M/s.Lap Finance & Consultancy Pvt. Ltd., Pune v. Addl. CIT, Range-11,, Pune

ITA 1292/PUN/2010 | 2006-2007
Pronouncement Date: 28-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 129224514 RSA 2010
Assessee PAN AAACL3209M
Bench Pune
Appeal Number ITA 1292/PUN/2010
Duration Of Justice 1 year(s) 4 month(s) 17 day(s)
Appellant M/s.Lap Finance & Consultancy Pvt. Ltd., Pune
Respondent Addl. CIT, Range-11,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-02-2012
Assessment Year 2006-2007
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I C SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO.1292/PN/10 (ASSESSMENT YEAR: 2006-07) LAP FINANCE AND CONSULTANCY P LTD. .. APPELLA NT OFFICE NO. 9 & 10 5 TH FLOOR AKSHAY COMPLEX ITI ROAD AUNDH PUNE PAN AAACL3209M VS. ADDL. COMMISSIONER OF INCOME-TAX .. RESPONDENT RANGE 11 PUNE APPELLANT BY : SHRI SUNIL GANOO RESPONDENT BY : SHRI S K AMBASTHA DATE OF HEARING : 13.01.20 12 DATE OF PRONOUNCEMENT : 28.02. 2012 ORDER PER G.S. PANNU A.M .: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I PUNE DATED 06.0 1.2010 WHICH IN TURN HAS ARISEN FROM ORDER DATED 22.12.2008 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (IN SH ORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS FOLLOWS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE DEDUCTION OF RS 96 63 009.00 AS CLAIMED BY THE APPELLANT U/S 80IA O F THE I.T. ACT 1961 MAY PLEASE BE ALLOWED AND THE ORDER OF THE LD CIT(A) DE NYING THE SAID EXEMPTION BE VACATED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW IT MAY PLEASE BE HELD THAT AN AMOUNT OF RS 56 87 500.00 RECEIVED BY THE A PPELLANT DURING THE YEAR ON TRANSFER OF SALES TAX INCENTIVE CONSTITUTES THE INCOME DERIVED FROM THE BUSINESS OF GENERATION OF ELECTRICITY FROM THE WIND MILL OWNED AND OPERATED BY THE APPELLANT AND CONSEQUENTLY THE SAME QUALIFIE S FOR DEDUCTION U/S 80IA OF THE I.T. ACT 1961. 3. THE LD AO HAVING HELD THAT THE SALES TAX INCENTI VE RECEIVED BY THE APPELLANT BEING A TRADING RECEIPT THE LD CIT(A) OUGHT TO HAV E HELD THAT AN AMOUNT OF RS 56 87 500.00 RECEIVED BY THE APPELLANT ON TRANSFER OF SALES TAX INCENTIVE QUALIFIES FOR DEDUCTION U/S 80IA OF THE I.T. ACT 1 961. THE SAID DEDUCTION MAY PLEASE BE ALLOWED TO THE APPELLANT AS CLAIMED IN TH E RETURN OF INCOME. 4. WITHOUT PREJUDICE TO GROUNDS OF APPEAL NOS 1 TO 3 ABOVE AND BY WAY OF AN ALTERNATE SUBMISSION IT IS SUBMITTED THAT IT MAY PLEASE BE HELD THAT THE SALES TAX INCENTIVE RECEIVED BY TH E APPELLANT UNDER POLICY ON WIND POWER GENERATION ISSUED BY GOV T. OF MAHARAHSTRA ON 12.3.1998 IS CAPITAL SUBSIDY GRANTED BY GOVT. OF MAHARASHTRA AS AN INCENTIVE FOR INSTALLATION AND OP ERATION OF WIND MILLS FOR POWER AND THEREFORE THE SAME IS EXEMPT FR OM INCOME TAX. 5. IT MAY PLEASE BE HELD THAT THE BANK INTEREST OF RS 1 93 915.00 RECEIVED BY THE APPELLANT FROM SARASWAT CO-OP BANK ON FIXED DEPOSITS KEPT FOR AVAILING THE LOAN FOR INSTALLATIO N OF WIND MILL QUALIFIES FOR DEDUCTION U/S 80IA OF THE I.T. ACT 1 961 AND THE DEDUCTION AS CLAIMED BY THE APPELLANT MAY LEASE BE ALLOWED. 6. THE INTERPRETATION OF PROVISIONS OF SECTION 80IA (5) OF THE I.T. ACT 1961 AS MADE BY THE LD CIT(A) BEING LEGALLY UNSUSTA INABLE ARBITRARY AND DEVOID OF MERITS THE SAME MAY PLEASE BE VACATED AND THE DEDUCTION U/S 80IA OF HE I.T. ACT 1961 AS C LAIMED BY THE APPELLANT MAY PLEASE BE ALLOWED. 7. THE CONCLUSION DRAWN BY THE LD AO AND AS CONFIRM ED BY THE LD CIT(A) THAT TILL AY 2006-07 THE APPELLANT ASSESSEE DID NOT ACTUALLY EARN ANY PROFITS FROM THE BUSINESS OF WIND POWER GE NERATION ELIGIBLE FOR DEDUCTION U/S 80IA(4) OF THE I.T. ACT 1961 BEING PATENTLY ILLEGAL ARBITRARY UNSUSTAINABLE AND DEVO ID OF MERITS THE SAME MAY PLEASE BE VACATED AND THE DEDUCTION U/S 80 IA AS CLAIMED BY THE APPELLANT ASSESSEE MAY PLEASE BE GRA NTED. 8. THE DISALLOWANCE OF RS 2 18 712.00 AS MADE BY TH E LD AO AND S SUSTAINED BY THE LD CIT(A) OUT OF FOREIGN TRAVEL EX PENSES BEING ARBITRARY UNREASONABLE UNJUSTIFIED AND DEVOID OF MERITS THE SAME MAY PLEASE BE DELETED. 3. THE ASSESSEE IS A COMPANY FORMED WITH THE OBJECT IVE OF DEALING IN FINANCE AND INVESTMENT. BESIDES IT WAS ALSO ENGAGED IN POWER GENERATION THROUGH WINDMILLS PROFIT DERIVED FROM WHICH WAS CLAIMED AS DEDUCTION UNDER SECTION 80IA(4) OF THE A CT. DURING THE YEAR UNDER CONSIDERATION DEDUCTION TO THE EXTENT O F RS 96 63 009/- WAS CLAIMED UNDER SECTION 80IA OF THE ACT. FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA OF THE ACT WHICH RESULTED IN AN ADDITION OF RS 96 63 009/-. IN APPEAL THE CO MMISSIONER OF INCOME-TAX (APPEALS) CONFIRMED THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER AGAINST WHICH ASSESSEE IS IN FURT HER APPEAL BEFORE US AND HAS CHALLENGED THE ABOVE FINDINGS IN GROUNDS NOS. (1) (6) & (7) (SUPRA). 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN GROUND NOS (1) (6) & (7 ) STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE B Y THE DECISION OF THIS BENCH IN THE CASE OF SERUM INTERNATIONAL LT D. PUNE V. ADDL. CIT RNGE-6 PUNE IN ITA NOS 290 TO 292/PN/10 BY ORD ER DATED 28.9.2011. THE LEARNED DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE DID NOT DISPUTE THIS FACTUAL MATRIX. T HE RELEVANT PORTION OF THE ORDER IS REPRODUCED BELOW:- 13. HAVING BEEN CONSIDERED THE ABOVE SUBMISSIONS WE FIND THAT THE ISSUE RAISED IN GROUND NO. 1 AS TO WHAT WOULD BE THE INITIAL A.Y FOR THE PURPOSES OF SECTION 80IA(5) OF THE ACT HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONAWALLA STUD AND AGR O FARM PVT. LTD. VS. ACIT (SUPRA). IN THAT CASE AFTER DISCUSSING THE ISSUE I N DETAIL THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE INITIAL A.Y FOR THE PURPOSE O F CLAIMING DEDUCTION U/S. 80IA WAS THE FIRST YEAR IN WHICH THE ASSESSEE CLAIMED THE DEDUCT ION U/S. 80IA (1) AFTER EXERCISING HIS OPTION AS PER THE PROVISIONS OF 80IA (2) OF THE ACT. IT WAS HELD THAT THE LD CIT(A) HAS ERRED IN HOLDING THAT THE INITIAL A.Y FOR THE P URPOSES OF SECTION 80IA(2) R.W.S. 80IA (5) WAS THE YEAR IN WHICH THE ASSESSEE STARTED GENE RATING ELECTRICITY FROM THE WIND MILL ACTIVITY. WE ALSO FIND THAT THE ISSUE RAISED IN G ROUND NO. 2 REGARDING THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S. 80IA UNDIMINI SHED BY UNABSORBED LOSSES AND DEPRECIATION ALSO SET OFF IN EARLIER YEARS AGAINST THE OTHER INCOME IS FULLY COVERED BY THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA) HOLDING THAT AS PER SUB-SECTION (5) OF SECTION 80IA PROFITS ARE TO BE COMPUTED AS IF SUCH ELIGIBLE BUSI NESS IS THE ONLY SOURCE OF INCOME OF