IL & FS WINDFARMS LAT ( PREVIOUSLY KNOWN AS IL & FS ENERGY DEV. CO.LTD), MUMBAI V. ACIT 10(1), MUMBAI

ITA 6133/MUM/2010

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3809 (ITAT-MUMBAI)
• Duration Of Justice: 9 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 10-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Assessee Lawyers: VIDYA PHANSE
• Keywords: Business income; Period of limitation; Revised return
• Section: 234B; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER & SHIR S RIFAUR RAHMAN, ACCOUNTANT MEMBER ./ I.T.A. NOS. 6133 & 6134/MUM/2010 ( / ASSESSMENT YEARS : 2006-07 & 2007-08 IL & FS WINDFARMS LAT (PREVIOUSLY KNOWN AS IL & FS ENERGY DEV. CO. LTD.,) THE IL & FS FINANCIAL CENTRE, PLOT NO. C-22, G BLOCK BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. / VS. THE ACIT 10(1) MUMBAI. ./ ./ PAN/GIR NO. : AAAC12550A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS. VIDYA PHANSE / RESPONDENT BY : SHRI KUMAR PADMAPANI BORA / DATE OF HEARING 19/12/2019 !'# / DATE OF PRONOUNCEMENT 17/01/2020 / O R D E R PER SHRI S RIFAUR RAHMAN- AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE SEPARATE ORDERS OF THE LD CIT(A)-21, MUMBAI, DA TED 14.06.2010 AND 03.06.2010 FOR AYS 2006-07 & 2007-08 . ITA NO. 6133/MUM/2010, A.Y 2006-07: ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 2 - 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION AND DISTRIBUT ION OF ELECTRICITY. THE ASSESSEE FILED ITS RETURN OF INCO ME ON 26.10.2006 AND CLAIMED DEDUCTION U/S 80IA EXCLUDING THE INTEREST INCOME. THE A.O DISALLOWED THE CLAIM OF T HE ASSESSEE U/S 80IA OF THE ACT ON THE INTEREST INCOME . ACCORDINGLY, THE A.O COMPLETED THE ASSESSMENT ON TH E BASIS OF THE RETURN OF INCOME. AGGRIEVED BY THE ORDER O F THE A.O THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 3. THE CIT(A) HELD THAT THE REVISED RETURN IS NOT A S PER LAW AND FURTHER HELD THAT THE INTEREST RECEIPTS ARE NOT DERIVED FROM BUSINESS OF GENERATING ELECTRICITY, TH EREFORE, NO DEDUCTION IS ALLOWED U/S 80IA OF THE ACT. AGGRIEVE D, THE ASSESSEE PREFERRED AN APPEAL BEFORE US BY RAISING T HE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN REJECTING THE CLAIM OF THE APPELLANT I S ENTITLED TO DEDUCTION U/S 80IA IN RESPECT OF THE INTEREST INCOM E OF RS. 1,49,68,016/-. THE APPELLANT PRAYS THAT THEY ARE E NTITLED TO DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME OF RS. 1,49,68,016/. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN REJECTING THE CLAIM OF THE APPELLANT T HAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S. 80IA IN RESPECT OF TH E INTEREST INCOME OF RS. 1,15,65,252/-. THE APPELLANT PRAYS THAT THE Y ARE ENTITLED ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 3 - TO DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME OF RS. 1,15,65,252/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN REJECTING THE CLAIM OF THE APPELLANT T HAT THE APPELLANT IS ENTITLED TO DEDUCTION U/S 80IA IN RESPECT OF THE INTEREST INCOME OF RS. 34,02,764/-. THE APPELLANT PRAYS THAT THEY ARE ENTITLED TO DEDUCTION U/S 80IA IN RESPECT OF INTEREST INCOME OF RS. 34,02,764/-. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN CONFIRMING THAT THE INCOME OF RS. 1,49 ,68,016/- IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES I NSTEAD OF THE SAME TO BE TAXED UNDER THE HEAD BUSINESS INCOME. T HE APPELLANT PRAYS THAT SUM OF RS. 1,49,68,016/- MAY B E TAXED UNDER THE HEAD INCOME FROM BUSINESS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT DENIES THE LIABILITY FOR PAYMENT INTEREST U/S 234B OF THE ACT. THE APPELLANT PRAYS THAT THE INTEREST LEVIED U/S 234B M AY BE DELETED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D THE GROUNDS OF APPEAL WHICH ARE WITHOUT PREJUDICE TO ON E OTHER. 4. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSU E IN DISPUTE IS SQUARELY COVERED BY THE DECISIONS OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER AY 2005 -06. FOR THE A.Y 2005-06 THE COORD INATE BENCH HAS HELD AS UNDER: 6 BEFORE US THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE HAS PURCHASED WIND FARM FROM INFRASTRUCTUR E LEASING & FINANCIAL SERVICES LTD AND MADE PART PAYMENT FOR THE SAID PURCHASE OF ASSET. THE BALANCE CONSIDERATION OF RS. 29.64 CRORES ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 4 - HAS BEEN REFLECTED UNDER THE HEAD DEFERRED CREDIT LIABILITY. THE ASSESSEE HAS SUBSCRIBED TO SUBORDINATED DEBTS OF 20 01 SERIES V IN THE FORM OF NON CONVERTIBLE REDEEMABLE DEBENTURE S. AS PER THE TERMS, THE INTEREST ON THIS INSTRUMENT WILL ACCRUE EVERY YEAR; BUT NO PHYSICAL PAYMENT WILL BE MADE AND ONLY AT THE EN D OF THE TERM, THE MATURITY VALUE OF THE SAID INSTRUMENT WIL L BE PAID TO THE ASSESSEE. THE LD AR HAS SUBMITTED THAT THIS INVESTM ENT INSTRUMENT WAS FOR THE PURPOSE OF MAKING THE PAYMEN T FOR THE WIND MILL. HE HAS THUS SUBMITTED THAT INVESTMENT IN THE INSTRUMENT IS PART OF THE TRANSACTION OF PURCHASE O F WIND MILL AND THEREFORE, THE INTEREST EARNED ON THE INSTRUMENT IS ELIGIBLE FOR DEDUCTION U/S 80IA. HE HAS RELIED UPON THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CI T VS PRAKASH OILS LTD REPORTED IN 58 DTR 279. HE HAS ALS O RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF JAGDI SHPRASAD M JOSHI VS DCIT IN ITA NO.3569/MUM/2001 VIDE ORDER DA TED 13.8.2004. THE LD AR HAS FURTHER SUBMITTED THAT FOR THE AY 2003- 04 AND 2004-05, THE TRIBUNAL REMANDED THE ISSUE TO THE RECORD OF THE CIT(A). 6.1 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT INTEREST I NCOME CANNOT BE TREATED AS INCOME DERIVED FROM THE UNDERTAKING T HEREBY NOT ELIGIBLE FOR DEDUCTION/S 80IA. THE LD DR HAS RELIED UPON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. CHITRANJALI REPORTED IN 159 ITR 801.THE LD DR HAS FURTHER SUBMITTED THAT THE ORDER OF THE TRIBUNAL IN THE CASE OF JAGDISHPRASAD M JOSHI (SUPR A) RELIED UPON BY THE LD AR IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE THIS ORDER WAS FOR THE AY 1997-98 AND THE P ROVISIONS OF SEC. 80IA HAS BEEN AMENDED BY THE FINANCE ACT W.E.F 1.4.2002 WHEREBY THE EXPRESSION BUSINESS OF INDUSTRIAL UND ERTAKING HAS BEEN CHANGED OVER TO EXPRESSION PROFIT AND GAIN' D ERIVED FROM UNDERTAKING HE HAS POINTED OUT THAT THIS ISSUE WAS NOT CONSIDERED BY THE TRIBUNAL. ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 5 - 7 WE HAVE CONSIDERED THE RIVAL CONTENTION AS WELL A S THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE VALIDITY OF THE R EVISED RETURN IS CONCERNED, UNDISPUTEDLY, THE ASSESSEE HAS FILED REV ISED RETURN WITHIN THE PERIOD OF LIMITATION AS PRESCRIBED UNDER THE PROVISIONS OF THE SEC. 139(5). THEREFORE, IN VIEW OF THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. COMMISSIONER OF INCOME-TAX REPORTED IN 284 ITR 323, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE CAN RAISE FRE SH CLAIM IN THE REVISED RETURN. ACCORDINGLY, THIS ISSUE RELATIN G TO THE FILING OF REVISED RETURN IS DECIDED IN FAVOUR OF THE ASSESSEE . 