ACIT, Coimbatore V. Dr.D.Ramamurthy, Coimbatore

ITA 1805/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90688 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 20-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-10-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Rule of consistency
• Section: 37

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHE NNAI , . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1805/MDS/2013 ' ! %! / ASSESSMENT YEAR :2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II, COIMBATORE. VS. DR. D. RAMAMURTHY, PROP: M/S. THE EYE FOUNDATION, 582-A, D.B. ROAD, R.S. PURAM, COIMBATORE 641 002. [PAN: ADCPR2167E] ( &' &' &' &' /APPELLANT ) ( ()&' ()&' ()&' ()&' / RESPONDENT ) &' * + / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT ()&' * + / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE * , / DATE OF HEARING : 20.05.2015 -.% * , /DATE OF PRONOUNCEMENT : 17.07.2015 / / / / / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I, COIMBAT ORE, DATED 09.07.2013 RELEVANT TO THE ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S THE PROPRIETOR OF M/S. THE EYE FOUNDATION, COIMBATORE. THE ASSESSEE FILED THE RETURN OF INCOME BY ADMITTING TOTAL INCOME OF .1,72,96,517/- AND CLAIMED DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT TO THE TUNE OF .31,24,169/-. IN THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 2 ASSESSMENT ORDER, ON VERIFICATION OF RECORDS, THE A SSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS RECEIVED COMPENSATIO N FOR THE LOSS OF POWER GENERATION FROM THE WINDMILL MANUFACTURE M/S. ENERC ON, WHICH AMOUNTS TO .11,77,500/-. THIS AMOUNT IS ALSO INCLUDED IN THE A SSESSEE'S CLAIM OF 80IA DEDUCTION, WHICH IS NOT ACCEPTED AS 80IA DEDUCTION AS THERE IS NO DIRECT NEXUS WITH THE PRODUCTION OF WIND ENERGY. THEREAFTE R, THE ASSESSING OFFICER HAS CONSIDERED THE CLAIM OF ONLY .19,32,441/- FOR DEDUCTION UNDER SECTION 80IA OF THE ACT IN VIEW OF THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF M/S. SRI VELAYUDHASAMY SPINNING MILLS PVT. LTD. HOWEVER, HE DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE DEPARTMENT HAS PREFERRED A SPECIAL LEAVE PETITION (SPL) BEFORE THE HON'BLE SUPREME COURT. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE COMPENSATION RECEIVED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE LD. CIT(A) HAS OBS ERVED THAT THE ASSESSEE HAS ONLY RECEIVED COMPENSATION DIRECTLY FOR THE LOS S OF GENERATION OF ELECTRICITY OF .6,77,500/-, IT HAS TO BE CONSIDERED FOR 80IA PURPO SE. HE FURTHER OBSERVED THAT COMPENSATION INCOME HAS PROXI MATE CONNECTION WITH THE BUSINESS OF GENERATION OF POWER AND IS AN INCOM E IN THE BUSINESS OF THE ASSESSEE AND IT IS ELIGIBLE FOR 80IA DEDUCTION. THE BALANCE AMOUNT OF .5 LAKHS RECEIVED ON ACCOUNT OF ADJUSTMENT OF THE COST OF THE WIND MILL CANNOT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 3 BE CONSIDERED FOR 80IA DEDUCTION. IN SO FAR AS CLAI M OF THE ASSESSEE IN RESPECT OF .19,32,441/- IS CONCERNED, THE LD. CIT(A), BY FOLLO WING THE DECISION OF M/S. SRI VELAYUDHASAMY SPINNING MILLS P VT. LTD. V ACIT 231 CTR 368, DIRECTED THE ASSESSING OFFICER TO CALCULATE TH E DEDUCTION UNDER SECTION 80IA OF THE ACT AND DECIDED IN FAVOUR OF THE ASSESS EE. 4. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MAT TER IN APPEAL BEFORE THE TRIBUNAL. THE FIRST GROUND OF THE REVENUE IS RE LATING TO DELETION OF ADDITION IN RESPECT OF .6,77,500/-. SO FAR AS THIS AMOUNT IS CONCERNED, TH E LD. DR HAS SUBMITTED THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT THIS AMOUNT WAS RECEIVED BY THE A SSESSEE FROM M/S. ENERCON LTD. FOR NON-PERFORMANCE OF WINDMILL AS PER THE STANDARDS. THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSEE IS N OT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND ACCORDINGLY, NO DEDUCTIO N CAN BE ALLOWED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE DELHI BENCH OF ITAT IN THE CASE OF MAGNUM POWER GENERATION LTD. V. DCIT (2011) 11 ITR 0493. HE HAS ALSO RELIED ON THE DECISION IN THE CASE OF ITO V. E.A. INFRASTRUCTURE OPERATIONS (P) LTD. (2011) 135 TTJ (MUMBAI) 239. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 4 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ONLY I SSUE FOR OUR CONSIDERATION IS WHETHER THE COMPENSATION RECEIVED BY THE ASSESSE E FOR THE LOSS OF POWER GENERATION FROM THE WINDMILL MANUFACTURER M/S. ENER CON LTD. IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT OR NOT. ACC ORDING TO THE ASSESSING OFFICER, THE CLAIM OF THE ASSESSEE IN RESPECT OF TH E COMPENSATION RECEIVED FROM M/S. ENERCON LTD. IS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA. HOWEVER, THE LD. CIT(A) HAS HELD THAT THERE IS PROX IMATE CONNECTION WITH THE BUSINESS OF GENERATION OF POWER AND IT IS AN INCOME IN THE BUSINESS OF THE ASSESSEE. WE FIND THAT THE COMPENSATION AMOUNT RECE IVED BY THE ASSESSEE FROM M/S. ENERCON LTD. IS ON ACCOUNT OF NON-FUNCTIO NING OF WINDMILL FROM THE MANUFACTURER M/S. ENERCON LTD. THE ASSESSEE CAN CLA IM DEDUCTION UNDER SECTION 80IA FOR GENERATION OF POWER THROUGH WINDMI LL. THE COMPENSATION RECEIVED BY THE ASSESSEE IS FOR THE NON-PERFORMANCE OF THE WINDMILL AS PER THE EXPECTED STANDARDS. THEREFORE, THE COMPENSATION RECEIVED BY THE ASSESSEE IS NOT DERIVED FROM THE INDUSTRIAL UNDERTA KING I.E. WINDMILL. 80IA DEDUCTION IS ALLOWABLE ONLY IN CONNECTION WITH INCO ME DERIVED FROM GENERATION OF POWER BY THE WINDMILL. IN THIS CASE, WINDMILL SUPPLIED BY M/S. ENERCON LTD. WAS NOT PROPERLY FUNCTIONING THEREBY T HERE IS LOSS OF GENERATION OF POWER. THEREFORE, ALTOGETHER THE AMOUNT RECEIVED BY THE ASSESSEE HAS NO DIRECT NEXUS WITH THE POWER GENERATION OF ASSESSEE S WINDMILL. ACCORDINGLY, IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 5 7. SO FAR AS CASE LAW RELIED ON BY THE ASSESSEE IN THE CASE OF MAGNUM POWER GENERATION LTD. V. DCIT (SUPRA) IS CONCERNED, IN THIS CASE, THE DEEMED GENERATION OF POWER AS PER THE AGREEMENT ENT ERED INTO WITH STATE GOVERNMENT UNDERTAKING FOR SUPPLY OF ELECTRICITY IS ENTITLED TO DEDUCTION UNDER SECTION 80IA. HOWEVER, THIS CASE LAW HAS NO A PPLICATION TO THE FACTS OF THE PRESENT CASE. 8. IN THE CASE OF ITO V. E.A. INFRASTRUCTURE OPERA TIONS (P) LTD. (SUPRA), THE BOMBAY BENCH OF THE TRIBUNAL HAS OBSERVED THAT HE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH MCGM FOR PAYMENT OF MINIMUM GUARANTEE OF TREATING 5000 KG OF BMW. THE CASE OF THE ASSESSI NG OFFICER IS THAT THE ASSESSEE HAS ONLY TREATED 4000 KG OF BMW AND THEREF ORE HELD THAT THE ASSESSEE IS ELIGIBLE FOR 4000 KG AND NOT 5000 KG. H OWEVER, THE TRIBUNAL HAS HELD THAT THE AMOUNT WHICH HAS BEEN RECEIVED BY THE ASSESSEE REPRESENTING THE EXCESS AMOUNT OVER AND ABOVE ACTUAL WORK DONE U PTO THE MINIMUM GUARANTEED AMOUNT IN RESPECT OF TREATMENT OF BMW PU RSUANT TO CONTRACT WITH MCGM ASSURING MINIMUM 5000 KG OF BMW LOAD. IT HAS N OT BEEN CONTROVERTED THAT IN THE EARLIER YEAR, THE ASSESSEE CLAIMED DEDUCTION ON THE ENTIRE AMOUNT GUARANTEED AMOUNT INCLUDING SUCH EXCE SS REALIZATION, WHICH WAS PROMPTLY ALLOWED BY THE ASSESSING OFFICER WITHO UT ANY FUSS. WITHOUT ANY DIFFERENCE IN THE FACTS OF THIS YEAR VIS-A-VIS THE EARLIER YEAR, THE PRINCIPLE OF CONSISTENCY SHOULD HAVE COME TO PLAY INHIBITING THE ASSESSING OFFICER FROM I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 6 GOING AHEAD WITH THE DISALLOWANCE. IT WAS FURTHER O BSERVED THAT THE RELATION BETWEEN THE INCOME FROM THE NOTIONAL TREATMENT OF B MW WITH THE UNDERTAKING IS DIRECT, AS IT IS SO IN THE CASE OF A CTUAL TREATMENT OF BMW AND THEREFORE, ENTIRE RECEIPT INCLUDING MINIMUM GUARANT EED CHARGES RECEIVED BY THE ASSESSEE WAS FLOWING FROM THE CONTRACT ENTERED INTO BY THE ASSESSEE AND THEREFORE, THE SAME WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4). 9. WE FIND THAT IN THE PRESENT CASE, THE COMPENSAT ION RECEIVED BY THE ASSESSEE IS FOR NOT FUNCTIONING OF THE WINDMILL TO THE EXTENT OF AS EXPECTED BY THE ASSESSEE. THEREFORE, THE AMOUNT RECEIVED BY THE ASSESSEE CANNOT BE SAID THAT IT IS DERIVED FROM INDUSTRIAL UNDERTAKING . THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 8 0IA OF THE ACT. IN VIEW OF THE ABOVE, THE GROUND RAISED BY THE REVENUE IS ALLO WED. THE ABOVE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE H AS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. 10. SO FAR AS ANOTHER GROUND RAISED BY THE REVENUE IN RESPECT OF THE AMOUNT OF .19,32,441/-, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF SRI VELAYUDHASAMY SPINNING MILLS PVT. LTD. V ACI T (SUPRA). THE LD. CIT(A), BY FOLLOWING THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, HAS RIGHTLY DIRECTED THE ASSESSING OFFICER T O CALCULATE THE DEDUCTION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NO. .. .1805 1805 1805 1805/M/ /M/ /M/ /M/1 11 13 33 3 7 UNDER SECTION 80IA OF THE ACT. ACCORDINGLY, THIS GR OUND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STAND S PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 17 TH OF JULY, 2015 AT CHENNAI. SD/- SD/- (CHANDRA POOJARI) AC COUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 17.07.2015 VM/- / * (',01 21%, /COPY TO: 1. &' / APPELLANT, 2. ()&' / RESPONDENT, 3. 3 ( ) /CIT(A), 4. 3 /CIT, 5. 14 (',' /DR & 6. 5! 6 /GF.