THE ASSESSEE. WHEN THE ASSESSEE EXERCISES THE OPTI ON ONLY THE LOSSES OF THE YEARS BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT F ORWARD AND NOT THE LOSSES OF THE EARLIER YEARS WHICH HAVE BEEN ALREADY SET OFF AGAIN ST THE INCOME OF THE ASSESSEE. THE HONBLE MADRAS HIGH COURT HAS BEEN FURTHER PLEA SED TO HOLD THAT REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAD ALREADY BEEN SET OFF AGAINST THE OTHER INCOME OF ASSESSEE AND SET OFF A GAINST THE CORRECT INCOME OF THE ELIGIBLE BUSINESS. FICTION CREATED BY SUB-SECTION (5) OF SECTION 80IA DOES NOT CONTEMPLATE SUCH NOTIONAL SET OFF HELD THE HONBLE HIGH COURT. THE HONBLE MADRAS HIGH COURT IN THAT DECISION HAS ALSO REFERRED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (SUPRA) AND T HE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMAN SHARES & FINANCE ( P) LTD. (SUPRA). THERE IS NO DISPUTE THAT EVEN A DECISION OF NON-JURISDICTIONAL HIGH COURT IS A BINDING PRECEDENT FOR THE TRIBUNAL UNTIL A CONTRARY DECISION IS GIVEN B Y ANY OTHER COMPETENT HIGH COURT. IN THIS REGARD WE FIND STRENGTH FROM THE RECENT DECIS ION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL E XCISE VS. VALSON DYEING BLEACHING AND PRINTING WORKS (SUPRA) WHEREIN THE HO NBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD IN A CASE OF EXCISE MATTER THA T TRIBUNAL IS BOUND BY THE DECISION OF HIGH COURT EVEN OF A DIFFERENT STATE SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COURT. THE HONBLE BOMBAY HIGH COURT HAS BEEN PLEASED TO HOLD FURTHER THAT THE TRIBUNAL HAD NO OPTION BUT TO FOLL OW THE JUDGMENT OF THE MADRAS HIGH COURT. AN AUTHORITY LIKE AN INCOME TAX TRIBUNAL AC TING ANYWHERE IN THE COUNTRY HAS TO RESPECT THE LAW LAID DOWN BY THE HIGH COURT THOUGH OF A DIFFERENT STATE SO LONG AS THERE IS NO CONTRARY DECISION OF ANY OTHER HIGH COU RT ON THAT QUESTION. WE THUS RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. VAKSON D YEING BLEACHING AND PRINTING WORKS (SUPRA) HOLD THAT THE TRIBUNAL IS BOUND BY T HE DECISION OF THE HONBLE MADRAS HIGH COURT ON AN IDENTICAL ISSUE IN THE CASE OF VE LAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT (SUPRA). WE THUS RESPECTFULLY FOLLOWI NG THE DECISION TAKEN BY THE HONBLE MADRAS HIGH COURT IN THAT CASE ON AN IDENTI CAL ISSUE UNDER ALMOST SIMILAR FACTS HOLD THAT WHEN THE ASSESSEE EXERCISING THE OPTION ONLY THE LOSSES OF THE YEAR BEGINNING FROM THE INITIAL A.Y. ARE TO BE BROUGHT FORWARD AND NOT THE LOSSES OF EARLIER YEAR WHICH HAVE BEEN ALREADY SET OFF AGAINST THE OT HER INCOME OF THE ASSESSEE. THE REVENUE CANNOT NOTIONALLY BRING FORWARD ANY LOSS OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST ANY OTHER INCOME OF THE ASSESS EE AND SET OFF THE SAME AGAINST THE CURRENT INCOME OF THE ELIGIBLE BUSINESS. WE TH US SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE A.O TO ALLOW THE CLAIMED DEDUCTION U/S. 80IA WITHOUT BRINGING THE NOTIONALLY BROUGHT FORWARD ANY LOSS OR DEPRECIATION OF EARLIER YEARS WHICH HAS ALREADY BEEN SET OFF AGAINST OTHER INCOME OF TH E ASSESSEE. THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PRIMA PAPER EN GINEERING P.LTD. VS. ITO (SUPRA) CITED BY THE LD. DR IS ALSO NOT HELPFUL TO THE REVE NUE SINCE FIRSTLY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHAS WAMY SPINNING MILLS (P) LTD. VS. ACIT (SUPRA) ON THE ISSUE WAS NOT CITED BEFORE THE BENCH AND SECONDLY THE LD. AR FAIRLY AGREED THAT THE ISSUE RAISED WAS COVERED AGA INST THE ASSESSEE BY THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. GOLDMINE S HARES & FINANCE (P) LTD. (SUPRA) FOLLOWED BY THE AUTHORITIES BELOW. THE LD. AR THER EIN THUS CONTENDED THAT THOUGH THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE IN VIEW O F THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOLDMINE SHARES & FINANCIAL (P) LTD. BUT IT SHOULD NOT BE CONSTRUED AS ACQUIESCENCE FROM THE SIDE OF T HE ASSESSEE AS THE LEGAL POSITION ON THE SUBJECT IS YET NOT SETTLED. THE GROUND NO. 2 IS THUS DECIDED IN FAVOUR OF THE ASSESSE. ACCORDINGLY FOLLOWING THE PARITY OF REASONING LAI D DOWN IN THE PRECEDENT WE SET ASIDE THE ORDER OF THE COMMISSION ER OF INCOME- TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO A LLOW THE CLAIM OF DEDUCTION OF THE ASSESSEE. ACCORDINGLY THE ISSUE I NVOLVED IN GROUND NOS. (1) (6) & (7) IS ALLOWED. 5. THE NEXT ISSUE INVOLVED IN GROUND NOS. (2) (3) & (4) RELATES TO DEDUCTION UNDER SECTION 80IA OF THE ACT OF AN AM OUNT OF RS 56 87 500/- RECEIVED BY THE ASSESSEE DURING THE YEA R UNDER APPEAL ON TRANSFER OF SALES TAX INCENTIVE. AFTER CONSIDERI NG THE SUBMISSIONS OF RIVAL SIDES WE FIND THAT IDENTICAL ISSUE WAS A SUBJECT MATTER OF CONSIDERATION BEFORE OUR CO-ORDINATE BENCH IN THE C ASE OF RASIKLAL M DHARIWAL (HUF) PUNE V. DCIT CIR. 2 PUNE IN ITA NO S. 575/PN/07 AND 150/PN/08 AND VIDE ITS ORDER DATED 31.3.2011 T HE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RELEVAN T PORTION OF THE ORDER OF THE TRIBUNAL IN THE AFORESAID DECISION IS EXTRACTED BELOW: 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. IN TERMS OF THE POLICY ON WIND POWER GENERATION FORMULATED BY THE GOVERNMENT OF MAHARASHTRA VIDE RESOLUTIONS DATED 12.3.1998 (SUPRA) AND 1.10.1999 (SUPRA) THE ASSESSEE AVAILED OF SALES-TAX BENEFIT OF A SUM OF RS 63 74 291/-. THE A SSESSEE CLAIMED THAT SUCH AMOUNT IS A CAPITAL RECEIPT NOT SUBJECTED TO TAXATION. ON THE CONTRARY AS PER THE REVENUE SUCH AMOUNT IS A REVENUE RECEIPT CHARGEABLE TO TAX. 9. BEFORE WE TOUCH UPON THE DIFFERING STANDS OF THE ASSESSEE AND REVENUE ON THE ISSUE IT WOULD BE APPROPRIATE TO CULL OUT THE FACTS HAVING A BEARING ON THE ISSUE. THE APPELLANT IS AN HUF WHICH IS INTER ALIA ENGAG ED IN A RANGE OF BUSINESS ACTIVITIES VIZ. MANUFACTURE AND SALE OF MANICKCHAND ZARDA PA N MASALA CONSTRUCTION ACTIVITIES MANUFACTURING OF TILES ETC. INCLUDING GENERATION AN D SALE OF POWER. IN THE COURSE OF ITS ACTIVITIES THE ASSESSEE COMPANY SET UP WIND MILLS IN THE STATE OF MAHARASHTRA FOR GENERATION OF WIND POWER. THE GOVERNMENT OF MAHARAS HTRA IN TERMS OF ITS POLICY ON WIND POWER GENERATION GRANTED VARIOUS BENEFITS INC LUDING SALES-TAX BENEFIT. IN TERMS OF THE PROCEDURE FOR AVAILING SALES-TAX BENEFITS ON NON-CONVENTIONAL ENERGY GENERATING PROJECTS SUCH AS WIND MILLS ASSESSEE WAS ALSO ENT ITLED TO THE FACILITY OF TRANSFERRING THE SALES-TAX BENEFIT TO THE THIRD PARTY. THE ASSES SEE AFTER OBTAINING THE REQUISITE PERMISSION FROM THE STATE GOVERNMENT TRANSFERRED TH E SALES-TAX BENEFIT ENTITLEMENTS TO A THIRD PARTY AND THE CONSIDERATION THEREOF AMOU NTING TO RS 63 74 291/- WAS CLAIMED AS A CAPITAL RECEIPT. AT THIS STAGE IT WOU LD BE APPROPRIATE TO BRIEFLY TOUCH UPON THE RESOLUTION OF THE STATE GOVERNMENT DATED 12.3.1 998 (SUPRA) THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: PREAMBLE THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERA TION OF ENERGY THROUGH NON- CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY IN THE STATE. IT WAS FOUND AFTER A SURVEY THAT THERE IS AN IMMENSE POTENTIAL FOR GENERATION OF WIND POWER IN THE STATE. SURVEYS CONDUCTED BY MEDA IN ASSOCIATION WITH MNES NEW DELHI AND IITM BANGALORE INDICATE THAT THE POTENTI AL IS ABOUT 300 TO 400 MW. EIGHT DIFFERENT SITES HAVE BEEN SELECTED FOR THIS PURPOSE AND FURTHER SURVEY IS BEING CARRIED OUT. THE STATE GOVERNMENT HAD ENUNCIATED ITS POLICY ON G ENERATION THROUGH NON- CONVENTIONAL SOURCES IN JANUARY 1996. THIS POLICY HOWEVER COULD NOT ATTRACT THE PROMOTERS. DURING THE INTERVENING PERIOD THE GOVER NMENT OF INDIA HAD ISSUED CERTAIN GUIDELINES REGARDING WIND ENERGY GENERATION. THESE GUIDELINES FROM GOVERNMENT OF INDIA WIND POWER GENERATION POLICIES OF OTHER STAT E GOVERNMENTS AND THE PROBLEMS BEING FACED BY PROMOTERS OF WIND ENERGY GENERATION WERE UNDER ACTIVE CONSIDERATION OF THE STATE GOVERNMENT. RESOLUTION : IN PARTIAL MODIFICATION OF ITS EXISTING POLICY TO P ROMOTE WIND ENERGY GENERATION THE STATE GOVERNMENT HAS TAKEN FOLLOWING DECISIONS TO P ROMOTE WIND ENERGY GENERATION IN THE STATE:- (1) TARIFF : MAHARASHTRA STATE ELECTRICITY BOARD SHALL PURCHASE ENERGY GENERATED FROM WIND POWER PLANTS AT A RATE OF 225 PAISE PER UNIT. THE F INANCIAL YEAR 1994-95 WILL BE TAKEN AS BASE YEAR FOR THIS RATE WHICH WILL BE INCREASED AT A RATE OF 5% PER ANNUM. THIS 5% ESCALATION WILL BE AVAILABLE TO THE DEVELOPERS FOR THE FIRST 10 YEARS OF THE PROJECT LIFE. THE LIABILITY OF THE PROJECT REDUCES AFTER REPAYMEN T OF DEBT. DUE TO THIS FOR THE NEXT 3 YEARS THERE WILL BE NO ESCALATION AND THE RATE WILL BE KEPT CONSTANT. THEREAFTER FOR THE BALANCE LIFE OF THE PROJECT (7 YEARS) AN ESCALATIO N OF 5% PER ANNUM WILL BE AVAILABLE TO THE DEVELOPERS. (2) BANKING IN LINE WITH THE CENTRAL GOVERNMENT POLICY WIND PO WER DEVELOPERS WOULD BE GIVEN PERMISSION TO BANK THE ENERGY GENERATED FROM WIND P OWER PLANTS WITH MSEB. BANKING CAN BE DONE ANY TIME OF THE DAY AND NIGHT. THE ENER GY BALANCE AT THE END OF ONE YEAR SHALL NOT BE TAKEN INTO ACCOUNT NEXT YEAR. THE BALA NCE OF ENERGY ACCOUNT WILL BE SETTLED BETWEEN THE MSEB AND PROMOTERS AT THE END O F THE YEAR AS PER THE TARIFF APPLICABLE DURING THAT YEAR. (3) TRANSMISSION LOSSES: MSEB SHALL BEAR THE TRANSMISSION LOSSES FOR WIND EN ERGY TRANSMISSION FOR THE FIRST THREE YEARS. THEREAFTER TRANSMISSION LOSSES WILL B E LEVIABLE AT THE RATE OF 1%. (4) THIRD PARTY SALE : PROMOTERS WILL BE PERMITTED TO SELL EXPORTABLE POWE R TO ANY TWO (INDUSTRIAL OR COMMERCIAL) CONSUMERS PER MW. WHEELING CHARGES FOR THIS WILL BE LEVIABLE AT THE RATE OF 2%. (5) EVACUATION ARRANGEMENT: MSEB SHALL INITIALLY BEAR THE EXPENDITURE FOR ERECT ION OF HIGH TENSION SUB-STATION AND TRANSMISSION INFRASTRUCTURE. MEDA SHALL RECOVER 50% OF THIS EXPENDITURE FROM WIND POWER PROJECT PROMOTERS AND WILL GIVE IT TO MSEB. D EVELOPERS SHALL BEAR THE COST OF TRANSMISSION LINES FROM THE SUB-STATION TO THE PROJ ECT AND ALL OTHER RELATED EQUIPMENT. (6) APPROACH ROADS : MEDA SHALL BEAR THE COST OF CONSTRUCTION OF ROADS T O THE PROJECT SITES. MEDA WOULD BE ENTITLE TO GOVERNMENT GRANTS FOR THIS EXPENDITURE. (7) CAPITAL SUBSIDY : WIND POWER PROJECTS WILL BE GRANTED STATUS OF SMALL SCALE INDUSTRIES. MEDA SHALL GIVE A SUBSIDY UPTO 30% OR THE FIXED CAPITAL INVESTMENT (LIMITED TO RS 20 LAKHS) TO THE PROMOTERS SUBJECT TO A CONDITION THAT WIND POWER PL ANT HAS SUCCESSFULLY OPERATED WITH A MINIMUM 12% PLANT LOAD FACTOR FOR AT LEAST ONE YE AR. (8) ENTRY TAX/OCTROI REFUND : ENTRY TAX/OCTROI AS PAID Y PROMOTERS WHILE MAKING C APITAL EXPENDITURE WILL BE REIMBURSED BY MEDA. (9) SALES TAX BENEFITS : INVESTMENTS IN PLANT AND MACHINERY NEW BUILDING L AND DEVELOPMENT TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOUL D BE CONSIDERED AS QUALIFYING INVESTMENT. PROMOTER SHALL BE ENTITLED TO SALES-TAX BENEFITS UPTO THE AMOUNT OF QUALIFYING INVESTMENT. THIS BENEFIT WOULD BE GIVEN IN 6 EQUAL INSTALMENTS OVER A PERIOD OF 6 YEARS (1/6 OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR) ONLY UNDER THE CONDITION THAT THE PLANT HAS SUCCESSFULLY OPERATED EVERY YEAR WITH A MINIMUM OF 12% PLANT LOAD FACTOR. THIS BENEFIT MAY ALSO BE AVAILAB LE TO ANY OTHER COMPANY ASSOCIATED WITH THE PROMOTERS. DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI ABOU T SALES TAX BENEFITS WILL BE SEPARATELY ISSUED BY THE FINANCE DEPARTMENT. BY ORDER AND IN THE NAME OF THE GOVERNOR OF MAHARAS HTRA. SD/-(L.V.NILESH) DEPUTY SECRETARY TO GOVERNMENT 10. A PERUSAL OF THE PREAMBLE TO SUCH RESOLUTION RE VEALS THAT THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERATION OF EN ERGY THROUGH NON CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREASING DEMAND OF ELECTRICITY IN THE STATE OF MAHARASHTRA. IT WAS FOUND THAT THERE IS IMMENSE POT ENTIAL FOR GENERATION OF WIND POWER IN THE STATE AND DIFFERENT SITES WERE SELECTE D BY THE GOVERNMENT FOR THIS PURPOSE. IT APPEARS THAT THE STATE GOVERNMENT HAD E NUNCIATED ITS POLICY OF GENERATION THROUGH NON CONVENTIONAL SOURCES IN JANUARY 1996 W HICH WAS NOT FOUND ATTRACTIVE BY THE PROMOTERS. IN TERMS OF THE SAID RESOLUTION THE GOVERNMENT MODIFIED ITS EXISTING POLICY TO PROMOTE WIND ENERGY GENERATION BY ANNOUNC ING CERTAIN CONCESSIONS AS INCENTIVES ENUMERATED THEREIN. SUCH INCENTIVES RELA TED TO TARIFF STRUCTURING BANKING OF POWER GENERATED BY WIND MILLS WITH MSEB BEARING OF TRANSMISSION LOSSES BY MSEB PERMITTING PROMOTERS TO SELL POWER TO THIRD PARTIES BEARING INITIAL EXPENDITURE FOR ERECTION OF HIGH TENSION AND SUB-STATION AND TRANSM ISSION INFRASTRUCTURE BEARING THE COST OF CONSTRUCTION OF ROADS TO PROJECT SITES REI MBURSEMENT OF ENTRY TAX/OCTROI TO THE PROMOTERS CAPITAL SUBSIDY UPTO 30% OF THE FIXED C APITAL INVESTMENT (LIMITED TO RS 20 LAKHS) AND SALES-TAX BENEFITS. SINCE THE PRIMARY D ISPUTE BEFORE US IS IN RELATION TO THE SALES-TAX BENEFITS AVAILABLE UNDER THE SCHEME IT W OULD BE IN THE FITNESS OF THINGS THAT WE MAY LOOK AT IT IN SLIGHT DETAIL. THE SCHEME INTE NDED THAT INVESTMENTS IN PLANT AND MACHINERY NEW BUILDING LAND DEVELOPMENT TECHNICA L DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOULD CONSTITUTE QUALIFYING INVE STMENT AND A PROMOTER