself, on the ground that otherwise the proviso would be meaningless and senseless (West Derby Union Vs. Metropolitan Life Assurance Society 1897 AC 647). It cannot be used as a lever to force plain words in the enactment to which it is appended, away from their natural meaning (IRC Vs. Johan Daw Staurt Ltd 91950)9 31 TC 274 (HL)). Where the language of the main enactment is clear, a proviso can have no repercussion on its interpretation so as to exclude from it by implication what clearly falls within it terms. (M.S.M. Railway Vs. Bezwada Municipality AIR 1944 PC 71; CIT Vs. Murlidhar Mathurawalla Mahajan Association 91948)(16 ITR 146 (Bom)). 12. In the preceding paragraphs, we have extracted relevant portions from the speech of the Finance Minister and also relevant portions from the circular issued by CBDT explaining the provisions of clause (b) of sec. 80IA(4)(iv) of the Act. On consideration of the same and also the legal effect of the proviso discussed above, in our view, the harmonious construction of clause (b) and the proviso there under, would be that the deduction u/s 80IA of the Act shall be allowed in respect of the profits derived from transmission or distribution of power through the new network. Had the intention of the parliament was to give deduction only to the undertaking which undertakes the work of laying network of new transmission or distribution lines and not to the undertaking which transmits or distributes the power, then clause (b) would have been worded accordingly and there would have been no necessity to insert a proviso for the said purpose. 13. In view of the foregoing discussions, we are not able to agree with the view entertained by the Ld CIT(A) with regard to the proviso to clause (b) of sec. 80IA(4)(iv) of the Act. Accordingly, we set aside the order of ld CIT(A) and hold that the assessee is eligible for deduction u/s 80IA(4)(iv)(b) of the Act in respect of the

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profits derived from distribution of power though the new network.” 17. On seeing the facts and circumstances of the present case which is quite similar to the decision of the Hon’ble ITAT in the case of Kinfra Exports Promotion (supra), we are of the view that the CIT(A) has rightly allowed the claim of the assessee in view of the provision u/s 80-IA of the Act, therefore, the finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. In the result, appeal filed by the revenue is hereby ordered to be dismissed. ITA NO. 547/M/2012:-

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“1- As regards addition of Rs. 3,46,80,000/-: 1.1 The Id. CIA (A) - 20 erred in law and on fads in treating the amount of Rs. 3,46,80,000/-received by the appellant company as "Advance against Transmission charges" as income of the financial year 2005 - 06. 1.2 The Id, CIT (A) - 20 erred in law and on facts in confirming the addition of Rs. 3,46,80,000,'-received as "advance against transmission charges" treating the same as accrued during the financial year 2005-06. 1.3 The Ld CIT (A) - 20 erred in law and on facts in ignoring the fact that "the Transmission charges’ accrued to the appellant company only on successful connectivity of the Wind Turbines installed by the WTG supplier. 1.4 The Id. CH (A) - 20 erred in law and on facts in coming to conclusion that just because tax at source is deducted by the payer from the "advance against transmission charges", such receipt became income of the year of the appellant company in which it is received. 1.5 The Id. CI f (A) - 20 erred in law and on Pacts failed to appreciate that as an accounting practice the entry for the advance transmission charges was reversed on 2nd April 2006 i.e. in the beginning of the following year i.e. 2006- 07 like any other accounting provisions which did not have any bearing on actual working. 2, As regards addition of Rs. 2,83,29,387/- : 2.1 The ld. C1T (A)-20 erred in law and on facts in confirming the addition of Rs. 2,83,29,387/-being the amount received by the appellant company on back to back payment basis from M/s, NEG Micon (India) Private Limited. 2.2 The Id. CIT (A) - 20 erred in law and on facts in treating the amount of Rs, 2,83,29,387/-received as back, to back payment as business receipts and accordingly as the income of the appellant company for assessment year 2006 - 07.”

