Bharuch Enviro Infrastructure Ltd., Bharuch V. The Dy.CIT.,Bharuch Circle, Bharuch

ITA 2223/AHD/2010

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9089 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGADISH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Revenue expenditure
• Section: 143(3); 115JB; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS. 2223 & 2290/AHD/2010 (ASSESSMENT YEAR:2011-12) BHARUCH ENVIRO INFRASTRUCTURE LTD., 117-118, G.I.D.C. ESTATE, ANKLESHWAR, GUJARAT 393002 APPELLANT VS. DEPUTY COMMISSIONER OF INCOME-TAX, BHARUCH CIRCLE, BHAURCH RES PONDENT / CROSS APPELLANT PAN: AAACB8075E /BY ASSESSEE : SHRI S. N. SOPARKAR, A.R. /BY REVENUE : SHRI JAGADISH, SR. D.R. /DATE OF HEARING : 13.01.2017 /DATE OF PRONOUNCEMENT : 27.02.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE REVENUE AND ASSESSEE HAVE FILED THE INSTANT CRO SS APPEALS FOR ASSESSMENT YEAR 2007-08 AGAINST CIT(A)-VI, BARODAS ORDER DATED 05.04.2010, PASSED IN APPEAL NO. CAB/VI-359/09-10, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. 2. WE COME TO REVENUES APPEAL ITA NO.2290/AHD/2010 . ITS FIRST SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN FACTS AS WELL AS LAW IN ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 2 - DIRECTING THE ASSESSING OFFICER TO COMPUTE ASSESSEE S DEDUCTION CLAIM U/S.80IA OF THE ACT SEPARATELY FOR ITS LAND FILLING AND INCINERATOR PROJECTS; SEPARATELY. 3. WE COME TO RELEVANT FACTS. THIS ASSESSEE IS A C OMPANY ENGAGED IN SOLID WASTE MANAGEMENT. IT DUMPS THE SOLID/SEMI SO LID WASTE IN SPECIFICALLY DUG PITS FOR THE VERY PURPOSE AS WELL AS BURNS THE SAME AT A VERY HIGH TEMPERATURE OF AROUND 1400CENTIGRADE. THIS LATER P ROCESS IS CALLED INCINERATOR WHEREIN INSTALLATION OF MACHINERY IS RE QUIRED AT THE SITE IN QUESTION. THE ASSESSING OFFICER FRAMED A REGULAR A SSESSMENT ON 22.12.2009 HOLDING THAT THE ABOVE TWO PROJECTS I.E. LAND FILLI NG AND INCINERATOR AMOUNTED TO A COMPOSITE PROJECT FOR TREATMENT OF SOLID WASTE MEANING THEREBY THAT THE SAME WERE NOT TO BE TREATED AS SEPARATE PROJECTS SO AS TO BE INDEPENDENTLY CONSIDERED FOR THE PURPOSE OF GRANTING SECTION 80IA DEDUCTION. 4. THE CIT(A) REVERSES ASSESSING OFFICERS FINDINGS AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSION OF THE ID. AR AND FACTS OF THE CASE. ON PERUSAL OF VARIOUS APPELLATE ORDERS PASSED .BY MY P REDECESSORS, IT IS SEEN THAT THE APPELLANT HAS BEEN ALLOWED DEDUCTION U/S.80IA OF TH E ACT SINCE A.Y.2002-03 IN RESPECT OF ITS LAND FILLING PROJECT-1. FURTHER, ON PERUSAL OF NOTES TO COMPUTATION FOR ASSESSMENT YEAR 2005-06 AND 2006-07, THE ASSESS EE HAS MADE ITS CLAIM FOR ALLOWABILITY OF DEDUCTION U/S.80IA OF THE ACT FOR I TS INCINERATOR UNIT. IT IS ALSO BROUGHT TO MY NOTICE THAT THE ASSESSING OFFICER HAS CONSIDERED THIS ISSUE OF CLAIM IN PARA NO.