SHALL BE ENTITLED TO SALES-TAX BENEFITS UPTO THE AMOUNT OF S UCH QUALIFYING INVESTMENT. SUCH SALES-TAX BENEFIT WAS TO BE GIVEN IN SIX EQUAL INST ALMENTS OVER A PERIOD OF SIX YEARS I.E. 1/6 TH OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR ON THE CONDITION THAT THE PLANT SUCCESSFULLY OPERATES EVERY YEAR WITH A MINIM UM OF 12% PLANT LOAD FACTOR. IN TERMS OF SUCH BROAD FRAMEWORK OF THE SALES-TAX BENE FIT THE STATE GOVERNMENT ISSUED SEPARATE DETAILED INSTRUCTIONS ABOUT THE MODUS OPER ANDI TO AVAIL SUCH BENEFITS BY WAY OF GOVERNMENT RESOLUTION DATED 1.10.1999 (SUPRA )S. THE RELEVANT PORTION OF THE SAID RESOLUTION DATED 1.10.1999 IS AS UNDER: PREAMBLE: WITH A VIEW TO ENCOURAGE INSTALLATION OF WIND ENERG Y GENERATOR UNITS STATE GOVERNMENT HAS PUBLISHED A POLICY VIDE ABOVE MENTIO NED GOVERNMENT RESOLUTION. ACCORDING TO THE SAID POLICY SALES TAX BENEFIT IS A VAILABLE EQUIVALENT TO THE QUALIFYING INVESTMENT ON WIND ENERGY GENERATION PROJECTS. TO AVAIL THE SALES TAX BENEFIT A PROCEDURE HAS BEEN LAID DOWN BY THE FINANCE DEPARTMENT VIDE NOTIFICATION NO. STA 1098/CR-45/TAX ATION 2 DATED 24.8.1998 AND NOTIFICATION NO VKN-1298/CR-33/TAXATION-1 DATED 24. 8.1998. HOWEVER EVEN AFTER RELEASE OF THE SAID NOTIFICATIONS THE INDUSTRIALIST S HAVE EXPRESSED CERTAIN DIFFICULTIES WHICH HAVE BEEN BROUGHT TO THE NOTICE OF THE GOVERN MENT. TAKING INTO CONSIDERATION THE REQUESTS OF THE WIND POWER PROMOTERS AS WELL AS THEIR DIFFICULTIES THE PROPOSAL FOR MODIFIED DETAILED PROCEDURE FOR AVAILING SALES TAX BENEFIT WAS UNDER CONSIDERATION OF THE GOVERNMENT. GOVERNMENT RESOLUTION : CONSIDERING THE DIFFICULTIES OF THE INDUSTRIALISTS AND WITH A VIEW TO MAKE AVAILABLE SALES TAX BENEFIT GOVERNMENT HAS DECIDED TO SIMPLIFY THE PROCEDURE AS FOLLOWS: 1. THE SALES TAX BENEFIT WILL BE AVAILABLE ON ELECT RICITY GENERATING UNITS IN RELATION TO ACHIEVEMENT OF PLANT LOAD FACTOR AS FOLLOWS: S.NO. PLANT LOAD FACTOR SALES TAX BENEFIT EQUIVALENT OF 1//6 TH OF QUALIFYING INVESTMENT WITHOUT BANK GUARANTEE WITH BANK GUARANTEE 1 12% 60% 50% 2 13% 70% 60% 3 14% 80% 70% 4 15% 90% 80% 5 16% 100% 90% 6 17% 100% 100% THE SALES TAX BENEFIT CAN BE AVAILED BY ALL PROJECT S WHICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MON THS AFTER THE DATE OF PUBLICATION OF THE GOVERNMENT RESOLUTION. SALES TAX BENEFIT WILL B E AVAILABLE FOR CONTINUOUS 6 YEARS AFTER OBTAINING THE ENTITLEMENT CERTIFICATE FROM THE SALES TAX DEPARTMENT. 2. WHILE DETERMINING THE PLANT LOAD FACTOR THE AVA ILABILITY OF THE TRANSMISSION LINES DURING THE MONTHS FROM MAY TO SEPTEMBER OF THAT FIN ANCIAL YEAR AVERAGE AVAILABILITY OF TRANSMISSION LINES SHALL BE TAKEN I NTO CONSIDERATION AND THIS PERCENTAGE WILL BE INCREASED PROPORTIONATELY TO 100 % AND THEN THE PLANT LOAD FACTOR WILL BE DETERMINED. FOR EXAMPLE IF TRANSMIS SION LINES AVAILABILITY IS 85% THEN THAT YEARS AVERAGE PLANT LOAD FACTOR WILL BE INCREASED PROPORTIONATELY TO CORRESPOND TO 100% AVAILABILITY OF TRANSMISSION LIN ES AND THE SALES TAX BENEFIT WILL BE INCREASED PROPORTIONATELY. THE AVAILABILITY OF T HE TRANSMISSION LINES DURING THE MONTHS FROM MAY TO SEPTEMBER OF THAT FINANCIAL YEAR WILL BE DECIDED BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY (MEDA) PUNE. 3. SALES TAX BENEFIT WILL BE AVAILABLE FOR THE PROM OTERS FROM THE DATE OF OBTAINING OR ENTITLEMENT CERTIFICATE FOR A PERIOD OF CONTINUO US 6 YEARS. AND FOR EVERY YEAR SUCH BENEFIT WILL BE LIMITED TO 1/6 TH OF THE QUALIFYING INVESTMENT. HOWEVER IN ANY ONE YEAR PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED THEN THAT YEARS SALES TAX BENEFIT WILL GET CANCELLED AND THAT UNIT WILL HAVE TO LOSE SALES TAX BENEFIT FOR THAT YEAR FOREVER. ANY TWO YEARS SALES TAX BENEFIT WILL NOT BE ALLOWE D TO DEDUCT TOGETHER TO CLAIM IN ONE YEAR. TO AVAIL THE SALES TAX BENEFITS THE PERIOD WI LL BE COUNTED FOR CONTINUOUS 6 (SIX) YEARS. THE FINANCIAL YEAR PERIOD WILL BE FROM 1 ST APRIL TO 31 ST MARCH. 4. THE FACILITY OF TRANSFERRING THE SALES TAX BENEF IT TO THE THIRD PARTY THE PROMOTERS OF THE PROJECT IF SELL ELECTRICITY T O THE THIRD PARTY FOR SUCH THIRD PARTY TRANSFERRING OF SALES TAX BENEFIT WILL BE PERMITTED . THE PROMOTERS OF THE PROJECT CAN CHOOSE THE THIRD PARTY FOR THIS FACILITY AND IT WIL L BE APPLICABLE FOR THAT YEAR ONLY. HOWEVER NO PERMISSION WILL BE GIVEN DURING THAT PE RIOD TO CHANGE THE NAME OF THE THIRD PARTY. THIRD PARTY UNITS CAN AVAIL THE BENEFI T UPTO THE AMOUNT MENTIONED IN PARAGRAPH 1. FOR THIS ELIGIBILITY CERTIFICATE WI LL BE GIVEN BY DIRECTOR MAHARASHTRA ENERGY DEVELOPMENT AGENCY. PROMOTERS OF THE PROJECT WILL BE ALLOWED TO CHOOSE A THE MOST TWO NAMES OF THE THIRD PARTY UNITS TO GET THE SALES TAX BENEFIT. THE ENTITLEMENT CERTIFICATE FOR UNITS OF THIRD PARTY WILL E CERTIFIED BY COMMISSIONER OF SALES TAX. AMOUNT OF SALES TAX BENEFIT IS RELATED T O THE WIND ENERGY GENERATION AND THEY ARE NOT RELATED TO THE AMOUNT OF ELECTRICITY S OLD TO THE THIRD PARTY. AFTER OBTAINING THE ENTITLEMENT CERTIFICATE FOR SALES TAX BENEFIT THE PROMOTERS OF THE PROJECT CAN TRANSFER TO THE THIRD PARTY TO WHOM THEY HAVE SOLD THE ELECTRICITY. AMOUNT OF SALES TAX BENEFIT IS RELATED TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TA X BENEFIT LIMITED ONLY TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY S OLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TAX BENEFIT LIMITED ONLY TO THE QUALIFY ING INVESTMENT AS MENTIONED IN PARAGRAPH 1. 5. AFTER SATISFYING THE CONDITION OF AVERAGE PLANT LOAD FACTOR SALES TAX BENEFIT CAN BE AVAILED BY THE ELIGIBLE WIND ENERGY GENERATION UNIT IN THE IMMEDIATE FOLLOWING YEAR. HOWEVER IF SOME PROMOTERS DESIRE TO AVAIL TH IS BENEFIT IN THE CURRENT FINANCIAL YEAR IMMEDIATELY ON COMMISSIONING OF WIND ENERGY PROJECT THEY CAN AVAIL THE BENEFIT ON THE FOLLOWING CONDITIONS: A) BANK GUARANTEE EQUIVALENT TO QUALIFYING INVESTME NT WILL HAVE TO BE GIVEN EVERY YEAR FOR AVAILING SALES TAX BENEFIT OF FOLLOWING FI NANCIAL YEAR. B) IF THE CONDITION OF PLANT LOAD FACTOR IS NOT FUL FILLED THE BANK GUARANTEE AMOUNT WILL BE FORFEITED AT THE END OF THE YEAR. THE FORFEITED AMOUNT OF BANK GUARANTEE WILL BE TRANSFERRED TO SALES TAX DEPARTMENT BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY. 6. FACILITY TO BULK LICENSEES IF THE BULK LICENSEE HAS INSTALLED WIND ENERGY GENE RATION UNIT PERMISSION WILL BE GRANTED TO AVAIL BY ADJUSTMENT IN THE TAX ON SALE O F ELECTRICITY SALES TAX BENEFIT DETERMINED ON QUALIFYING INVESTMENT IN THE PROJECT. FOR THAT PURPOSE ENTITLEMENT CERTIFICATE WILL BE GIVEN BY ENERGY DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AND ELIGIBILITY CERTIFICATE WILL BE ISSUED BY MAHARAS HTRA ENERGY DEVELOPMENT AGENCY. 