ISSUE NO. 1:-

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“During the appellate proceedings the appellant has submitted as under: - In regard to ground no. 2 which relates to an addition of Rs.2,83,29,387/- the assessing officer in para no. 7 at page no. 4 of the assessment order has observed that on perusal of the TDS claimed by assessee, it was noticed that Mis. NEG MICON p. Ltd. Had deducted tax at source on sum of Rs.2,83,29,387/- paid to the assessee. The assessee had not shown said sum as business receipts. Accordingly, during the course of assessment proceeding vide noticed u/s 142(1) issued, the assessee was asked to explain and state as to why the said sum should not be treated as business receipts for the year under consideration relevant to A.Y. 2006-07. In response to the query raised assessee company gave reply vide letters dated 25.11.10 and 3.12.2010 relevant extracts of which are reproduced below. As far as sum of Rs.2,83,29,387/- not having been treated as income for A.Y. 2006-07 is concerned our submissions are as under:- That in the course of carrying on business we h ad been carrying out certain works of development by appointing contracting and at the same time Mis. NEG MICON had also to carry on some civil and electrical works since they had sold the turbines on tum key basis such as laying of foundations as well internal civil and electrical constructions. It was for the sake of convenience that we as well as Mis. NEG MICON had availed the services of same contractors. It may further be stated that MIS. NEG MICON had thrust further responsibility upon us to the effect that we will be supervising the work and ensure that work is carried on in a satisfactory manner and up to the mark by these contractors even in the respect of work of the Mis. NEG MICON. Since these bills were just routed through they were neither accounted as expenses nor as income in our books. We may clarify that whatever bill we were receiving for MIS. NEG MICON works from the contractors. Since the contractors are issuing bills in our name, we in tum had been issuing bills to MIS. NEG MICON for the same amount. In the year under consideration we have received total labour bills of Rs.2,83,29,387/- from 2 contractors for the works of MIS. NEG MICON and in tum had issued bills of similar amount in the name

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of MIS. NEG MICON as the amount was only to be routed through us by MIS. NEG MICON as the amount was only to be routed through us by MIS. NEG MICON and as the persons to whom payments were made by us were not our contractors in respect of these bills no tax was deductible at source. We further submit that since no part of this amount had effectively come to us the question of said amount forming a part of our income also does not arise. It may be placed on record that this additional responsibility of supervising the work and making payment on behalf of MIS. NEG MICON was taken over by us totally out of business expediency because by that we were able to have control over the quality as well completion of work within reasonable period since the very earning of incme by as starts only on commissioning of the powr generation and its transmission to MESB though ultimately even in this process we have earned a generation and its transmission to MESB though ultimately even in this process we have earned a sum of Rs.73.22,4131 which sum was retained by us out of the amount payable to the contractors on behalf of MIS. NEG MICON as a sort of security and since by the end of the year the generation were commissioned without any problem even this sum is transferred by us to profit & loss ale. Under the head development charges in respect of which no deduction u/s 80IA of the I.T. Act, 1961 has been claimed.” The assessee vide its letter dated 3.12.2010 has submitted as under: - As regards query raised by your honours in sub para (f) of Sr. No.(1) of the questionnaire asking us to give schedule of all the payments that have been received from MIS. NEG MICON and how they have been accounted for we are enclosing herewith a statement which infact is annexure to form 16A for certificates of TDS which covers all the payments, excluding Rs.5,07,93,756/- for supply of materials on back to back basis. As regards your query in sub clause (f) of main question (i) of the annexure we submit that during the year we have received I receivable a total sum of Rs.17,90,03,143I- from MIS. NEG MICON out of which a sum of Rs,2,83,29,387/- was for back to back payments to their labour contractors a sum of

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Rs.5,07,93,756/- was receivable towards back to back payment to their material supplier and the balance sum of Rs.9,98,80,000/- was receivable towards trans back to back payments to their material supporter and the balance sum of Rs.9,98,80,000/- was receivable towards transmission charges out of which again a sum of Rs.3,46,80,000/- was treated as advance at the year end since wind turbines in respect thereof could not be commissioned even till 31.03.2006 and were commissioned in the next year leaving a sum of Rs.6,52,00,000/- being the receipts for transmission charges which sum has been credited n our profit and loss account.” 4.2. The AO however, in para 7.3 at page 5 & 6 of the assessment order has rejected assessee’s contention holding as under: “That though during the course assessment proceedings the assessee submitted bitts issued by parties to the assessee and corresponding bills raised by the assessee to MIS. NEG MICON From a perusal of the bills it is seen that parties have raised invoices in the name of the assessee and the assessee h payment made to the assessee itself, it is seen that MIS. NEG MICON has deducted TDS on the payment made to the assessee on the bills raised by it. However, the assessee has not deducted any TDS on the payments made to the4 sub-contractors. Since the assessee has not claimed these as expenses, the payments made to subcontractors do not come under the purview of section 40(a)(ia) of the Act. However, they are receipts of the assessee from MIS. NEG MICON as TDS has been deducted on such bills and claimed by the assessee. Hence, Rs.2,83,29,387/- is added to the income of the assessee. 4.3 In the course of appeal proceedings assessee’s AR has submitted as under: “In this regard and in continuation to what has been stated hereinabove my only submission, in support of the contention that the said sum is not required to be added in the case of appellant company as an alleged unrecorded receipt, because once the Ld. AO herself has accepted the fact that this sum which is simply routed through assessee has infact been passed on to other for carrying out work for MIS. NEG MICON and the sald payment has not been claimed as a deduction in the books of accounts, the question of amount received even arithmetically which is meant

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for giving to others legally and as per principles of accountancy cannot be treated as unrecorded receipt, as in the process. Assessee has correctly neither shown the receipt nor the payment.” 23. The Ld. CIT(A), however, confirmed the addition by holding that there was no reason for MSEB to route the payment payable to MIS. NEG MICON through the assessee. The Ld. CIT(A) also noticed that the TDS has been deducted u/s 194C of the Act on the impugned payment and TDS certificate has been issued in the name of the assessee. The Ld. CIT(A) further noticed the assessee has not produced any MOU to support the claim that payment was transferred on back to back basis to MIS. NEG MICON. He also observed as to how the assessee would have carried out this work on behalf of MIS. NEG MICON without deriving any commercial benefit. The Ld. CIT(A) also noticed that the assessee has not deducted at source on the payment made to MIS. NEG MICON. Accordingly, the Ld. CIT(A) did not agree with the contentions of the assessee and confirmed the disallowance made by the AO. 24. We have heard the parties on this issue and perused the record. We noticed that MSEB has deducted TDS on the amount of Rs.2,83,29,387/- which is claimed to have been received by assessee on behalf of MIS. NEG MICON. As rightly pointed out by CIT(A) the assessee did not substantiate its submissions with any correspondence/agreement entered between the assessee and MIS. NEG MICON. It is also not clear from the orders as to whether the TDS amount deducted on the above said payment has been claimed by assessee or it has been claimed by MIS. NEG MICON. Claim for TDS amount deducted on the above said payment, to some extent, will throw light on this issue. In the absence of any evidence supporting the

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claim of the assessee, it will be difficult for the tax authorities to accept the contention of the assessee. 25. At the same time, the assessee cannot be taxed on receipt to which it is not entitled to. Hence, we are of the view, the assessee may be provided with one more opportunity to substantiate its submissions with any credibility evidence. Accordingly, we set aside the order passed by the CIT(A) on this issue and restore the same to the file of the Assessing Officer for examining it afresh. ISSUE NO. 3:-

ITA. NO. 1385/M/2012:-

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1.3 The Id. CIT (A) - 20 erred in law and on facts in not considering the fact that the appellant company follows '"Mercantile system of Accounting" and as such treated the amount of Rs.3,46,80,000, - as income of the earlier year i.e. year ended 31-03-2006. 2. As regards addition /disallowance of Rs. 5,90,414/- 2.1 The Id. CIT (A) - 20 erred in law and on facts in disallowing the amount of Rs.5,90,414/- Incurred by the appellant company towards site management development expense during the financial year 2006 - 07. 2.2 The Id. CIT (A) - 20 erred in law and on facts in con firming the addition of Rs. 5,90,414/-out of site development and management expenses incurred by the appellant company. 3. As regards addition of Rs.4,46,000 to lease Rent income 3.1 The Id, CIT (A) - 20 erred in law and on facts in taking l/25th of Lease Rent received during the year instead of taking pro-rata of l/25th on time basis depending upon the months remaining in the year of receipt and adding Rs. 4,56,000/- lo the returned income for the year, 4. The appellant company therefore prays that the additions /disallowances made by the Assessing Officer to its returned income may please be deleted and relief as per the grounds of appeal may please be allowed. 5. The appellant company craves leave to add. amend, alter, vary and or delete any of the grounds of appeal as may he advised from time to time.” ISSUE NO. 1:-