-4-1 IN THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT FOR A.Y 2006- 07. FURTHER, IN SUPPORT, THE APPELLANT HAS RELIED O N DECISION BY MUMBAI BENCH-1 IN THE CASE OF - JCIT VS. ASSOCIATED CAPSULES PVT. LTD (2008-TIOL- 247-ITAT MUM). - CIT VS. ANAND AFFILIATES ( 2008-TIOL-662-HC- P & H-IT), THE RATIO OF WHICH IS APPLIED - TEXTILES MACHINERY CORPORATION LTD VS. CIT (1977 -107-ITR- 195(SC) - CIT VS. BRIGADE ENTERPRISES (P) LTD ( MANU / IL/ 0019/2008) RELYING ON THE SAID DECISIONS, THE APPELLANT ESTABL ISHES ASJJNDER THAT THE APPELLANT HAS TWO DIFFERENT UNDERTAKINGS AND EACH OF THEM FUL FILS INDEPENDENTLY ALL THE CONDITIONS AS STIPULATED U/S.80IA OF THE ACT; ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 3 - SR.NO. STIPULATED CONDITIONS UNDER THE PROVISION OF SECTION 80IA (4) OF THE ACT; UNDERTAKING WISE DEDUCTION CLAIMED U/S.80IA(4) OF THE ACT 1 PARTICULARS OF UNDERTAKINGS LAND FILLING PROJECT- I INCINERATOR UNIT 2- 80IA(2) ALLOWABILITY OF DEDUCTION 10 OUT OF 20 YEARS. 10 OUT OF 20 YEARS. 3-80)IA(4)(A) OWNERSHIP STATUS OF THE ENTERPRISES/ UNDERTAKING OWNED BY THE COMPANY. OWNED BY THE COMPANY. (80)IA(4)(B) AGREEMENT WITH THE CENTRAL GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY TO CARRY OUT INFRASTRUCTURE FACILITIES; I. VIDE AGREEMENT DATED 15 TH MAY, 2002 WITH GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION II. GUJARAT POLLUTION CONTROL BOARD HAS GIVEN PERMISSION VIDE LETTER DATED 22 ND JANUARY, 1998; I. VIDE AGREEMENT DATED 21 ST NOVEMBER, 2005 WITH GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION. II. GUJARAT POLLUTION CONTROL BOARD HAS GIVEN PERMISSION VIDE LETTER DATED 19TH NOVEMBER,2004; LAND AREA 59,040 SQ.MT. 74,260.93 SQ.MT (80)IA(4)(C) DATE OF COMMENCEMENT OF OPERATING AND MAINTAINING INFRASTRUCTURE FACILITIES 01 ST APRIL, 1998 22 ND JANUARY,2005 FIRST YEAR OF CLAIM 2002-03 2007-08 4. INPUT SOLID WASTES SOLID WASTES OF HAZARDOUS NATURE AND HAVING HIGHLY TOXIC CONTENTS. 5. DESCRIPTION OF PLANT AND MACHINERY. SEPARATE LAND IS ACQUIRED HAVING AREA OF 59,040 SQ.MTS. NEW INCINERATOR PLANT AND OTHER ACCESSORIES ACQUIRED, ON A SEPARATE LAND OF 74,260.93 SQ. MTS ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 4 - 6. DESCRIPTION OF PROCESS CARRYING OUT WASTES TO THE SITE OF PITS, DUMPING OF WASTES AND PREPARATION OF PIT COVERING AS PER CRITERIA PUBLISHED BY GPCB./ CPCB THE WASTES ARE BURNT IN INCINERATOR THROUGH A DIFFERENT PROCESS WHERE WASTES WHICH CAN NOT BE TREATED THROUGH DUMPING INTO PITS AFTER CONSI DERING TOXIC AND OTHER H AZARDOUS ELEMENTS IN WASTES. THUS, I FIND MERIT IN THE ASSESSEE'S SUBMISSION WHE REIN IT IS ESTABLISHED THAT BOTH THE UNITS ARE DIFFERENT AND INDEPENDENT BY WAY OF P ROCESS, METHOD, MECHANICS, DIFFERENT MACHINERY/ INFRASTRUCTURE, HAVING ENTERED INTO SEPARATE AGREEMENTS WITH THE AUTHORITIES CONCERNED. I ALSO HAVE GONE THROUGH VARIOUS CASE LAWS RELIED BY THE ASSESSEE WHICH SQUARELY COVER THE ISSUES UNDER CONS IDERATION. IN THE LIGHT OF AFORESAID DISCUSSION AND ON THE FACTS OF THE CASE A ND RESPECTFULLY FOLLOWING THE DECISION RELIED BY THE ASSESSEE, I DIRECT THE ASSES SING OFFICER TO RE-COMPUTE THE DEDUCTION U/S.801A OF THE ACT SEPARATELY FOR BOTH T HE UNITS AND ALLOW THE SAME ACCORDINGLY. 