7. IF THE PROMOTERS DO NOT ABIDE BY TERMS AND CONDI TIONS OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND SALES TAX DEPARTMENT THEN T HE DIRECTOR OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND COMMISSIONER OF SALES TAX RESERVE THE RIGHT TO CANCEL THE ENTITLEMENT CERTIFICATE AND THE ELIGI BILITY CERTIFICATE. 8. SALES TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS USED AND ITS PROCEDURE SHALL BE AS PER PA CKAGE SCHEME OF INCENTIVE (PSI) 1993 AND AMENDMENT THEREON FROM TIME TO TIME . 9. THE PROMOTER WILL NOT BE ELIGIBLE FOR SALES TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC GENERATOR. IF SU CH CASES ARE NOTICED THEN THE DIRECTOR MAHARASHTRA ENERGY DEVELOPMENT AGENCY HAS RIGHT TO CANCEL ENTITLEMENT CERTIFICATE AND ELIGIBLE CERTIFICATE . 10. THE SITES APPROVED BY MINISTRY OF NON-CONVENTIO NAL ENERGY SOURCES GOVERNMENT OF INDIA NEW DELHI WILL BE ELIGIBLE FOR SALES TAX BENEFIT. THE NO OBJECTION CERTIFICATE WILL BE ISSUED BY MA HARASHTRA ENERGY DEVELOPMENT AGENCY ONLY AFTER SUBMISSION OF UNDERTAKING FROM TH E CONCERNED MANUFACTURER AND PROMOTER THAT THE MACHINERY USED FOR WIND GENERATIO N PROJECT IS NEW. 11. THERE IS NO RESTRICTION FOR EXPANSION OF PROJEC TS. HOWEVER CAPACITY OF THE WIND ENERGY GENERATOR SHOULD BE MINIMUM 200 KW 12. PROCEDURE FOR AVAILING THE SALES TAX BENEFIT WI LL BE APPLICABLE TO ALL PROJECTS SUCH AS THE WIND ENERGY GENERATOR UNITS/WIND SPV DIE SEL HYBRID SELF STARTING GENERATOR (HYBRID STAND ALONE SYSTEM) AND AS PER MA HARASHTRA GOVERNMENTS DECLARED POLICY PUBLISHED IN THIS CONNECTION. BY THE ORDER ANDS ON BEHALF OF GOVERNOR OF MAHARASHTRA SD/- (P.D. KARKHANIS) SECTION OFFICER (ENERGY). 11. AS IS EVIDENT THE SAID RESOLUTION DEALS WITH T HE MANNER IN WHICH THE INTENDED SALES-TAX BENEFITS CAN BE AVAILED OF BY THE PROMOTE RS. IT IS CLEAR THAT THE SALES-TAX BENEFITS CAN BE AVAILED BY ALL PROJECTS WHICH ARE C OMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MONTHS AFTER THE DATE OF PUBLICATION OF THE SAID RESOLUTION. IT IS ALSO PROVIDED THAT THE SALES-TAX BENEFIT IS AVAILABLE ON ELECTRICITY GENERATING UNITS IN RELATION TO ACHIEVEMENT OF PLAN T LOAD FACTOR. THE PROCEDURAL REQUIREMENT ALSO ENTAILS THAT THE SALES-TAX BENEFIT WILL BE AVAILABLE FOR THE PROMOTERS FROM THE DATE OF OBTAINING OF ENTITLEMENT CERTIFIC ATE FOR A PERIOD OF CONTINUOUS SIX YEARS AND FOR EVERY YEAR SUCH BENEFIT WILL BE LIMI TED TO 1/6 TH OF THE QUALIFYING INVESTMENT. IT IS ALSO PROVIDED THAT IN ANY ONE YEA R IF PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED THEN THAT YEARS SALES-TAX BENEFIT WILL G ET CANCELLED AND THAT SUCH UNIT WOULD LOOSE SALES-TAX BENEFIT OF THAT YEAR FOR EVER. ANOT HER PERTINENT PROCEDURE OUTLINED IN THE RESOLUTION PERMITTED THE FACILITY OF TRANSFERRI NG THE SALES-TAX BENEFIT TO THIRD PARTIES. IN TERMS OF SUCH FACILITY THE PROMOTERS OF THE PRO JECT WERE PERMITTED TO TRANSFER SALES- TAX BENEFIT TO THIRD PARTY IF IT SOLD ELECTRICITY TO SUCH THIRD PARTY. SUCH TRANSFER WAS SUBJECT TO ISSUANCE OF THE ENTITLEMENT CERTIFICATE TO BE ISSUED BY THE COMMISSIONER OF SALES-TAX. THE SAID RESOLUTION ALSO PROVIDED THAT T HE SALES-TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATER IALS USED. IT IS FURTHER NOTIFIED BY THE STATE GOVERNMENT THAT THE PROMOTER WILL NOT BE ELIGIBLE FOR SALES-TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC G ENERATOR. THE POLICY FURTHER PROVIDED THAT THERE WAS NO RESTRICTION FOR EXPANSIO N OF PROJECT. HOWEVER THE MINIMUM CAPACITY OF WIND MILL GENERATION WAS STATED TO BE 2 00 KW. IN TERMS OF THE AFORESAID SCHEME THE ASSESSEE OBTAINED THE ENTITLEMENT CERT IFICATE AND TRANSFERRED THE SALES-TAX BENEFIT TO A THIRD PARTY. THE ASSESSEE AV AILED THE SALES-TAX BENEFIT FOR ITS WIND POWER PROJECT INSTALLED AT VILLAGE KUSHI (VANK USAWADE) TAL. SATARA DIST. SATARA AND SUCH BENEFIT AMOUNTING TO RS 63 74 291/- PERTAI NING TO THE YEAR UNDER CONSIDERATION HAS BEEN CLAIMED AS A CAPITAL RECEIPT . FACTUALLY SPEAKING ON THE ASPECT OF THE ASSESSEE HAVING RECEIVED THE SAID AMOUNT IN TERMS OF THE SCHEME OF THE STATE GOVERNMENT AS SALES-TAX BENEFIT UNDER THE AFORESAID GOVERNMENT RESOLUTIONS IS NOT IN DISPUTE. 12. IN ORDER TO EXAMINE THE TAXABILITY OF SUCH AMOU NT IT WOULD BE APPROPRIATE TO REFER TO THE PROPOSITIONS BASED ON THE CASE LAWS RE FERRED TO US. IN THE CASE OF SAHNEY STEELS (SUPRA) THE QUESTION BEFORE THE HONBLE SUP REME COURT WAS WHETHER THE SUBSIDY RECEIVED BY THE ASSESSEE THEREIN FROM ANDHR A PRADESH GOVERNMENT WAS TAXABLE AS A REVENUE RECEIPT OR NOT. THE ANDHRA PR ADESH GOVERNMENT HAD NOTIFIED CERTAIN FACILITIES AND INCENTIVES FOR ALL THE NEW I NDUSTRIAL UNDERTAKINGS COMMENCING PRODUCTION ON OR AFTER 1.9.1969 WITH INVESTMENT CAP ITAL (EXCLUDING WORKING CAPITAL) NOT EXCEEDING RS 5 CRORES. THE INCENTIVES WERE TO BE AL LOWED FOR A PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION AND SUC H CONCESSION WAS ALSO AVAILABLE FOR SUBSEQUENT EXPANSION OF 50% AND ABOVE OF THE EXISTING CAPACITIES PROVIDED SUCH EXPANSION WAS LOCATED IN A CITY OR TO WN OR PANCHAYAT AREA OTHER THAN THAT IN WHICH THE EXISTING UNIT WAS LOCATED. THE H ONBLE SUPREME COURT NOTICED THAT THE SALIENT FEATURE OF THE SCHEME FORMULATED BY THE ANDHRA PRADESH GOVERNMENT WAS THAT THE INCENTIVES WERE NOT AVAILABLE UNLESS AND U NTIL PRODUCTION HAD COMMENCED AND THAT THE SAME WAS LIMITED TO A PERIOD OF 5 YEAR S FROM THE DATE OF COMMENCEMENT OF PRODUCTION. THE HONBLE SUPREME COURT NOTED THAT ALL THE INCENTIVES ARE PRODUCTION INCENTIVES IN THE SENSE THAT THE COMPANY WOULD BE E NTITLED TO THESE INCENTIVES ONLY AFTER IT GOES INTO PRODUCTION AND THAT THE SCHEME W AS NOT TO MAKE ANY PAYMENT DIRECTLY OR INDIRECTLY FOR THE SETTING UP OF INDUST RIES. ON FACTUAL ANALYSIS OF THE SCHEME IT WAS INFERRED THAT THE SUBSIDIES WERE OPE RATIONAL SUBSIDIES INASMUCH AS THEY WERE GIVEN TO ENCOURAGE SETTING UP OF INDUSTR IES IN THE STATE OF ANDHRA PRADESH BY MAKING THE BUSINESS OF PRODUCTION AND SALE OF GO ODS IN THE STATE MORE PROFITABLE. THE HONBLE SUPREME COURT OBSERVED THAT THE CHARACT ER OF SUBSIDY WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMINED HAVING REGAR D TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE FOLLOWING OBSERVATIONS ARE RE LEVANT: IF ANY SUBSIDY IS GIVEN THE CHARACTER OF THE SUBS IDY IN THE HANDS OF THE RECIPIENT WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IF I T IS GIVEN Y WAY OF ASSISTANCE TO THE ASSESSEE IN CARRYING ON OF HIS TRADE OR BUSINESS I T HAS TO E TREATED AS TRADING RECEIPT. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. FOR EXAMPLE IF THE SCHEME WAS THAT THE ASSESSEE WI LL BE GIVEN REFUND OF SALES TAX ON PURCHASE OF MACHINERY AS WELL AS ON RA W MATERIALS TO ENABLE THE ASSESSEE TO ACQUIRE NEW PLANT AND MACHINERY FOR FUR THER EXPANSION OF ITS MANUFACTURING CAPACITY IN A BACKWARD AREA THE ENTI RE SUBSIDY MUST BE HELD TO BE A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IT WI LL NOT BE OPEN TO THE REVENUE TO CONTEND THAT THE REFUND OF SALES TAX PAID ON RAW MA TERIALS OR FINISHED PRODUCTS MUST BE TREATED AS REVENUE RECEIPT IN THE HANDS OF THE A SSESSEE. IN BOTH THE CASES THE GOVERNMENT IS PAYING OUT OF PUBLIC FUNDS TO THE ASS ESSEE FOR A DEFINITE PURPOSE. IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSIN ESS OR COMPLETE A PROJECT AS IN SEAHAM HARBOUR DOCK CO.S CASE (1931) 16 TC 333 (HL ) THE MONIES MUST E TREATED AS HAVING BEEN RECEIVED FOR A CAPITAL PURPOSE. BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSI NESS OPERATION AND THE MONEY IS GIVEN ONLY AFTER AND CONDITIONAL UPON COMMENCEMENT OF PRODUCTION SUCH SUBSIDIES MUST BE TREATED AS ASSISTANT FOR THE PURPOSE OF THE TRADE.. IN THE CASE BEFORE US THE SUBSIDIES HAVE NOT BEEN GRANTED FOR PRODUCTION OR FOR BRINGING INTO EXISTENCE ANY NEW ASSET. THE SUBS IDIES WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTRY AND COMME NCEMENT OF PRODUCTION. SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN F OR THE PURPOSE OF CARRYING ON OF THE BUSINESS OF THE ASSESSEE. APPLYING THE TEST OF VISC OUNT SIMON IN THE CASE OF OSTIME (1946) 14 ITR (SUPPL) 45 (HL) IT MUST BE HELD THAT THESE SUBSIDIES ARE OF REVENUE CHARACTER AND WILL HAVE TO BE TAXED ACCORDINGLY. 13. ANOTHER DECISION WHICH HAS BEEN REFERRED TO IS THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICA LS LTD. (SUPRA). IN THIS CASE ALSO THE ISSUE RELATED TO THE CHARACTER OF SUBSIDY RECEIVED BY SUGAR FACTORIES . THE HONBLE SUPREME COURT REITERATED THE PARAMETERS APP LIED IN THE EARLIER JUDGMENT OF SAHNEY STEEL (SUPRA). AS PER THE HONBLE SUPREME CO URT THE CHARACTER OF THE RECEIPT OF A SUBSIDY IN THE HANDS OF THE RECIPIENT HAS TO B E DETERMINED WITH REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY HAS BEEN GRANTED. TH E FOLLOWING DISCUSSION IS IMPORTANT TO NOTICE: ON THE FACTS OF THAT CASE IT WAS HELD THAT THE SU BSIDY GIVEN WAS TO MEET RECURRING EXPENSES. IT WAS NOT FOR ACQUIRING THE CAPITAL ASSE T. IT WAS NOT TO MEET PART OF THE COST. IT WAS NOT GRANTED FOR PRODUCTION OF OR BRINGING IN TO EXISTENCE ANY NEW ASSET. THE SUBSIDIES IN THAT CASE WERE GRANTED YEAR AFTER YEAR ONLY 6 AFTER SETTING UP OF THE NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCTION AND THEREFORE SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE P URPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY THE CONTENTIONS RAISE D ON BEHALF OF THE ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED AND IT WAS HE LD THAT THE SUBSIDY RECEIVED BY SAHNEY STEEL COULD NOT BE REGARDED AS ANYTHING BUT A REVENUE RECEIPT. ACCORDINGLY THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THE IM PORTANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYSED THE ENTIRE CASE LAW AND IT HAS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGING THE CHARACTER OF A SUBSIDY. THAT TEST IS THAT THE CHARA CTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE P URPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS IN SUCH CASES ONE HAS TO AP PLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITI ON IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST B E UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR S UBSTANTIAL EXPANSION OF EXISTING UNITS. ON THIS ASPECT THERE IS NO DISPUTE. IF THE O BJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFIT ABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND IF THE OBJECT O F THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW U NIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCO UNT. THEREFORE IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WHICH DETERMI NES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OR THE MECHANISM THROUGH WHICH TH E SUBSIDY IS GIVEN ARE IRRELEVANT ONE MORE ASPECT NEEDS TO BE MENTIONED. IN SAHNEY S TEEL AND PRESS WORKS LTD. THIS COURT FOUND THAT THE ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND T HE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR DOCK CO. THE ASSESSEE WA S OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VERY IMP ORTANT. IN THE PRESENT CASE ALSO RECEIPT OF THE SUBSIDY WAS CAPITAL IN NATURE AS THE ASSESSEE WAS OBLIGED TO UTILIZE THE SUBSIDY ONLY FOR REPAYMENT OF TERM LOANS UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. APPLYING THE ABOVE TESTS TO THE FACTS OF THE PRESE NT CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT OF THE INCENTIVE SUBS IDY WE ARE SATISFIED THAT SUCH PAYMENT RECEIVED BY THE ASSESSEE UNDER THE SCHEME W AS NOT IN THE COURSE OF A TRADE BUT WAS OF CAPITAL NATURE. 14. ANOTHER DECISION RELIED UPON BY THE APPELLANT I S IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA). IN THIS CASE THE FACTS WE RE THAT THE PATALGANGA UNIT OF THE ASSESSEE WAS LOCATED IN A NOTIFIED BACKWARD AREA. T HE SALES-TAX LIABILITY OF THE ASSESSEE WAS EXEMPTED BY THE STATE GOVERNMENT AND U NDER THE SCHEME OF INCENTIVES ASSESSEE WAS NOT REQUIRED TO PAY ANY SA LES-TAX TO THE GOVERNMENT. THE CONTENTION OF THE ASSESSEE WAS THAT NON-PAYMENT OF SALES-TAX BE CONSIDERED AS A SUBSIDY BY THE GOVERNMENT WHICH IS OF CAPITAL IN N ATURE. THE SPECIAL BENCH OF THE TRIBUNAL FOUND THAT THE INCENTIVES WERE PROVIDED FO R FOLLOWING FOUR OBJECTS NAMELY DEVELOPMENT OF BACKWARD REGIONS OF THE STATE OF MAH ARASHTRA; DISPERSAL OF INDUSTRIES; PROMOTION OF INDUSTRIES FOR EMPLOYMENT ORIENTED UNI TS; AND PROVIDING LOCAL EMPLOYMENT TO SC/ST. THE TRIBUNAL OBSERVED THAT IN ORDER TO DECIDE THE CHARACTER OF RECEIPT THE PURPOSE OF GRANTING SUBSIDY WAS RELEVAN T WHILE THE MODE OF PAYMENT AND THE APPLICATION OF MONEY FOR CAPITAL OR REVENUE PUR POSES WAS IRRELEVANT. THEREFORE AS PER THE SPECIAL BENCH THE DECISIVE FACTOR WAS THE O BJECTS WITH WHICH THE INCENTIVE WAS GIVEN AND THEREFORE SUCH SUBSIDY WAS HELD TO BE A CAPITAL RECEIPT. THE SAID DECISION HAS ALSO BEEN FURTHER APPROVED BY THE HONBLE HIGH COURT VIDE ORDER DATED 15.4.2009 (SUPRA). THE HONBLE HIGH COURT APPLIED THE PURPOSE TEST AND FOUND THAT THE OBJECT OF THE SUBSIDY BEING TO SET UP UNITS IN BACKWARD AREAS FOR GENERATION OF EMPLOYMENT COULD CONSTRUE THE SUBSIDY AS A CAPITAL RECEIPT. 