AHW Steel Ltd., Kolkata V. ACIT- Rg-3, kolkata, Kolkata

ITA 1100/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1781 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMITAVA BHATTACHARYA JCITSRDR
• Assessee Lawyers: S S GUPTA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHOWDHURY, JUDICIAL MEMBER ITA NO.1100/KOL/2014 ASSESSMENT YEAR:2009-10 AHW STEEL LTD. G.P. AGRAWAL & ASSOCAITES, 7A, KIRAN SHANKAR ROY ROAD, KOLKATA-700001 [ PAN NO.AACCA 5741 M ] / V/S . ACIT, RANGE-3, P-7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI S.S. GUPTA, FCA /BY RESPONDENT SHRI AMITAVA BHATTACHARYA, JCIT-SR-DR /DATE OF HEARING 07-03-2017 /DATE OF PRONOUNCEMENT 26-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, KOLKATA DATED 24.12.2013. A SSESSMENT WAS FRAMED BY ACIT, RANGE-3, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 20.12.2011 FOR ASSE SSMENT YEAR 2009-10. SHRI S.S. GUPTA, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI AMITAVA BHATTACHARYA, LD. DEPARTMENTAL REPRESE NTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. AT THE OUTSET, IT IS OBSERVED THAT THERE IS A DE LAY OF 32 DAYS ON THE PART OF ASSESSEE IN FLING THIS APPEAL BEFORE THE TRIBUNAL. IN THIS REGARD, ASSESSEE HAS FILED AN APPLICATION SEEKING CONDONATION OF THE SAID DELAY A ND KEEPING IN VIEW THE REASONS GIVEN THEREON, WHICH IS DULY SUPPORTED BY AN AFFIDA VIT FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THERE IS A SUFFICIENT CAUSE FOR THE D ELAY ON THE PART OF ASSESSEE IN FILING ITA NO.1100/KOL/2014 A. Y. 2009-10 AHW STEEL LTD. VS. ACIT, RG-3 K OL. PAGE 2 PRESENT APPEAL. HENCE, WE CONDONE THE DELAY AND PRO CEED TO DISPOSE OF THIS APPEAL OF THE ASSESSEE ON MERIT. 3. THE ONLY INTER-CONNECTED ISSUE RAISED BY ASSESSE E IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ADDITION BY SUSTAINI NG THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80-IA OF THE ACT FOR 87 LACS. 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A LIMITED COMPANY AND ENGAGED IN MANUFACTURING AND TRADING IN IRON AN D STEEL PRODUCTS, SHARE TRADING AND WIND POWER GENERATION. THE ASSESSEE IN THE YEAR UND ER CONSIDERATION CLAIMED DEDUCTION U/S. 80-IA OF THE ACT FOR 1,23,29,042/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE AFORESAID DEDUCTION U/S. 80-IA OF THE ACT WAS CLAIMED BY ASSESSEE AFTER CONSIDERING T HE RECEIPT OF 87 LACS ON ACCOUNT OF COMPENSATION AWARDED BY M/S SUZLON ENERGY LTD. ( SEL FOR SHORT) DUE TO NON- GENERATION OF GUARANTEED ELECTRICITY UNITS. THE AFO RESAID COMPENSATION WAS PERTAINING TO THE PERIOD BEGINNING FROM JUNE 2006 TO MAY 2008. ON QUESTION BY THE AO ABOUT THE NON-CONSIDERATION OF AFORESAID COMPENSATION FOR THE DEDUCTION U/S. 80-IA OF THE ACT, THE ASSESSEE RELIED ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF MAGNUM POWER GENERATION LTD. VS. DCIT REPORTED IN 11 ITR 493. HOWEVER, THE ASSESSING OFFICER HELD THAT THE CASE LAW CITED BY A SSESSEE IS DISTINGUISHABLE FROM THE INSTANT CASE AND IMPUGNED COMPENSATION IS NOT ELIGI BLE FOR DEDUCTION U/S. 80-IA OF THE ACT. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE IMPUGNED COMP ENSATION RECEIVED BY ASSESSEE HAS DIRECT NEXUS WITH THE BUSINESS AS IT WAS PROVID ED ON ACCOUNT OF FAILURE OF MACHINES TO GENERATE THE ELECTRICITY UNITS AS GUARA NTEED. THEREFORE, THE COMPENSATION WAS AWARDED. HOWEVER, LD. CIT(A) DISREGARD THE SUBM ISSION OF ASSESSEE AND CONFIRMED THE ORDER OF ASSESSING OFFICER BY OBSERVI NG AS UNDER:- IN THE CASE OF THE APPELLANT IT IS CLEAR THAT THE COMPENSATION WAS TO BE GIVEN TO THE APPELLANT AS PER THE AGREEMENT WITH M/S SUZLON ENERGY LTD., WHICH WAS THE SUPPLIER OF THE WINDMILLS WAS NOT THE APPELLANTS O PERATIONAL INCOME BUT WAS SONLY INCIDENTAL TO ITS BUSINESS ACTIVITY AND CONSTITUTES A SOURCE OF INCOME BEYOND THE FIRST DEGREE OR PROXIMATE NEXUS BETWEEN PROFITS AND THE I NDUSTRIAL UNDERTAKING. THEREFORE THE SAME CANNOT BE CONSIDERED AS INCOME DERIVED FROM THE PROFITS ON SALE OF POWER ON WHICH DEDUCTION U/S 80IA WOULD BE AVAILABLE TO T HE APPELLANT. IT IS THEREFORE HELD THAT THE APP WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80 IA ON THE COMPENSATION RECEIVED BY ITA NO.1100/KOL/2014 A. Y. 2009-10 AHW STEEL LTD. VS. ACIT, RG-3 K OL. PAGE 3 IT FROM SUZLON ENERGY LTD. THEREFORE, ACCORDINGLY T HE DISALLOWANCE MADE BY THE AO OF RS.87,00,000/- IS CONFIRMED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS ERRED IN LAW AS WELL AS IN FACTS IN UPHOLDING THE DISALLOWANCE MADE BY THE LD. A.O ON ACCOUNT OF DEDUCTION U/S. 80-IA ON A SUM OF RS.87 LACS, ON THE ALLEGED GROUND THAT THE DEDUCTION ON THE SAID SUM WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80-IA. 2. BECAUSE THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS), WAS ERRED IN LAW AS WELL AS IN FACTS IN HOLDING THAT, THE SUM OF RS.87 LACS WAS A COMPENSATION AND NOT THE APPELLANTS OPERATIONAL INCOME, BUT WAS ONLY INCIDE NTAL TO ITS BUSINESS ACTIVITY AND CONSTITUTED INCOME BEYOND THE FIRST DEGREE AND PROX IMITY NEXUS BETWEEN THE PROFIT AND THE INDUSTRIAL UNDERTAKING AND CANNOT BE CONSIDERED AS INCOME DERIVED FROM THE SALE OF POWER ON WHICH DEDUCTION U/S. 80-IA WOULD BE AVA ILABLE . 6. LD. AR FOR THE ASSESSEE BEFORE US FILED A PAPER BOOKS WHICH ARE RUNNING FROM PAGES 1 TO 118 AND COMPILATION OF CASE COMPRISING OF PAGES FROM 1 TO 125 RESPECTIVELY AND PRAYED THAT ISSUE MAY BE DECIDED A CCORDING TO LAW. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE AFORES AID COMPENSATION IS IN THE NATURE OF INCENTIVE GIVEN TO ASSESSEE AND IT WAS LIMITED F OR A PERIOD OF TWO YEARS. THUS, THE AFORESAID INCENTIVE CANNOT BE CONSIDERED FOR THE PU RPOSE OF DEDUCTION U/S. 80-IA OF THE ACT. HE VEHEMENTLY RELIED ON THE ORDER OF AUTHORITI ES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIALS ON RECORD; INCLU DING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. THE ISSUE BEFORE US IS WHETHER THE COMPENSATION RECEIVED BY THE ASSESSEE IS BUSINESS INCOME AND THE REFORE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA OF THE ACT. IT IS UNDISPUTED FAC T THAT THE COMPENSATION WAS RECEIVED BY THE ASSESSEE FROM SEL AS THE MACHINES F AILED TO GENERATE THE GUARANTEED ELECTRICITY UNITS. IT IS ALSO ADMITTED FACT THAT TH E ASSESSEE IS INTO THE BUSINESS OF WIND POWER GENERATION BUSINESS. THUS IT CAN BE INFERRED THAT THE IMPUGNED COMPENSATION HAS DIRECT NEXUS WITH THE BUSINESS OPERATIONS OF TH E ASSESSEE AND ACCORDINGLY ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. WE ALS O FIND THAT IN THE IDENTICAL FACTS & CIRCUMSTANCES THE HONBLE ITAT DECIDED THE ISSUE IN FAVOR OF ASSESSEE BY ALLOWING THE COMPENSATION ON ACCOUNT OF POWER GENERATION LOS S IS ENTITLED FOR DEDUCTION U/S. ITA NO.1100/KOL/2014 A. Y. 2009-10 AHW STEEL LTD. VS. ACIT, RG-3 K OL. PAGE 4 80-IA OF THE ACT IN THE CASE OF LAHOTI OVERSEAS LTD. VS DY. COMMISSIONER OF INCOME TAX IN ITA NO.3821/MUM/2012 VIDE ORDER DATED 30-3-2016 FOR THE A.Y. 2008-09. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BEL OW:- IN THE INSTANT CASE THE AMOUNT IS PAID BY SUZLON IN DIA LIMITED TOWARDS SPECIFIC PERFORMANCE DUE TO SHORT GENERATION OF POWER THAN M INIMUM GUARANTEED POWER GENERATION CERTIFIED BY THE EQUIPMENT SUPPLIER I.E. SUZLON ENERGY LIMITED AND IT HAS A DIRECT AND CLOSE NEXUS OF FIRST DEGREE WITH THE GEN ERATION OF POWER BEING SHORTFALL IN GENERATION OF POWER THAN THE GUARANTEED RATED CAPAC ITY BY EQUIPMENT SUPPLIER AND THE SUBSIDY GOES ON TO REDUCE THE COST OF GENERATIO N OF POWER AS THE FIXED COSTS AND OTHER COST WHICH ARE STILL INCURRED DESPITE SHORT G ENERATION OF POWER ARE RECOUPED BY THE SAID SUBSIDY FROM SUZLON ENERGY LIMITED AND THU S HAS DIRECT AND CLOSE NEXUS WITH THE BUSINESS OF GENERATION OF POWER BY THE WINDMILL UNDERTAKING OF THE ASSESSEE COMPANY AND DEDUCTION U/S. 80IA OF THE ACT IS ALLOW ABLE. KEEPING IN VIEW OF THE RATIO OF LAW LAID DOWN BY TH E HON'BLE SUPREME COURT IN THE CASE OF MEGHALAYA STEELS LIMITED (SUPRA) AND THE C ITED JUDGMENT OF CO-ORDINATE BENCHES OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE C OMPANY, WE HOLD THAT THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY FROM M/S SUZLON EN ERGY LTD. OF RS.35,55,880/- ON ACCOUNT OF SPECIFIC PERFORMANCE BEING COMPENSATION ON ACCOUNT OF SHORTFALL IN THE POWER GENERATED BY THE ASSESSEE COMPANY VIS--VIS T HE MINIMUM GUARANTEE RATED CAPACITY OF PRODUCTION OF POWER ASSURED BY SUZLON E NERGY LIMITED IS TO BE HELD TO BE DERIVED FROM THE WINDMILL POWER UNDERTAKING ENGAGED IN GENERATION OF POWER AND IS ENTITLED FOR DEDUCTION U/S. 80IA OF THE ACT. THE PRINCIPLES LAID DOWN BY THE HONBLE ITAT ARE BI NDING ON US. MOREOVER, THE LD. DR BEFORE US HAS ALLEGED THAT THE IMPUGNED COMPENSA TION IS IN THE NATURE OF INCENTIVE WHICH IN OUR CONSIDERED VIEW IS NOT TRUE. IT IS BEC AUSE OF THE FACT THAT IT WAS GIVEN DUE TO NON-GENERATION OF UNITS AS GUARANTEED BY THE SEL . THUS BY NO STRETCH OF IMAGINATION THE COMPENSATION CAN BE EQUATED WITH TH E INCENTIVE. THUS RESPECTFULLY FOLLOWING THE ORDER OF HONBLE ITAT MUMBAI BENCHES (SUPRA) WE REVERSE THE ORDER OF AUTHORITIES BELOW. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26/05/2017 SD/- SD/- (PARTHA SARATHI CHOWDHURY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 26/05/2017 / KOLKATA ITA NO.1100/KOL/2014 A. Y. 2009-10 AHW STEEL LTD. VS. ACIT, RG-3 K OL. PAGE 5 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-AHW STEEL LTD. G.P. AGRAWAL & ASSOCIATES , 7A, KIRAN SHANKAR ROY ROAD, KOLKATA-700001 2. /RESPONDENT-ACIT, RANGE-3 P-7,CHOWRINGHEE SQ. AAYAK AR BHAWAN, KOL-69 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.PRIVATE SECRETARY HEAD OF OF FICE/DDO / /'#,