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ISSUE NO. 2:-

“6.7 I have perused the assessment order, remand report as well as counter comments on remand report of the appellant. Since the disallowance were made without bringing any adverse material on record or by carrying out adequate enquiries the matter was remanded to the AO to conduct enquiry u/s 250(4) on them. 6.8. The appellant in addition to what it had provided during assessment proceedings had offered to produce whatever further evidences required to substantiate its claim which was not called by the AO. Thus, in spite of having the mandate given by the CIT(A) vide his letter dated 18.11.2010 to examine the records and conduct further enquiry the AO submitted a remand report which is no different from he position as it existed at the assessment stage. The additions and disallowances were made at assessment stage in a summary manner without confronting the appellant. At remand stage to the position remained unchanged. 6.9. On the other hand, the appellant had furnished details of expenditure incurred which prima-facie discharges its onus. However, it is observed that some amounts have been debited under the head miscellaneous expenses without further details except the name of the person to whom payment is made. This is not contradicted by the AR of the appellant and, therefore, even if the same is vouched it cannot be said that they are amenable to cross-verification. In these circumstances, it would be fair and reasonable to disallow 15% of Rs.39,36,096/- amounting to Rs.5,90,414/- which will take care of those disallowance which may not be fully substantiated. Accordingly, disallowance to the extent of Rs.5,90,414/- is confirmed and the appellant gets

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relief of Rs.33,45,682/-. This ground of appeal is partly allowed.” 28. On appraisal of the above said finding, we noticed that the said payment was not properly mentioned and in details the name of persons has already been mentioned. The said payment was not verifiable, therefore, the CIT(A) disallowed the 15% of total expenses to the tune of Rs.39,36,096/- which seems justifiable specifically in the circumstances, when no evidence of any kind was produced before us in support of his claim, therefore in the said circumstances, we confirmed the finding of the CIT(A) on this issue.

ISSUE NO. 3:-

“7 Ground of appeal no. 4 relates to an addition of Rs.2,68,75,200/- as advance deposit of lease rent. 7.1 In grounds of appeal it was stated by the appellant by the AO was erred in law and on facts in adding the entire amount received by the appellant company as advance lease rent received during the F.Y. 2006-07. 7.2. I was further challenged that the AO erred in law and on facts in not appreciating that the lease rent of Rs.2,75,20,000/- is received in advance by the appellant company from various sub- lessees for the entire period of 25 years of the sub-lease as a deposit and out of adjusted in each year. 7.3. It was also stated that the AO err3ed in law and on facts in not appreciating the fact that the appellant is following mercantile system of accounting where all income and expenses are accounted on accrual basis and not on cash receipt basis whereby the advance

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lease rent of 2,75,20,000/- is accrued over the entire period of 25 years of the sub-lease. 7.4. The AO has made this addition at para 8.2 of page 11 of assessment order from which it is evident that as per TDS reconciliation statement assessee had received advance lease rent of Rs.2,75,20,000/- out of which it had offered a sum of Rs.6,44,800/- as its come and since according to the AO the appellant had not provided any basis or reason for not showing the balance amount except stating that the same is offered on pro-rata basis over a period of 25 years without giving any documentary evidence the balance sum of Rs.2,68,75,200/- was added. 7.5. In course of appellate proceedings the appellant filed a paper book which was forwarded to the AO where it was explained that one of the business activity of the assessee is setting up of wind power project for which it had taken land on long term lease from MIDC which was developed and divided into plots and given to on sub-lease to various wind mill owners through wind mill turbine suppliers for a period of 25 years. From these owners, owners the above amount was received for the entire Period of 25 years as deposit/advice to by adjusted over-a period of 25 years on pro-rata basis towards annual lease. The lease agreements were also filed. Since the amount received pertain to a period ot-25 years even-though the tax was deducted at source as per provisions of the Law at the time of receipt itself the same was to be offered for tax in a period of .26 years pro rata-basis and accordingly pro rata credit for TDS also has to allow in the year in is offered. It was for this reason that the assessee company has offered the income of Rs.6,44,800/-/- pertaining to year under appeal though inadvertently credit for the entire IDS was claimed in the year itself. 7 6. In the remand report the Assessing Office^ reiterated the fact that since credit for entire TDS has been claimed "in time current year the corresponding deposit/advance in entirety has also to be-taxed. Tin the current year. The appellant drew attention to the order u/s 263 "dated 15.10.2009 passed by CIT for A.Y.2006-07 where this aspect was examined at par 6 page 9 & 10 of order and the appellant's contention that since the amount since the amount pertained to 25 years the income on the same has be offered on prorate basis was upheld. In the current year a sum of Rs.2,68,75,200/-out of deposit/advance received, "has been

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offered" and the balance sum at shown in the balance-sheet as the deposit/advance against lease is to be adjusted in subsequent year. lt was also highlighted that for A. Y. 2006-07 where a similar issue has arisen the Assessing Officer has accepted the plea of the assessee and the only proportionate" sub-lease amount of total advance/lease received was assessable in respective year and credit for TDS was to be given pertaining to the income offered " 7.7 In this regard when confronted with the- fact that though the appellant had received Rs.2,75,20,000/- this year and so 1/25th amount showed come to Rs.11,00,8000 then why only Rs.6,44,800/- was offered it was submitted that the prorate was worked on proportionate time basis depending upon the months remaining in the year of receipt. 7.8. I have examined the assessment order remand report various submissions made by the appellant. This is a recurring issue which was subject matter of addition of entire amount of lease advanced/deposit in A.Y.2002-03 and A.Y.2006—7. No doubt the appellant received advance amount of Rs.2,75,20,000/- adjustable against annual lease over the entire lease period of 25 years. The appellant however claimed credit of entire TDS relatable to this amount in the current year. The AO therefore, invoked the provisions of Section 199 that unless the income from which the tax has been deducted has been offered in the return of income, no credit for such tax deducted or collected can be given. 7.8.1. The Assessing Officer, therefore has ought to make out the case that entire lease deposit is chargeable to year The appellant on the other head contends that based and the method of accounting followed and accepted by the Assessing Officer in the A.Y. 2006-07 and also by the Hon’ble CIT-9 Mumbai vide his order u/s.263 for assessment year only 1/25th of the amount should be assessed every year. 7.8.2 There is merit in the appellant's contention. The Hon'ble CIT-9 Mumbai passed an order u/s.263 for A.Y. 2006-07 dated 15.10.2009 wherein one of the issue addressed was this. The appellant claimed before the Hon'ble CIT-9 that it had land various parties from which a sum of Rs.9.60 crores was received as deposit which was to be appropriated toward rent every year in equal proportion for a term of 25 years. Thus, according to the appellant only a sum of Rs.38,40,600/- 1/25th was t axable as income in the A.Y. 2006—7. It offered to withdraw the excess claim of TDS of Rs.27,25,203/- proportionate to the balance e rent of

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Rs.9,21,60,000/-. The Hon’ble CIT-9 accepted the claim and directed the AO to withdraw the excess claim of TDS in terms of provisions of Section 199 of the I.T. Act, 1961. The AO thereafter, passed the order on 27.12.2010 giving effect to the order u/s 263 of the CIT wherein no addition was made at the balance rent of Rs.9,21,60,000/- 7.8.3 The same principle line was adopted by the CIT -20 while deciding the appeal for A.Y.2002-03 dated 20.03.2011 wherein on receipt of advance deposit of Rs.1,19,62,000/- only Rs.4,78,480/- being 1/25th of the above sum was made chargeable to tax in that year and the AO was directed to grant credit for TDS proportionately. 7.8.4 Thus two authorities of coordinate rant have taken a identical stand and hence following the principle of judicial consistency, it would be fair and proper if 1/25th of Rs.2,75,20,000/- which comes to Rs.11,00,800/- is brought to tax in this year ad credit of TDS granted proportionately. 7.8.5 The appellant contention that it has taken Rs.6,44,800/- on the proportionate time basis and thus has offered 1/25th of Rs.1,05,60,000/- from Bharti Shipyard Ltd, Mumbai as it was received in the earlier part of year while the balance received from other parties was offered at lesser amount as it was received on later part of the is rejected. The appellant has to offer lease advance/deposit form all the 7 parties this year on a uniform basis as per the agreement. 7.8.6 To sum up, the advance deposit to be brought to tax this year would be Rs.11,00,800/- and not 6,44,800/-. The AO will grant TDS credit proportionately to Rs.11,00,800/-. The appellant gets relief of the balance sum of Rs.2,64,19,200/-. This ground of appeal is partly allowed.” 30. On appraisal of the above said finding, we noticed that the matter of controversy has been adjudicated by the CIT(A) on the basis of the decision by the CIT(A)-20 for the A.Y. 2002-03 the total lease rent was to the tune of Rs.2,75,20,000/- and 1/5th comes to the tune of Rs.11,00,800/- which was liable to be taxed in the further 25 years. Since the finding of the CIT(A) in the earlier year nowhere changed or verified and we also finding

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it justifiable to assess the 1/25th rent in the next 25 years, we are of the view that the finding of the CIT(A) is quite justifiable which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the revenue against the assessee.