15. ON THE BASIS OF THE AFORESAID DECISIONS AN UNDI SPUTED PREMISE WHICH CAN BE DEDUCED IS THAT IN ORDER TO DETERMINE THE CHARACTER OF THE IMPUGNED RECEIPT WHETHER CAPITAL OR REVENUE THE SAME HAS TO BE DECIDED IN THE LIGHTS OF THE OBJECTS AND PURPOSE FOR WHICH THE SCHEME HAS BEEN FORMULATED BY THE STATE GOVERNMENT. IT IS QUITE CLEAR THAT THE POINT OF TIME AT WHICH THE SUB SIDY IS PAID OR THE FORM OF INCENTIVE GRANTED UNDER A SCHEME ARE IMMATERIAL CONSIDERATION S. IN A CASE WHERE THE SUBSIDY/INCENTIVE UNDER A SCHEME IS GRANTED TO ENCO URAGE SETTING UP OF NEW INDUSTRIES THE SAME IS LIABLE TO BE CHARACTERIZED A S A CAPITAL RECEIPT WHILE AN INCENTIVE/SUBSIDY GRANTED IN THE COURSE OF TRADE FO R THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE THE SAME IS LIABLE TO BE REGARDED AS A REVENUE RECEIPT. 16. IN THIS BACKGROUND WE MAY NOW REVERT BACK AND EXAMINE THE SCHEME UNDER WHICH THE ASSESSEE HAS AVAILED OF THE SALES-TAX BEN EFIT. IN THE PRESENT CASE AS NOTED EARLIER THE STATE GOVERNMENT VIDE ITS RESOLUTION DATED 12.3.1998 MODIFIED ITS EXISTING POLICY FOR THE PURPOSES OF PROMOTING WIND ENERGY GENERATION IN THE STATE OF MAHARASHTRA. THIS POLICY HAS BEEN FORMULATED IN THE BACKGROUND OF THE FACT THAT THE EARLIER POLICY OF THE STATE GOVERNMENT ON GENERATIO N THROUGH NON CONVENTIONAL SOURCES IN JANUARY 1996 DID NOT ACHIEVE THE DESIRE D RESULTS. IN THE SAID POLICY NINE DIFFERENT INCENTIVES HAVE BEEN LAID OUT WHICH HAVE BEEN EXTRACTED BY US IN EARLIER PART OF THIS ORDER. THE DISPUTE BEFORE US IS IN RELATION TO THE SALES-TAX BENEFITS. THE PREAMBLE OF THE POLICY ITSELF REFLECTS THE AREA WHI CH IS SOUGHT TO BE ADDRESSED BY THE POLICY WHICH IS THE PROBLEMS BEING FACED BY PROMOT ERS OF WIND ENERGY GENERATION. IT IS QUITE CLEAR THAT THE SALES-TAX BENEFIT IS NOT IN TENDED TO BE GRANTED FOR CREATION OF OR BRINGING INTO EXISTENCE ANY NEW ASSET. IT IS ALSO C LEAR THAT THERE IS NO PRESCRIBED CRITERIA AS TO THE MANNER IN WHICH SUCH INCENTIVES ARE TO BE UTILIZED. THE CLAIM OF THE ASSESSEE IS THAT THE SALES-TAX BENEFIT IS GRANTED H AVING REGARD TO THE QUALIFYING INVESTMENT WHICH IS STATED TO BE TOWARDS INVESTMEN TS IN PLANT AND MACHINERY NEW BUILDING LAND DEVELOPMENT TECHNICAL DEVELOPMENT A ND DESIGN OF WIND PRODUCTS. ACCORDING TO THE APPELLANT THE INCENTIVE BEING LIN KED TO THE QUALIFYING INVESTMENT SHOWS THAT IT IS INTENDED AS A RECOUPMENT OF THE FI XED COST ALREADY INCURRED BY THE ASSESSEE AND THEREFORE SUCH INCENTIVES ARE TO BE REGARDED AS CAPITAL IN NATURE. IN OUR CONSIDERED OPINION SUCH PURPOSE AS ARTICULATE D ON BEHALF OF THE APPELLANT IS NOT EMERGING FROM THE SCHEME OF THE STATE GOVERNMENT. RATHER THE EMPHASIS ON OF THE GRANT OF SALES-TAX BENEFIT IS ON ACTUAL RUNNING OF THE PLANT AND THAT TOO UNDER PRESCRIBED EFFICIENCY LEVELS. IN FACT IN THE RESOL UTION DT 1.10.1999 STAGGERED PLANT LOAD FACTORS ACHIEVED BY THE UNIT ENTITLED THE UNIT TO VARYING LEVELS OF SALES-TAX BENEFIT. THEREFORE IT COULD NOT BE SAID THAT THE SALES-TA X BENEFIT IS AVAILABLE MERELY ON COMMENCEMENT OF GENERATION. WE ARE CONSCIOUS THAT M ERE TIMING OF THE GRANT OF SUBSIDY IS NOT RELEVANT. HOWEVER IN THE PRESENT CA SE IT IS NOT THE TIMING OF THE SUBSIDY ALONE BUT THE GRANT IS LINKED TO ACHIEVING OPERATIONAL EFFICIENCIES AND THAT TOO FOR ONLY SIX CONTINUOUS YEARS. IF A UNIT WHICH IS O THERWISE ELIGIBLE FOR INCENTIVE DOES NOT ACHIEVE THE PLANT LOAD FACTOR OF 12% OR ABOVE IT WOULD NOT BE ENTITLED TO RECEIVE THE SALES TAX BENEFIT. THEREFORE IN OUR CONSIDERED OPINION THOUGH THE OBJECT OF THE SCHEME IS TO PROMOTE GENERATION OF ENERGY THROUGH N ON CONVENTIONAL SOURCES BUT THE SAME IS SOUGHT TO BE ACHIEVED BY THE GOVERNMENT IN THE FORM OF SUPPORTING THE UNITS TO PERFORM MORE EFFICIENTLY AND PROFITABLY. 17. IN FACT THE HONBLE SUPREME COURT IN THE CASE O F PONNI SUGARS & CHEMICALS LTD. (SUPRA) CLEARLY NOTED THAT THE SUBSIDY RECEIVE D THEREIN WAS TO BE UTILIZED ONLY FOR REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR S ETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. IN THE PRESENT CASE THERE IS NO SUCH RESTRICTION OR OBLIGATION ON THE PART OF THE ASSESSEE TO UTILIZE THE INCENTIVES AVAI LED. IN FACT ON THIS ASPECT THE INSTANT SCHEME IS AKIN TO THE SCHEME NOTED BY THE HONBLE S UPREME COURT IN THE CASE OF SAHNEY STEELS (SUPRA) WHEREIN THE ASSESSEE WAS FOUN D FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IN THE PRESENT CASE ALSO THE ASSESSEE IS NOT OBLIGED TO SPEND THE MONEY FOR ANY PARTICULAR PURPOSE. THUS A PPLYING THE PURPOSE TEST TO THE FACTS OF THE PRESENT CASE AND KEEPING IN MIND THE O BJECTS BEHIND THE PAYMENT OF INCENTIVE SUBSIDY WE ARE SATISFIED THAT THE SALES- TAX BENEFITS RECEIVED BY THE ASSESSEE UNDER THE INSTANT SCHEME ARE IN THE COURSE OF CARRYING ON ITS TRADE MORE PROFITABLY AND THEREFORE SUCH RECEIPT CANNOT BE CHA RACTERIZED AS CAPITAL IN NATURE. THUS THE ASSESSEE FAILS ON THIS GROUND. 6. THOUGH THE LEARNED COUNSEL FOR THE ASSESSEE STAT ED THAT SIMILAR ISSUE HAS BEEN ADJUDICATED BY THE TRIBUNAL IN THE CASE OF RASHIKLAL M DHARAVI (HUF) (SUPRA) AGAINST THE ASSES SEE HOWEVER IT WAS POINTED OUT THAT WHILE ADJUDICATING THE ISSUE THE TRIBUNAL HAS NOT CONSIDERED THE PREAMBLE OF THE GOVERNMENT RESOL UTION DATED 1.10.1999 (SUPRA) AND THEREFORE ITS DECISION THAT THE CHARACTER OF SUBSIDY RECEIVED BEING IN THE NATURE OF REVENUE REC EIPT WAS REQUIRED TO BE REVIEWED AND THAT IT SHOULD BE HELD AS A CAPITAL RECEIPT. 7. WE HAVE CONSIDERED THE PLEA SET-UP BY THE APPELL ANT AND FIND THAT THE RELEVANT PORTION OF THE GOVERNMENT RESOLUT ION DATED 1.10.1999 AS ALSO THE RESOLUTION OF THE STATE GOVER NMENT DATED 12.3.1998 HAVE BEEN DULY CONSIDERED INASMUCH AS TH E RELEVANT PORTION HAS BEEN EXTRACTED BY THE TRIBUNAL IN ITS O RDER. BE THAT AS IT MAY IN VIEW OF THE PRECEDENT WHICH HAS BEEN RENDER ED IN IDENTICAL FACTUAL SITUATION WE FIND NO REASONS TO DEVIATE FR OM THE SAID PRECEDENT AS IT CONTINUES TO HOLD THE FIELD. AS A R ESULT THEREOF AS STATED ABOVE WE DECIDE THE ISSUE AGAINST THE ASSES SEE. THE GROUND NOS. (2) (3) & (4) ARE DISMISSED. 8. THE ISSUE RAISED IN GROUND NO. 5 RELATES INTERES T OF RS 1 93 915/- RECEIVED ON FIXED DEPOSITS WITH SARASWAT CO-OP. BANK.THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA WIT H RESPECT TO INCOME BY WAY OF BANK INTEREST OF RS 1 19 915/- HAS BEEN DENIE D BY THE LOWER AUTHORITIES ON THE GROUND THAT THE SAME DOES NOT HAVE A DIRECT NEXUS WITH THE ELIGIBLE UNDERTAKING. THE COMMISSIONER OF INCOME-TAX (A PPEALS) HAS DENIED THE CLAIM BY REFERRING TO THE JUDGMENT OF THE HONBL E SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD. V. CIT 262 ITR 278 (SC) . 