8 NOW, WE TURN TO THE ALLOWABILITY OF THE CLAIM OF DEDUCTION U/S 80IA ON INTEREST INCOME. THE CIT(A) HAS CONSIDERED AND ADJUDICATED THE ISSUE BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD V CIT REPORTED IN 262 ITR 278 IN PARAS 3.2 TO 2.4 AS UNDE R: 3.2 I HAVE PERUSED THE FACTS IN THIS CASE AND THE POSITION OF LAW. THE ASSESSEE QUALIFIES FOR DEDUCTION U/S. 801A AS AN UNDERTAKING SET UP FOR THE GENERATION OF POWER AS P ER CLAUSE (IV)(A), OF SUBSECTION (4,) OF SECTION 801A. SUBSEC TION (1), OF SECTION 801A PROVIDES THAT (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUBSECTION (4) (SU CH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSIN ESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE AS SESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT. O F PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIV E ASSESSMENT YEARS. 3.3 THERE ARE SEVERAL CASE LAWS WHEREIN IT HAS BEEN HELD THAT THE WORD DERIVED IS TO HAVE A RESTRICTED MEANING. THE EXPRESSION DERIVED FROM HAS SINCE NOW BEEN EXPLAINED BY THE APEX COURT IN THE CASE OF PANDIAN CHEMICALS LTD. V. CIT[2003] 262 ITR 278, ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 6 - WHEREIN THE APEX COURT HAS OBSERVED THAT THE WORD DERIVED FROM IN SECTION 8OHH OF THE INCOME-TAX ACT, 1961 M UST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMED IATE NEXUS WITH THE ASSESSEES UNDERTAKING. APART FROM THIS, I N THE SAID DECISION, THE APEX COURT HAS CONFIRMED THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT V. PANDIAN CHE MICALS LTD. [1998] 233 ITR 497. WE MAY, WITH RESPECT, REFER TO SOME OF THE OBSERVATIONS OF THE MADRAS HIGH COURT WHICH ARE IN THE FOLLOWING TERMS: PROFITS OR GAINS ELIGIBLE FOR DEDUCTION UNDER SEC TION 8OHH OF THE INCOME-TAX ACT, 1961, MUST BE DERIVED FROM THE ACTU AL CONDUCT OF THE BUSINESS. THE EXPRESSION DERIVED FROM SHOULD BE GIVEN A RESTRICTED MEANING AND WHENEVER THE LEGISLATURE WAN TS TO GIVE A WIDER EXPRESSION, THE LEGISLATURE EMPLOYS THE EXPRE SSION ATTRIBUTABLE TO AND THE USE OF THE EXPRESSION DE RIVED FROM INDICATES THAT THE PROFIT OR GAIN SHOULD BE DERIVED FROM THE CONDUCT OF THE BUSINESS. THERE IS NO JUSTIFICATION TO GIVE THE EXPRESSION DERIVED FROM A WIDER MEANING TO COVER EVERY RECEIPT CONNECTED WITH THE INDUSTRIAL UNDERTAKING. IT IS NO T ALL BUSINESS RECEIPTS THAT WOULD QUALIFY FOR THE DEDUCTION AND T HE LEGISLATURE HAS APPARENTLY NOT INTENDED TO GIVE THE BENEFIT OF DEDUCTION TO ALL BUSINESS INCOME. IF THE INTENTION OF THE LEGISLATUR E WAS TO GRANT RELIEF TO ALL BUSINESS INCOME, IT COULD HAVE USED T HE EXPRESSION, PROFITS AND GAINS OF INDUSTRIAL UNDERTAKING THE F ACT THAT THE LEGISLATURE HAS USED THE EXPRESSION PROFITS AND GA INS DERIVED FROM THE INDUSTRIAL UNDERTAKING HAS SOME SIGNIFICA NCE AND IT CONNOTES THAT THE IMMEDIATE AND EFFECTIVE SOURCE OF INCOME ELIGIBLE FOR GRANT OF RELIEF UNDER SECTION 8OHH MUS T BE THE INDUSTRIAL UNDERTAKING ITSELF AND NOT ANY OTHER SOU RCE. THE MANDATE OF LAW IS THAT UNLESS THE SOURCE OF THE PRO FIT IS THE UNDERTAKING, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 8OHH. MERE COMMERCIAL CONNECTION BETWEEN TH E INCOME AND THE INDUSTRIAL UNDERTAKING WOULD NOT BE SUFFICI ENT. ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 7 - 3.4 NOW, THE APPELLANT HAS CLAIMED DEDUCTION UNDER SUB CLAUSE (IV)(A), OF SUB-SECTION (4) OF SECTION 801A, WHICH READS AS FOLLOW: (IV) AN UNDERTAKING WHICH,--- (A) IS SET UP IN ANY PART OF INDIA FOR THE GENERATI ON OR GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWER AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1993 AND ENDING ON THE 31ST DAY OF MARCH, 2010; THE ELIGIBLE BUSINESS UNDER SECTION 801A IS THEREFO RE, GENERATION OF ELECTRICITY. IT IS ONLY THE PROFITS OF THIS BUSI NESS WHICH ARE ELIGIBLE FOR DEDUCTION. THE ABOVE RECEIPTS ARE CLEA RLY NOT DERIVED FROM THE BUSINESS OF GENERAL OF ELECTRICITY. THE WO RD USED IN 801A(L) IS DERIVED. HENCE, NO DEDUCTION IS AVAILA BLE ON THE INCOME SPECIFIED IN THE ABOVE GROUND. 9 AS FAR AS THE DECISION OF HONBLE MADHYA PRADES H IS CONCERNED, IT IS TO BE NOTED THAT IN THAT CASE, THE INTEREST WAS RECEIVED ON THE DELAYED RECEIPT OF SALE; THEREFORE, IT WAS PART OF THE SALE PROCEEDS AND THE TURNOVER AND ACCORDINGLY, THE SAID DECISION IS NOT APPLICABLE IN THE CASE IN HAND WHER E THE INTEREST HAS BEEN EARNED BY THE ASSESSEE ON THE INVESTMENT M ADE IN THE SECURITIES. THE TRIBUNAL FOR THE AY 2003-04 AND 200 4-05 HAS REMANDED THE ISSUE TO THE RECORD OF THE CIT(A) FOR FRESH ADJUDICATION AS THE CIT(A) REFUSED TO ADMIT THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE IN THE SAID YEAR. THEREFORE, IN THE ABSENCE OF ANY FINDING, THE ORDER OF THE TRIBUNAL F OR THE AY 2003- 04 AND 2004-05 WOULD NOT HELP THE CASE OF EITHER PA RTY FOR THE AY UNDER CONSIDERATION. THIS ISSUE HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF PANDIAN CHEMIC ALS (SUPRA) WHICH HAS BEEN FOLLOWED BY THE CIT(A). FURTHER, IN THE CASE OF LIBERTY INDIA V. COMMISSIONER OF INCOME-TAX REPORTE D IN 317 ITR 218, THE SUPREME COURT HAS OBSERVED THAT TO CLAIM T HE DEDUCTION U/S 80IA AND 80IB, THE INCOME SHOULD HAVE DIRECT FI RST DECREE NEXUS TO THE PROFIT & GAINS AS DERIVED FROM THE UND ERTAKING. THEREFORE, ON MERITS, WE DO NOT FIND ANY REASON TO INTERFERE WITH ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 8 - THE ORDER OF THE IMPUGNED ORDER OF THE CIT(A) AND A CCORDINGLY, THE SAME IS UPHELD. 5. AS THE ISSUE IN DISPUTE IS MATERIALLY IDENTICAL TO THE SAID AY, I.E, THE INTEREST IS DERIVED FROM SECURITI ES AND IT IS NOT DIRECTLY LINKED TO DIRECT INCOME OF THE ASSESSE E. HENCE, WE UPHOLD THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO TOWARDS INTEREST INCOME , AS THE DECISION OF THE CIT(A) IS IN CONSONANCE WITH TH E ORDER OF TRIBUNAL AND THE GROUND NOS 1 TO 3 RAISED BY THE AS SESSEE ON THIS ISSUE ARE DISMISSED. 5.1 WITH REGARD TO THE GROUND OF APPEAL NO. 4, AS T HE INTEREST INCOME IS FROM SECURITIES, THE SAME IS TO BE CHARGED IN THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, GROUND RAISED BY THE ASSESSEE IS DISMISSED. 5.2 WITH REGARD TO THE GROUND OF APPEAL NO. 5, IT I S CONSEQUENTIAL AND ACCORDINGLY DISMISSED. 5.3 IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 6134/MUM/2010, A.Y: 2007-08: 6. THE ISSUES INVOLVED IN THIS APPEAL ARE EXACTLY I DENTICAL TO A.Y 2006-07 EXCEPT VARIANTS IN FIGURES. HENCE, THE DECISION RENDERED BY US FOR THE A.Y 2006-07 (SUPRA) WOULD APPLY MUTATIS-MUTANDIS FOR A.Y 2007-08 ALSO. ITA NO .6133 & 6134/MUM/2010. IL & FS WINDFARMS LAT, MUMBAI. - 9 - 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 17 .01.2020 SD/- SD/- (SAKTIJIT DEY) ( S. RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 17 .01.2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. &'( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// / ( ASST. REGISTRAR) $%, / ITAT, MUMBAI