Section 80-IA of the Income-tax Act, 1961 Deductions

Eveready Spinning Mills (P.) Ltd.

v.

Assistant Commissioner of Income-tax, Circle-I, Tirupur

Section 80-IA of the Income-tax Act, 1961 - Deductions - Profitsand gains from infrastructure development undertakings - Assessment year2007-08 - Assessee was in business of manufacturing of yarn - It had alsoinstalled three windmills for which it had adopted impugned assessment year asinitial assessment year for purpose of claim of deduction under section 80-IA -Windmills of assessee were disparately situated vis-Ã-vis its yarnmanufacturing activity - State Electricity Board purchased power produced bywind mills of assessee at rate of Rs. 2.70 per unit and when it sold electricityto assessee's textile units, it had charged assessee a rate of Rs. 3.50 perunit - Assessee while computing its claim for deduction under section 80-IA inrespect of windmills, had adopted price of Rs. 3.50 per unit - AssessingOfficer was of opinion that assessee could not be permitted to inflate profit from its windmills unit and he, therefore, adopted price of Rs. 2.70 fixed byState Electricity Board for purchase of power from windmills, to be correctpricing for computing profits of windmills - Accordingly, assessee's claim for deduction was substantially reduced - It was apparent from records thatassessee was an industrial consumer and Board supplied power to such industrialconsumers at rate of Rs. 3.50 per unit - It was also undisputed that hadassessee not been saddled with restrictions of supplying surplus power to StateElectricity Board, it would have supplied power to ultimate customers at aprice not less than Rs. 3.50 per unit, being rate charged by Board from itsindustrial consumers - Whether in view of aforesaid, profits of eligibleundertaking had to be determined on basis of annual landing cost of electricitypurchased by assessee from State Electricity Board, i.e., Rs. 3.50 per unit -Held, yes [In favour of assessee]