9. BEFORE US THOUGH THE LEARNED COUNSEL FOR THE ASSESSE E HAS SUPPORTED THE GROUND OF APPEAL RAISED HOWEVER THERE IS NO MAT ERIAL BROUGHT OUT SO AS TO REQUIRE ANY INTERFERENCE IN THE DECISION OF THE LOW ER AUTHORITIES THAT IN THE ABSENCE OF ANY NEXUS BETWEEN THE IMPUGNED INTEREST INCO ME AND THE INDUSTRIAL UNDERTAKING THE CLAIM FOR DEDUCTION UNDER SE CTION 80IA OF THE ACT IS UNTENABLE. MOREOVER THE CLAIM OF THE REVENUE IS ALSO SUPPORTED BY THE SUBSEQUENT DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA V. CIT 317 ITR 218 (SC). AS A RESULT THEREOF THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS HEREBY AFFIRMED AND THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 10. THE ISSUE IN GROUND NO. 8 RELATES TO THE DISALL OWANCE OF RS 2 18 712/- OUT OF FOREIGN TRAVEL EXPENSES. THE ASSE SSEE HAD CLAIMED TOTAL TRAVEL EXPENSES AT RS 5 68 962/-. OUT OF THIS AN AMOUNT OF RS 2 18 712/- WAS SPENT ON FOREIGN TOUR OF DIRECTOR MR S P S PAWAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS EXPLAINED THAT THE ASSESSEE WAS AN INVESTMENT COMPANY AND ALSO CAR RIES ON BUSINESS OF PROMOTERS AND BUILDERS AND THE SAID DIR ECTOR HAD UNDERTAKEN THE TOUR TO USA TO EXPLORE THE OPPORTUNI TIES IN FOREIGN MARKET FOR ACQUISITION OF PROPERTIES IN INDIA OWNED BY NRIS AND ALSO TO FIND BUYERS FOR THE PROPOSED OWNERSHIP SCHEMES. THUS IT WAS SUBMITTED THAT THE TOUR WAS UNDERTAKEN IN CONNECTIO N WITH THE BUSINESS ACTIVITIES OF THE ASSESSEE AND THEREFORE THE EXPENDITURE INCURRED FOR THE SAME WAS ALLOWABLE AS A BUSINESS E XPENDITURE. HOWEVER THE ASSESSING OFFICER REJECTED THE CLAIM O F THE ASSESSEE. BY PLACING RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COOPER ENGINEERING LTD V.CIT 1 35 ITR 597 (BOM) THE ASSESSING OFFICER HELD THAT THE EXPENDIT URE OF RS 2 18 712/- INCURRED BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF BUSINESS AND WAS DISALLOWED UNDER SECTION 37(1) OF THE ACT. IN APPEAL THE COMMISSIONER OF INCOME-TAX (APPEALS) UP HELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ACCORDI NG TO THE COMMISSIONER OF INCOME-TAX (APPEALS) THE ASSESSEE COULD NOT ESTABLISH THE REQUISITE NEXUS TO ESTABLISH THAT THE EXPENDITURE IN QUESTION WAS WHOLLY AND EXCLUSIVELY INCURRED FOR TH E PURPOSE OF BUSINESS OF THE ASSESSEE. AGAINST THIS DECISION TH E ASSESSEE IS IN FURTHER APPEAL BEFORE US. 11. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HA S VEHEMENTLY POINTED OUT THAT THE LOWER AUTHORITIES HAVE MIS-DIRECT ED THEMSELVES IN DENYING THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF EXPENSES ON ACCOU NT OF FOREIGN TRAVEL INCURRED BY ONE OF ITS DIRECTORS. IT WAS POINTED OUT THAT THE ASSESSEE DULY EXPLAINED BEFORE THE LOWER AUTHORITIES THE REASONS WH ICH PROMPTED THE DIRECTOR TO UNDERTAKE THE FOREIGN TOUR WHICH WAS PRIMAR ILY TO EXPLORE BUSINESS OPPORTUNITIES FOR THE ASSESSEE COMPANY. THE LEARNED COUNS EL VEHEMENTLY SUBMITTED THAT NON-FURNISHING OF SPECIFIC EVIDENCE AS MAD E OUT BY THE LOWER AUTHORITIES CANNOT BE CONSTRUED SO STRICTLY SO AS TO PUT MO RE THAN REQUIRED ONUS ON THE ASSESSEE. IT WAS THEREFORE CONTENDED THAT T HE CLAIM OF THE ASSESSEE BE ALLOWED AS THE EXPENDITURE ON FOREIGN TRAVEL HAS BEEN UNDERTAKEN WITH A BUSINESS PURPOSE IN MIND AND IS IN THE NORMAL COURSE OF CARRYING ON OF BUSINESS. 12. IN-FACT THE LEARNED CIT-DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT EXCEPT FOR MENTIONING THAT THE VISIT WAS UNDERTAKEN FO R THE PURPOSES OF BUSINESS NO EVIDENCE HAS BEEN LED TO SHOW WHAT ACTUAL ACTIVITIES WERE CARRIED ON BY THE DIRECTOR DURING THE TOUR ABROAD AND THAT THERE IS ALSO NO REPORT SUBMITTED BY THE DIRECTOR RELATING TO THE TOUR . IT WAS POINTED OUT THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) IN PARA 3.3 OF TH E IMPUGNED ORDER HAS CLEARLY BROUGHT OUT THAT THE RELEVANT EVIDENCE IS NOT PLACED ON RECORD TO PROVE THAT THE TOUR HAS BEEN UNDERTAKEN FOR ANY BUSINESS PURP OSE AND THEREFORE THE DISALLOWANCE HAS BEEN RIGHTLY SUSTAINED. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN PRINCIPLE THERE CAN BE NO DISPUTE TO THE PROPOSITION THAT WHERE AN ASSE SSEE IS CALLED UPON TO JUSTIFY THE EXPENSES CLAIMED IN COMPUTING BUSINESS INCOME T HE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLISH THE SAME WITH REQUISITE EV IDENCE THAT THE EXPENDITURE IS RELATED TO CARRYING ON OF ITS BUSINESS ACTI VITIES. IN THE PRESENT CASE THE CLAIM OF THE ASSESSEE IS WITH REGARD TO EXPENSES ON FOREIGN TOUR UNDERTAKEN BY ONE OF ITS DIRECTORS. THE PURPOSE OF THE T OUR HAS BEEN EXPLAINED BY THE ASSESSEE SO HOWEVER THE OBJECTION TAKEN OUT BY T HE REVENUE IS THAT IN SUPPORT THEREOF THE ASSESSEE HAS NOT FURNISHED ANY EVIDE NCE TO SUBSTANTIATE WHETHER THE EXPENDITURE HAS BEEN INCURRED FOR PURPOSE OF BUSINESS. HAVING CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW IN OUR VIEW WHILE THE INSISTENCE ON EVIDENCE BY REVENUE CANNOT BE FAULTED SO HOWEVER AT THE SAME TIME NATURE AND LEVEL OF EXPENDITURE CLAIMED BY THE ASSESSEE IS ALSO REQUIRED TO BE APPRECIATED. THE EXPENDITURE ON FOREIGN TRAVEL IS NOT AN EXPENDITURE WHICH IS ALIEN TO CARRYING ON OF A BUSINESS BY ANY BUSINESS ENTITY AND IN THE PRESENT CASE ALSO THE BONA FIDES OF THE CLAIM CANNOT BE FAULTE D. NO DOUBT IN THE ABSENCE OF APPROPRIATE SUBSTANTIATION FROM THE SIDE OF T HE ASSESSEE CERTAIN AMOUNT OF DISALLOWANCE IS DEFINITELY MERITED AND NOT T HE ENTIRE AMOUNT OF EXPENSES OF RS 2 18 712/- STATED TO HAVE BEEN INCURRED BY ONE OF ITS DIRECTORS. THEREFORE CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMS TANCES WE DEEM IT FIT AND PROPER TO RESTRICT THE DISALLOWANCE TO 50% OF THE E XPENDITURE CLAIMED AND ACCORDINGLY WE SET-ASIDE THE ORDER OF THE COMMISSIONER O F INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OFFICER TO RETAIN AN A DDITION OF RS 1 09 356/- BEING 50% OF THE TOTAL DISALLOWANCE OF RS 2 18 712/- MADE BY THE LOWER AUTHORITIES. THUS ON THIS GROUND THE ASSESSEE PAR TLY SUCCEEDS. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF FEBRUARY 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE DATED 28 TH FEBRUARY 2012 B COPY TO:- 1) LAP FINANCE & CONSULTANCY P LTD 2) ADDL.CIT R-11 PUNE 3) THE CIT (A)-I PUNE 4 THE CIT-1 PUNE 5) DR A BENCH I.T.A.T. PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS ITAT PUNE