5. WE HAVE HEARD RIVAL SUBMISSIONS. IT EMERGES THA T THE ASSESSEE HAS AMPLY DEMONSTRATED DURING THE COURSE OF LOWER PROCE EDINGS THAT TWO PROJECTS IN QUESTION ARE IN FACT SEPARATE ONES. WE AFFORDED AMPLY OPPORTUNITY TO LEARNED DEPARTMENTAL REPRESENTATIVE TO REBUT ALL TH E ABOVE EXTRACTED EVIDENCE / PLEADINGS TO THE EFFECT THAT THE TWO PRO JECTS I.E. LAND FILLING AND INCINERATOR ONE ARE VERY MUCH SEPARATE. THE REVENU E FAILS TO QUOTE ANY MATERIAL AGAINST THE SAME. WE ACCORDINGLY FIND NO REASON TO INTERFERE WITH THE CIT(A)S CONCLUSION UNDER CHALLENGE. THIS FORM ER SUBSTANTIVE GROUND THUS FAILS. 6. THE REVENUES LATTER SUBSTANTIVE GROUND SEEKS TO RESTORE THE ADDITION OF RS.10,34,19,765/-COLLECTED BY THE ASSESSEE IN TH E NATURE OF NON REFUNDABLE RECEIPTS TREATED INCOME IN THE COURSE OF ASSESSMENT AND DELETED IN LOWER APPELLATE PROCEEDING. THE ASSESSING OFFICER INTER ALIA WAS OF THE VIEW THAT THE ASSESSEE COULD NOT REFUSE SOLID WASTE RECEIPT I F ACCOMPANIED WITH PAYMENT ONCE THE CARRIER REACHED ITS GODOWN OR SITE , ITS CLIENT MADE PAYMENT ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 5 - AFTER DEDUCTING TDS THEREBY RECORDING IT IN ITS BOO KS OF ACCOUNTS AS REVENUE EXPENDITURE, THE BURNING OF SLUDGE IN QUESTION WAS TO BE COMPLETED AS ASSESSEES BEHEST, IT CLAIMED ALL EXPENSES PERTAINI NG TO THE SAID WASTE DISPOSAL ACTIVITY AND HE FURTHER DENIED ASSESSEES CONTENTIO N THAT ALL OPERATING EXPENSES IN ITS CASE ARE INCURRED IRRESPECTIVE OF T HE FACT WHETHER OR NOT THE SLUDGE WASTE STOOD BURNT OR STORED IN GODOWN. THE ASSESSING OFFICER THEREFORE TREATED THE ENTIRE ADVANCE SUM AS INCOME AS WELL AS FOR THE PURPOSE OF COMPUTING BOOK PROFIT. 7. THE CIT(A) ACCEPTS ASSESSEES CONTENTIONS AGAINS T THE SAID ADDITION AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSION OF THE ID. AR AND FACTS OF THE CASE. I FIND THAT THE APPELLANT IS CONSISTENTLY FOLLOWING THE ME RCANTILE METHOD OF ACCOUNTING SINCE INCEPTION OF THE COMPANY AND FOLLOWING ACCOUNTING STANDARD AS-9 WHICH IS BEING DULY DISCLOSED IN THE NOTES FORMING PART OF THE ANNUAL ACCOUNTS, THE INCOME OF THE APPELLANT ACCRUES ONLY WHEN THE WASTE S RECEIVED IS BURNT. ACCORDINGLY, THE APPELLANT HAS RIGHTLY ACCOUNTED TH E PROCEEDS OF THE SOLID WASTES WHICH ARE BEING NOT BURNT TILL THE CLOSE OF YEAR AS ADVANCE IN THE ACCOUNTS. FURTHER, I FIND THAT IN THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT, THE ASSESSING OFFICER HAS NEITHER DISCUSSED NOR GIVEN F INDINGS THAT ON THE ADOPTION OF ACCOUNTING STANDARD AS-9 IN RESPECT OF THE SPECIFIC NATURE OF BUSINESS OF THE APPELLANT, THE ACCOUNTS GIVE INCORRECT OR IMPROPER RESULTS SO AS TO REJECT THE METHOD ADOPTED FOR RECOGNIZING THE REVENUE IN VIEW OF THE PROVISION OF SECTION 145 OF THE ACT. THE APPELLANT HAS RELIED UPON THE FOLLOWING DECISIO NS; - THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF TREASURE ISLAND RESORTS (P) LTD. VS. DCIT ( 90 ITD 814)(HYD) - BY THE APEX COURT IN THE CASE OF CALCUTTA CO. LT D VS. CIT (1959) 37 ITR. I FIND THAT THE FORESAID DECISIONS ARE CORRECTLY SU PPORT THE FACTS OF THE INSTANT CASE AND ACCORDINGLY, RELYING ON THE AFORESAID SUBMISSIO NS OF THE APPELLANT AND FACTS OF THE CASE, I DIRECT THE ASSESSING OFFICER TO TREAT T HE AMOUNT OF RS.10,34,19,765/- AS ADVANCE RECEIVED FROM CUSTOMERS / MEMBERS INSTEAD O F AS INCOME IN COMPUTING BOTH NORMAL INCOME AS WELL AS BOOK PROFIT U/S.115JB OF THE ACT. 8. HEARD BOTH SIDES. THE RELEVANT ISSUE BETWEEN T HE PARTIES IS AS TO WHETHER THE ASSESSEES ADVANCE RECEIPTS FROM ITS CU STOMERS AMOUNTING TO RS.10,34,19,765/- IN THE NATURE OF NON REFUNDABLE R ECEIPTS ARE TO BE TREATED AS ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 6 - INCOME IN ENTIRETY PERTAINING TO RELEVANT ASSESSMEN T YEAR OR NOT. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURTS DECISION IN (20 15) 15 TAXMANN.COM 429 (GUJ.) CIT VS. UNIQUE MERCANTILE SERVICES PVT. LTD. DECIDES A SIMILAR QUESTION PERTAINING TO MEMBERSHIP FEE SPREADING OVE R TO A TIME SPAN OF MORE THAN ONE ASSESSMENT YEAR TO BE TAXABLE ON PRORATA B ASIS. WE ADOPT THE SAME REASONING HEREIN AS WELL AND DIRECT THE ASSESSING O FFICER TO ASSESS THE ABOVE STATED NON REFUNDABLE RECEIPTS BY ADOPTING SIMILAR PROPORTIONATE COMPUTATION FORMULA. THIS REVENUES GROUND IS ACCORDINGLY ACCE PTED FOR STATISTICAL PURPOSES. THE REVENUE PARTLY SUCCEEDS IN ITS APPEAL ITA NO.2290/AHD/2010. 9. WE NOW PROCEED TO DEAL WITH ASSESSEES APPEAL IT A NO.2223/AHD/2010. ITS FIRST SUBSTANTIVE GROUND PLE ADS THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN EXCLUDING INTEREST INCOME OF RS.42,88,461/- AND ONE TIME MEMBERSHIP FEE FOR INCINERATOR PLAN OF RS.11.2 0 LACS FOR THE PURPOSE OF COMPUTING SECTION 80IA DEDUCTION CLAIM BY FOLLOWING HONBLE APEX COURTS DECISION IN PANDIAN CHEMICALS CASE 262 ITR 278 (SC ) THAT THE SAME COULD NOT BE HELD TO HAVE BEEN DERIVED FROM THE ABOVESTAT ED SOLID WASTE DISPOSAL PLANT. 