ITO, CHENNAI V. OPG Renewable Energy Pvt Ltd., CHENNAI

ITA 1940/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8138 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 29-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-09-2015
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: V RA VICHANDRAN
• Keywords: Retrospective amendment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.1940 & 1941/MDS/2015 / ASSESSMENT YEARS : 2010-11 & 2011-12 THE INCOME TAX OFFICER COMPANY WARD 5(1) CHENNAI VS. M/S OPG RENEWABLE E NERGY PVT. LTD NO.6, SARDAR PATEL ROAD GUINDY, CHENNAI 600 032 [PAN AAACO 9714 A ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : DR. MILIND MADHUKAR BHUSARI, CIT /RESPONDENT BY : SHRI V . RAVICHANDRAN, CA / DATE OF HEARING : 29 - 12 - 2015 ! / DATE OF PRONOUNCEMENT : 05 - 02 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-8, (I/C- 3), CHENNAI, DATED 17.6.2015 FOR ASSESSMENT YEARS 2 010-11 AND 2011- 12. SINCE COMMON ISSUE ARISES FOR CONSIDERATION I N BOTH THE APPEALS, WE HEARD THEM TOGETHER AND DISPOSING OF THE SAME B Y THIS COMMON ORDER. ITA NOS.1940 & 1941/15 :- 2 -: 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEDUCTIO N U/S 80IA OF THE ACT. 3. DR. MILIND MADHUKAR BHUSARI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF GENERATION OF POWER FROM A UNIT AT OPG NAGAR, PERIYAOBULAPURAM VILLAGE, GUMMIDIPOONDI. ACCORDING TO THE LD. DR, THE POWER PLANT WAS SET UP M/S KANISHK STEEL INDUST RIES LTD. THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S KANISHK STEEL INDUSTRIES LTD. FOR OPERATING THE POWER PLANT. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IS NOT THE OWNER OF THE POWER PLANT, THEREFORE, IT IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. HOWEV ER, THE CIT(A) BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN I.T.A.NO. 2058/MDS/2 013 DATED 29.5.2015, FOUND THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. 4. REFERRING TO EXPLANATION TO SEC. 80IA OF THE ACT WH ICH WAS INTRODUCED BY FINANCE ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 1.4.2000, THE LD. DR SUBMITTED THAT SEC. 80IA MAY N OT BE APPLICABLE IN RELATION TO A BUSINESS WHICH IS IN THE NATURE OF WO RKS CONTRACT. IN THIS CASE, ACCORDING TO THE LD. DR, THE ENTIRE POWER PLA NT WAS SET UP BY ITA NOS.1940 & 1941/15 :- 3 -: M/S KANISHK STEEL INDUSTRIES LTD. AND THE ASSESSEE WAS ENTRUSTED THE TASK OF OPERATING THE POWER PLANT. THE POWER GENER ATED BY THE POWER PLANT HAS TO BE PARTLY SUPPLIED BY THE ASSESSEE-COM PANY. THEREFORE, IT IS A CLEAR CASE OF WORKS CONTRACT, HENCE, THE ASSE SSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 5. ON THE CONTRARY, SHRI V. RAVICHANDRAN, LD. REPRESEN TATIVE FOR THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, PLACING RELIANCE ON TH E JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF M/S K.A INFRASTRUC TURE PVT. LTD. VS DIRECTOR (ITA-I)CBDT AND ANOTHER, WRIT PETITION NO. 11871 OF 2011, DATED 28.10.2011, FOUND THAT DEDUCTION U/S 80IA IS AVAILABLE TO AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER. THE TRIBUNAL FURTHER FOUND THAT THERE IS NO RESTRICTION FOR GRANT OF DEDUCTION U/S 80IA ONLY TO THE PERSON WHO OWNS THE POWER PLANT. REFERRING TO THE SUBMISSION OF THE LD. DR, THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEM ENT WITH M/S KANISHK STEEL INDUSTRIES LTD. FOR OPERATION AND GEN ERATION OF ELECTRICITY. THE LD. REPRESENTATIVE FURTHER CLARIF IED THAT IT IS NOT A CASE OF WORKS CONTRACT. IT IS A SIMPLE CASE OF OPERATIN G THE POWER PLANT FOR GENERATION OF ELECTRICITY. THE POWER PLANT WAS SET UP BY M/S KANISHK STEEL INDUSTRIES LTD. AND THERE IS NO WORK REMAINS TO BE EXECUTED BY THE ASSESSEE IN RESPECT OF FORMATION OF THE POWER PLANT. ACCORDING TO ITA NOS.1940 & 1941/15 :- 4 -: THE LD. REPRESENTATIVE, THE TERM WORKS CONTRACT M EANS A WORK HAS TO BE EXECUTED BY UTILIZING THE RAW MATERIAL SUPPLIED BY A THIRD PARTY. THE RESULTANT PRODUCT HAS TO BE HANDED OVER TO THE PERSON WHO IS SUPPLYING THE RAW MATERIAL. THE PERSON WHO IS MANU FACTURING THE GOODS, IS ENTITLED ONLY FOR A COMMISSION. IN THE CASE BEFORE US, ACCORDING TO THE LD. REPRESENTATIVE, THE POWER PLAN T WAS INSTALLED BY M/S KANISHK STEEL INDUSTRIES LTD. THE ASSESSEE WA S ENTRUSTED THE TASK OF OPERATING THE POWER PLANT. AS PER THE AGRE EMENT, THE ASSESSEE HAS TO SUPPLY 9 MILLION UNITS OF POWER IN EVERY FINANCIAL YEAR TO M/S KANISHK STEEL INDUSTRIES LTD. THE EXCESS PO WER GENERATED BY THE ASSESSEE OVER AND ABOVE 9 MILLION UNITS CAN BE SOLD TO THIRD PARTIES INCLUDING TAMILNADU ELECTRICITY BOARD. BY PRODUCING A COPY OF THE AGREEMENT DATED 26.4.2008, THE LD. REPRESENTATI VE SUBMITTED THAT THE ASSESSEE WAS GIVEN A LICENCE TO OPERATE THE PO WER PLANT FOR A CONSIDERATION OF 9 MILLION UNITS OF POWER TO BE SUP PLIED TO M/S KANISHK STEEL INDUSTRIES LTD. IN EVERY FINANCIAL YEAR. TH EREFORE, IT IS NOT A CASE OF WORKS CONTRACT AS CLAIMED BY THE LD. DR. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THERE WAS AN AGREEMENT FOR LICENCE BETWEEN THE ASSESSEE AND ONE M/S KANISHK STEEL INDUSTRIES LTD. THIS AGREEMENT OF LICENCE EM POWERS THE ASSESSEE-COMPANY TO OPERATE THE POWER GENERATING UN IT OWNED BY M/S ITA NOS.1940 & 1941/15 :- 5 -: KANISHK STEEL INDUSTRIES LTD. ON IDENTICAL SET OF FACTS, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, THIS TRIBUNAL IN I.T.A.NO. 2058/MDS/2013 DATED 29.5.2015, FOUND THAT THE ASSE SSEE NEED NOT BE THE OWNER OF THE POWER PLANT FOR CLAIMING DEDUCTION U/S 80IA OF THE ACT. AFTER PLACING RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF M/S K.A INFRASTRUCTURE PVT. LTD. (SU PRA), THIS TRIBUNAL FOUND THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. IN FACT, THE CIT(A), AFTER REPRODUCING THE OBSERVAT ION MADE BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2009-10, ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IA OF THE ACT. 7. NOW FOR THE ASSESSMENT YEARS UNDER CONSIDERATION, T HE LD. DR IS RAISING AN ADDITIONAL GROUND WITH REGARD TO WORKS CONTRACT ON THE BASIS OF EXPLANATION TO SEC. 80IA INTRODUCED BY FINANCE ACT, 2009. WE HAVE CAREFULLY GONE THROUGH THE EXPLANATION INTR ODUCED BY FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 W HICH READS AS FOLLOWS: EXPLANATION FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION ( 4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PE RSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXE CUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SE CTION(1)] ITA NOS.1940 & 1941/15 :- 6 -: IN VIEW OF THIS EXPLANATION, WHEN THE BUSINESS REFE RRED TO IN SEC. 80IA IS IN THE NATURE OF WORKS CONTRACT AWARDED BY AN Y PERSON, THEN THE PROVISIONS OF SEC. 80IA OF THE ACT MAY NOT BE APPLI CABLE AT ALL. AS RIGHTLY CLARIFIED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, WORKS CONTRACT MEANS EXECUTION OF A WORK BY USING THE RA W MATERIAL SUPPLIED BY A THIRD PARTY ON PAYMENT OF A COMMISSIO N. THE MANUFACTURED GOODS SHALL BE SUPPLIED TO THE PERSON WHO IS GIVING THE WORKS CONTRACT. IN THE CASE BEFORE US, THE ENTIRE POWER PLANT WAS ESTABLISHED BY M/S KANISHK STEEL INDUSTRIES LTD. T HE ASSESSEE WAS GIVEN THE LICENCE TO OPERATE AND GENERATE ELECTRICI TY BY AN AGREEMENT DATED 26.4.2008. THE CONSIDERATION OF THE AGREEMEN T IS SUPPLY OF 9 MILLION UNITS OF POWER GENERATED IN EVERY FINANCIAL YEAR. IF THE PRODUCTION OF ELECTRICITY IS LESS THAN 9 MILLION UN ITS IN ANY FINANCIAL YEAR THEN THE ASSESSEE SHALL COMPENSATE TO M/S KANISHK STEEL INDUSTRIES LTD. BY AN AMOUNT EQUAL TO THE VALUE OF SUCH SHORTF ALL OF ELECTRICITY ON THE BASIS OF THE RATE ON WHICH TAMILNADU ELECTRICIT Y BOARD SUPPLIES ELECTRICITY. EVEN THOUGH THERE IS NO EXPRESS AGREE MENT IN RESPECT OF THE ELECTRICITY GENERATED OVER AND ABOVE 9 MILLION UNITS IN EVERY FINANCIAL YEAR, THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SUPPLY THE SAME TO M/S KANISHK STEEL INDUSTRIES LTD . IN OTHER WORDS, THE ASSESSEE MAY USE THE ELECTRICITY GENERATED OVE R AND ABOVE 9 MILLION UNITS IN ANY FINANCIAL YEAR IN ACCORDANCE W ITH ITS DISCRETION. THE ITA NOS.1940 & 1941/15 :- 7 -: AGREEMENT FOR LICENCE DOES NOT PROVIDE FOR PAYMENT OF ANY COMMISSION TO THE ASSESSEE BY M/S KANISHK STEEL INDUSTRIES LT D. IN THOSE FACTS AND CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT IT IS NOT A CASE OF WORKS CONTRACT AS CONTENDED BY THE LD . DR. IT IS A SIMPLE CASE OF A LICENCE TO OPERATE THE POWER PLANT SET UP BY M/S KANISHK STEEL INDUSTRIES LTD. SINCE THE INCOME OF THE ASS ESSEE INCLUDES PROFITS AND GAINS DERIVED FROM GENERATION OF POWER, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN THE CASE OF M/S K.A INFRASTRUCTURE PVT. LTD. (SU PRA), THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THERE FORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 5 TH FEBRUARY, 2016 RD ITA NOS.1940 & 1941/15 :- 8 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF