SURESH S. KHILARI, NAVI MUMBAI V. JTCIT RG 22)3), MUMBAI

ITA 4003/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9039 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 05-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B D PATIL DR
• Assessee Lawyers: PRASAD RAO
• Section: 143(3); 234B; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , . / BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 4003/M/2009 / ASSESSMENT YEAR 2005-06 SHRI SURESH S. KHILARI, 101, PRABHAT CENTRE ANNEXE, SECTOR-6, CBD BELAPUR, NAVI MUMBAI 400 614 PAN: AAJPK 7584 J VS. JT. CIT, RANGE 22(3), MUMBAI. ( / APPELLANT ) ( ! / RESPONDENT ) ' / APPELLANT BY : SHRI PRASAD RAO ! # ' /RESPONDENT BY : SHRI B.D. PATIL (DR) # $%& / DATE OF HEARING : 05-12-2012 '( # $%& / DATE OF PRONOUNCEMENT : 28-12-2012 )* / O R D E R PER RAJENDRA, AM THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT . 28-04-2009 PASSED BY THE CIT(A)-XXII, MUMBAI. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE: 1. THE HONBLE CIT(A) XXII MUMBAI SERIOUSLY ERRED I N LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IN NOT ALLOWING ADMISSI BLE DEDUCTION CLAIMED U/S 80JJA OF RS. 14,13,142/-, ALLEGEDLY DISALLOWED BY THE LEARNED A. O, WHILE ORDERING THE ASSESSMENT AND THEREBY CONFIRMING AND UPHOLDING THE IMPUGNED ACTIO N OF THE LEARNED A.O. THE ADMISSIBLE DEDUCTION IS FULLY ALLOWABLE IN VIEW OF THE DETAILE D AND EXHAUSTIVE SUBMISSIONS MADE AND BE ALLOWED AS SUCH, IN FULL AS CLAIMED. 2. THE HONBLE CIT(A) XXII, MUMBAI SERIOUSLY ERRED IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, IN CONFIRMING AND UPHOLDI NG THE ALLEGED ARBITRARY, LUMP SUM DISALLOWANCE ON ESTIMATE BASIS, OF RS.3,00,000/- OU T OF VARIOUS EXPENSES. THE SAID IMPUGNED ITA NO. 4003/M/2009 SHRI SURESH S. KHILARI 2 DISALLOWANCE BE DELETED IN VIEW OF THE DETAILED SUB MISSIONS ADVANCED. WITHOUT PREJUDICE TO THIS MAIN CONTENTION, THE ALLEGED DISALLOWANCE IS H IGHLY EXCESSIVE AND BE REDUCED SUBSTANTIALLY. 3. YOUR APPELLANT DENIES ANY LIABILITY IN RESPECT O F INTERESTS CHARGED U/S. 234B AND 234C AND OTHER APPLICABLE PROVISIONS OF LAW AND THE SAME BE DIRECTED TO BE DELETED, BEING CONSEQUENTIAL. 4. YOUR APPELLANT CRAVES LEAVE, TO ADD TO, AMEND OR ALTER THE AFORESAID GROUNDS AND / OR ADDUCE FURTHER EVIDENCE BEFORE OR AT THE TIME OF HE ARING. 2. ASSESSEE, A CIVIL CONTRACTOR, FILED HIS RETURN OF I NCOME AS AN INDIVIDUAL ON 28-10-2005 DECLARING TOTAL INCOME AT RS. 39.89 LAKH S. INITIALLY, THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME-TAX ACT, 1961 (A CT), LATER ON RETURN WAS SELECTED FOR SCRUTINY. ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 31-12-2007 DETERMINING HIS TOTAL INCOME AT RS. 6 7.63 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT AS SESSEE HAD SHOWN CONTRACT RECEIPT ON RS. 94.2 LAKHS WHICH WERE CLAIM ED AS CONTRACT RECEIPTS ON PROCESSING OF BIO DEGRADABLE WASTE. ASSESSEE DECL ARED NET PROFIT OF RS. 14.13 LAKHS FROM THE SAID CONTRACT AND CLAIMED A DEDUCTIO N U/S. 80JJA OF THE ACT. AO CALLED FOR JUSTIFICATION FOR CLAIMING THE BENEFIT U NDER THE SAID SECTION FROM THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT TENDER DOCUMENT SHOWED THAT TENDER IN QUESTION WAS FOR THE WORK OF COMPREHENSIVE OPERATION AND MAINTENANCE OF LAND FILL SITE AT TURB HE AND KOPARKHAIRNE AS PER SWM RULES SUBMITTED IN 2000, THAT TENDER DOCUMENT NOWHE RE STATED IN ITS SCOPE OF WORKING ANYTHING ABOUT PROCESSING OR TRADING BY BIO DEGRADA BLE WASTE, THAT WORK-ORDER ALSO DID NOT TALK ABOUT PROCESSING OR TRADING OF WASTE, DOCUMENTS FILED BY THE ASSESSEE ONLY MENTIONED THE SCOPE OF WORK AS OPERATION AND MAINTE NANCE OF LAND FILL SITE, THAT THE CONTRACT WAS ONLY FOR CONSERVANCY/DUMPING GARBAGE A T A PARTICULAR LAND FILL SITE, THAT ASSESSEE DID NOT FURNISH COPIES OF BILLS OF ITEMS W HICH WERE SOLD/WERE MANUFACTURED/MADE FROM PROCESSING/TRADING OF BIO DE GRADABLE WASTE, ASSESSEE WAS NOT PROCESSING OR TRADING BIO DEGRADABLE WASTE FOR ANY OF THE ITEMS MENTIONED IN SECTION 80JJA, THE CONTRACT BUSINESS WAS NOT FOR CO LLECTING AND THEN PROCESSING/TRADING THE BIO DEGRADABLE WASTE. HE RE JECTED THE CLAIM MADE BY THE ASSESSEE AMOUNTING TO RS. 14.13 LAKHS MADE AS PER T HE PROVISIONS OF SECTION 80JJA OF THE ACT. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEA L AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, HE HELD THAT SECTION 80JJA OF THE ACT WAS A STATUTORY PROVISION, THE SAID SECTION CLEARLY PROVIDED FOR DEDUCTION IF PARTICULAR CONDITIONS WERE FULFILL ED, THAT MERELY SATISFYING ONE CONDITION OUT OF THE MANY ENUMERATED IN THE SAID SE CTION WOULD NOT ENTITLE TO CLAIM THE SAID DEDUCTION, THAT APPELLANT HAD NOT ESTABLIS HED THE CIRCUMSTANCES THAT WARRANTED THE DEDUCTION, THAT ASSESSEE WAS COLLECTING BIO DEG RADABLE WASTE ONLY, THAT CONDITION OF GENERATING POWER ETC., WAS NOT FULFILLED BY THE ASSESSEE, THAT THE PLAIN READING OF COPY OF CONTRACT SUBMITTED BY THE ASSESSEE SHOWN TH AT THE APPELLANT HAD CONTRACT OF CONSERVATIVE WORK OF DUMPING GARBAGE, THAT COVERING ALL GARBAGE AND ADDING CHEMICALS TO IT DID NOT ENTITLE HIM TO CLAIM THE DE DUCTION, THAT ASSESSEE WAS UNABLE TO SPECIFY THE FINAL USAGE OF WASTE COLLECTED, THAT HE DID NOT FILE ANY DETAILS OF ITEMS MANUFACTURED OR SOLD. ITA NO. 4003/M/2009 SHRI SURESH S. KHILARI 3 5. BEFORE US, GROUND NO.2 WAS NOT PRESSED, HENCE SAME IS TREATED AS DISMISSED. WITH REGARD TO GROUND NO.1, AUTHORISED REPRESENTATI VE (AR) SUBMITTED THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80JJA, THAT WASTE MA NAGEMENT RESULTED IN CARBON TO THE MUNICIPALITY OF NAVI MUMBAI, THAT THE ASSESSEE WAS COLLECTING AND PROCESSING BIO- DEGRADABLE WASTE, THE WORD FOR USED IN THE SECTIO N HAD NOT BEEN INTERPRETED PROPERLY BY THE REVENUE AUTHORITIES, THAT LEGISLATURE INTEND ED TO EXTEND THE BENEFIT OF THE SECTION TO THE ASSESSEES, WHO COLLECTED/PROCESS THE WASTE, THE ASSESSEE WAS NOT IN GENERATION OF ELECTRICITY, THAT FOR CLAIMING THE DE DUCTION GENERATION OF ELECTRICITY WAS NOT A PRE-CONDITION. HE REFERRED TO PAGE NOS. 127 & 131 OF THE PAPER BOOK. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT ASS ESSEE WAS NO COLLECTING THE BIO- DEGRADABLE WASTE, THAT MUNICIPAL CORPORATION OF NAV I MUMBAI WAS COLLECTING THE WASTE, THE TENDER DOCUMENT WAS ABOUT LAND FILLING, THAT THE ASSESSEE WAS DUMPING GARBAGE, THAT ASSESSEE HAD NOT PRODUCED ANY EVIDENC E REGARDING GENERATION OF POWER/SALE OF BY-PRODUCTS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. THE LANGUAGE AND INTENT OF THE SECTION MAKE IT CLEA R THAT BENEFITS OF THE SECTION 80JJA ARE AVAILABLE WHEN ALL THE CONDITIONS ARE FULFILLED BY AN ASSESSEE, AS ENVISAGED BY THE SAID SECTION. HERE, WE WOULD LIKE TO REPRODUCE THE SECTION: 80JJA. DEDUCTION IN RESPECT OF PROFITS AND GAINS F ROM BUSINESS OF COLLECTING AND PROCESSING OF BIO-DEGRADABLE WASTE. WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDE S ANY PROFITS AND GAINS DERIVED FROM THE BUSINESS OF COLLECTING AND PROCESSING OR TREATING O F BIO-DEGRADABLE WASTE FOR GENERATING POWER, *OR PRODUCING BIO-FERTILIZERS, BIO-PESTICIDE S OR OTHER BIOLOGICAL AGENTS OR FOR PRODUCING BIO-GAS OR, MAKING PELLETS OR BRIQUETTES FOR FUEL OR ORGANIC MANURE, THERE SHALL BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, *A DEDUCTION OF AN AMOUNT EQUAL TO THE WHOLE OF SUCH PROFITS AND GAINS FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS BEGINNING WITH THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH BUSINESS COMMENCES. 6.1. AS PER OUR UNDERSTANDING THERE ARE TWO PARTS OF THE SECTION-ONE IS ABOUT BUSINESS OF COLLECTING AND PROCESSING OF BIO-DEGRAD ABLE WASTE AND THE OTHER ONE IS ABOUT GENERATING POWER/PRODUCING BIO GAS/MAKING PEL LETS ETC. FOR FUEL OR ORGANIC MANURE. IF AN ASSESSEE UNDERTAKES ANY ONE OF THE A CTIVITIES MENTIONED IN THE SECTION; LIKE COLLECTING BIO-DEGRADABLE WASTE OR PROCESSING THE SAID WASTE OR GENERATING POWER OR PRODUCING BIO GAS OR MAKING PELLETS ETC. F OR SPECIFIC PURPOSES; HE CANNOT CLAIM THE BENEFITS UNDER SECTION 80JJA. IN OUR OPI NION FOR CLAIMING A DEDUCTION UNDER THE SAID SECTION HE SHOULD FULFILL BOTH THE CONDITI ONS-HE SHOULD NOT ONLY COLLECT AND PROCESS THE WASTE BUT HE SHOULD ALSO BE ENGAGED IN EITHER OF THE THREE ACTIVITIES. IN OTHER WORDS ONLY THOSE ASSSESSEES ARE ENTITLED TO T HE DEDUCTION OF SECTION 80JJA WHO CUMULATIVELY FULFILL BOTH THE CONDITION OF CARRYING ON OF A BUSINESS OF COLLECTING AND PROCESSING OF BIO-DEGRADABLE AND GENERATING/ PRODUC ING/ MAKING OF POWER/BIO GAS OR MAKING BRIQUETTES ETC., FOR SPECIFIC PURPOSES. WE ARE OF THE OPINION THAT THOUGH A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SUCH A PR OVISION, YET THE INTERPRETATION HAS TO BE AS PER THE WORDING OF THE SECTION. AS PER THE S ETTLED PRINCIPLES OF TAX-JURISPRUDENCE IF THE WORDINGS OF A SECTION ARE CLEAR, THEN BENEFI TS WHICH ARE NOT AVAILABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN T HE SECTION. IN OTHER WORDS IN SUCH CASES WHAT IS REQUIRED TO BE SEEN IS THE LANGUAGE E MPLOYED, WHICH, IF CLEAR AND ITA NO. 4003/M/2009 SHRI SURESH S. KHILARI 4 UNAMBIGUOUS, IS TO BE GIVEN EFFECT. IN OUR OPINION WORDS OF 80JJA ARE PLAIN, CLEAR AND UNAMBIGUOUS. 6.1.1 ACT BROADLY PROVIDES FOR TWO TYPES OF TAX INCENTIVE S, VIZ., INVESTMENT-LINKED INCENTIVES AND PROFIT-LINKED INCENTIVES. CHAPTER V I-A OF THE ACT, WHICH PROVIDES FOR INCENTIVES IN THE FORM OF DEDUCTIONS ESSENTIALLY BE LONGS TO THE CATEGORY OF PROFIT- LINKED INCENTIVES. THEREFORE, WHEN SECTION REFERS T O PROFITS DERIVED FROM ELIGIBLE BUSINESS, IT IS NOT THE A PART OF THE BUSINESS WHIC H ATTRACTS THE INCENTIVES : WHAT ATTRACTS THE INCENTIVES UNDER SECTION IS THE GENERATION OF PROFITS (OPERATIONAL PROFITS) FROM THE BUSINESS AS A WHOLE. IN OTHER WORDS FOR CLAIMING D EDUCTION UNDER THE VARIOUS PROVISIONS OF CHAPTER VIA IT IS NOT ENOUGH THAT THE RE SHOULD BE A TRACEABLE RELATIONSHIP BETWEEN THE PROFITS EARNED AND THE ACTIVITY CARRIED OUT BY THE ASSESSEE. THE PROFITS MUST BE MORE CLOSELY LINKED TO THE BUSINESS CARRIED OUT BY THE ASSESSEE TO BE HELD THAT THEY WERE DERIVED FROM IT. IN OUR OPINION THIS CON STRUCTION OF THE SECTION UNDER CONSIDERATION LEADS TO NO CONTRADICTION OR ABSURDIT Y AND IT IS REASONABLE. AS PER OUR UNDERSTANDING, PARLIAMENT HAS PROVIDED THE BENEFIT OF SECTION 80JJA TO THOSE ASSESSES WHO ARE IN BUSINESS OF COLLECTING AND PROCESSING OF WASTE THAT CULMINATES IN EITHER OF THE ABOVE REFERRED THREE ACTIVITIES. ONE OF THE AC TIVITY I.E. STAND-ALONE ACTIVITY DOES NOT CONSTITUTE PROFITS AND GAINS FROM BUSINESS OF COLLECTING AND PROCESSING OF BIO- DEGRADABLE WASTE AS ENVISAGED BY THE SECTION UNDER CONSIDERATION. 6.1.2 IN THE PRESENT CASE PROFITS EARNED FROM THE LAND FI LLING WERE NOT EVEN REMOTELY LINKED TO THE GENERATION OF POWER OR PRODUCING OF B IO GAS OR MANUFACTURE OF SPECIFIED ITEMS. THE ASSESSEE IS ACTUALLY TREATING THE WASTE AT THE SITES. HE IS NOT EVEN COLLECTING THE WASTE, AS FOUND BY THE AO AND THE FAA. OUT OF THE SEVERAL ACTIVITIES FROM COLLECTING THE WASTE TO GENERATION/PRODUCTION OF PO WER/BIO GAS HE IS CARRYING OUT ONLY ONE ACTIVITY. WE HAVE PERUSED THE EXPLANATORY NOTE TO THE FINANCE BILL OF THE RELEVANT ASSESSMENT YEAR. FROM THE WORDS OF THE SECTION AND NOTES ON CLAUSES IT IS CLEAR THAT THE SECTION WAS INTRODUCED TO MANAGE THE SOLID WAST E AND GENERATE POWER/BIO-GAS, NOT ONLY FOR PROCESSING THE WASTE. 6.2 AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES OF TH E CASE, IT IS NOT POSSIBLE FOR US TO IGNORE THE RESTRICTION PUT BY THE PROVISIONS OF THE SECTION 80JJA. THEREFORE, UPHOLDING THE ORDERS OF THE FAA WE DECIDE GROUND NO .2 AGAINST THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2012. )* # '( & , -). 28 TH DECEMBER, 2012 ( # / 0 SD/- SD/- ( . . / B.R. MITTAL ) ( / RAJENDRA ) )1 / JUDICIAL MEMBER & )1 / ACCOUNTANT MEMBER MUMBAI, -) DATE: 28 TH DECEMBER, 2012 TNMM ITA NO. 4003/M/2009 SHRI SURESH S. KHILARI 5 COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR J BENCH, ITAT, MUMBAI 6. GUARD FILE !2$ $ //TRUE COPY// )* )* )* )* / BY ORDER, 3 33 3 / 4 4 4 4 DY./ASST. REGISTRAR , / ITAT, MUMBAI