10. HEARD BOTH SIDES. IT EMERGES THAT THE ASSESSEE S INTEREST INCOME IN QUESTION ARISES FROM FIXED DEPOSITS MAINTAIN WITH B ANK IN ORDER TO COMPLY WITH GUJARAT POLLUTION CONTROL BOARDS, NORMS, TERMS AND CONDITIONS SINCE IT HAS TO UPKEEP THE SITE IN QUESTION FOR A PERIOD OF 30YEARS OF CLOSURE DATE. BOTH THE LEARNED REPRESENTATIVES VERY MUCH AGREE TH AT A CO-ORDINATE BENCH IN ASSESSEES CASES ITSELF FOR ASSESSMENT YEARS 2002-0 3 TO 2004-05 IN ITA NOS. 733, 1424, 4389 & 4408/AHD/2007 HAS ALREADY REVERSE D SIMILAR EXCLUSION THEREBY TREATING IDENTICAL INTEREST INCOME AS ELIGI BLE PROFITS FOR THE PURPOSE OF SECTION 80IA DEDUCTION. WE QUOTE THE VERY REASONIN G HEREIN AS WELL ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 7 - ASSESSEES FORMER LIMB OF THE IMPUGNED DISALLOWANCE PERTAINING TO INTEREST INCOME. 11. WE NEXT PROCEED TO DEAL WITH THE LATTER LIMB OF ONE TIME MEMBERSHIP FEE FOR INCINERATOR PLANT (SUPRA). THERE CAN HARDLY BE ANY DISPUTE THAT THE ASSESSEE CHARGES THE ABOVE FEE FOR ITS ENROLMENTS O F MEMBERS FOR THE INCINERATOR PLANT IN QUESTION. WE OBSERVE IN THESE FACTS THAT THE SAID FEE IS VERY MUCH LIABLE TO BE TREATED AS BUSINESS PROFITS AS ACCEPTED IN ASSESSEES BOOKS AS PROFIT AND GAIN OF BUSINESS AND PROFESSION WHICH HAVE NOWHERE BEEN REJECTED IN COURSE OF THE LOWER PROCEEDINGS. WE AC CORDINGLY ACCEPT ASSESSEES ARGUMENTS AGAINST THIS LATTER EXCLUSION AS WELL. 12. THE ASSESSEES NEXT SUBSTANTIVE GROUND SEEKS TO TREAT 10% OF THE ABOVE INTEREST INCOME TOWARDS ITS EXPENDITURE. SHRI SOPAR KAR DOES NOT PRESS THE SAME IN VIEW OF OUR FINDINGS ON PRECEDING ISSUE. T HIS SUBSTANTIVE GROUND IS THUS DISMISSED AS NOT PRESSED. 13. THE ASSESSEES THIRD AND FIFTH SUBSTANTIVE GROU ND INTER ALIA PLEAD THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWIN G ITS PROVISION MADE FOR POST CLOSER EXPENSES OF RS.27,82,379/- AS WELL AS A DDING THE SAME IN ITS BOOK PROFITS COMPUTATION U/S.115JB OF THE ACT. BOTH THE LEARNED COUNSEL AGREE HEREIN AS WELL THAT THE ABOVE STATED CO-ORDINATE BE NCH DECISION HAS ALREADY DELETED IDENTICAL DISALLOWANCE IN EARLIER ASSESSMEN T YEARS (SUPRA) AND LATTER ISSUE OF SECTION 115JB IS RENDERED ACADEMIC. WE A PPRECIATE THIS FAIR STAND TO ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUNDS. 14. THE ASSESSEES FOURTH & SIXTH SUBSTANTIVE GROUN D CHALLENGE DISALLOWANCE OF PROVISION MADE FOR PIT COVERING EXP ENSES OF RS.1,40,83,813/- AS WELL AS INCLUSION THEREOF IN COMPUTING SECTION 1 15JB BOOK PROFITS. WE NOTICE HEREIN AS WELL THAT IT HAS SUCCEEDED ON THE VERY ISSUES BEFORE THE ITA NOS. 2223 & 2290/AHD/2010 (BHARUCH ENVIRO INFRA STRUCTURE LTD. VS. DCIT) A.Y. 2007-08 - 8 - TRIBUNAL IN EARLIER ASSESSMENT YEARS (SUPRA). THE REVENUE FAILS TO REBUT ALL THESE FACTUAL AND LEGAL DEVELOPMENTS POST FACTO FIL ING OF THE INSTANT APPEALS. WE THEREFORE ACCEPT ASSESSES THESE TWO GROUNDS AS WELL. ITS APPEAL ITA NO.2223/AHD/2010 SUCCEEDS. 15. THE REVENUES APPEAL ITA NO.2290/AHD/2010 IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS ASSESSEES CROSS APPEA L ITA NO.2223/AHD/2010 IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF FEBRUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 27/02/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0