ACIT, Haridwar V. M/s. THDC India Ltd., Uttrakhand

ITA 6457/DEL/2012

• Counselvise Citation: 645720114 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 02-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI I.C. SUDHIR, JM ITA NOS.3956 &6457/DEL/2012 ASSESSMENT YEARS : 2008-09 & 2009-10 ACIT, CIRCLE HARIDWAR, D-29 & 30, INDUSTRIAL AREA, HARIDWAR. VS. THDC INDIA LTD., BHAGIRATHI BHAWAN, PRAGATIPURAM, BYE PASS ROAD, RISHIKESH. PAN: AAACT7905Q CO NOS.91 & 92/DEL2014 (ITA NOS.3956 &6457/DEL/2012) ASSESSMENT YEARS : 2008-09 & 2009-10 THDC INDIA LTD., BHAGIRATHI BHAWAN, PRAGATIPURAM, BYE PASS ROAD, RISHIKESH. PAN: AAACT7905Q VS. ACIT, CIRCLE HARIDWAR, D-29 & 30, INDUSTRIAL AREA, HARIDWAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI J.P. CHANDRAKAR, SR. DR ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 2 DATE OF HEARING : 02.03.2015 DATE OF PRONOUNCEMENT : 03.03.2015 ORDER PER R.S. SYAL, AM: THESE TWO APPEALS BY THE REVENUE AND EQUAL NUMBER OF CROSS OBJECTIONS BY THE ASSESSEE RELATE TO THE AYS 2008-0 9 AND 2009-10. 2. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEAL S, WE ARE PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2008-09 3. THE REVENUE IS AGGRIEVED AGAINST THE ALLOWING OF DEDUCTION U/S 80IA ON THE AMOUNT OF `EXCESS PROVISION WRITTEN BAC K AND `LATE PAYMENT CHARGES. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A JOINT VENTURE COMPANY OF THE GOVERNMENT OF INDIA AND THE GOVERNMENT OF ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 3 UTTAR PRADESH. IT IS ENGAGED IN THE BUSINESS OF GEN ERATION OF HYDRO- ELECTRICITY. APART FROM THE INCOME FROM THE DIRECT GENERATION OF POWER, THE ASSESSEE ALSO EARNED INCOME CLASSIFIED AS OTHE R INCOMES DETAILED AS UNDER :- INCOME FROM BANK DEPOSIT RS. 14465893.10 INTEREST FROM EMPLOYEES RS. 23555964.00 FROM OTHERS RS. 2824.17 MACHINE HIRE CHARGES RS. 1298369.00 RENT RECEIPTS RS. 2626552.96 SUNDRY RECEIPTS RS. 6418412.34 EXCESS PROVISION WRITTEN BACK RS. 11611006.22 PROFIT ON SALE OF ASSETS RS. 1191502.46 LATE PAYMENT SURCHARGE RS. 4451755.00 TOTAL RS.6,56,22,279.25 5. THE AO OBSERVED THAT THE ASSESSEE CLAIMED DEDUCT ION U/S 80IA ON ALL THE ABOVE ITEMS OF INCOME EXCEPT `INTEREST FROM BANK TO THE TUNE OF RS.1,01,12,153/- AND `PROFIT FROM SALE OF ASSETS. IT WAS OPINED THAT THE ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 4 OTHER ITEMS OF INCOME AS LISTED IN THE ABOVE TABLE WERE DERIVED FROM INDEPENDENT SOURCE OF INCOME AND DID NOT HAVE ANY F IRST DEGREE NEXUS WITH THE GENERATION OF POWER. RELYING ON THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA VS. CIT (2009) 317 ITR 218 (SC), HE DENIED DEDUCTION U/S 80IA ON THE REMAINING ITEM S. THE LD. CIT(A) GOT CONVINCED WITH THE ASSESSEES CONTENTION IN RESPECT OF `EXCESS PROVISION WRITTEN BACK AND `LATE PAYMENT C HARGES FOR WHICH HE ORDERED FOR THE GRANT OF DEDUCTION U/S 80IA. TH E REVENUE IS AGGRIEVED AGAINST SUCH DIRECTION OF THE LD. CIT(A). 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVAN T MATERIAL. THERE IS NO APPEARANCE FROM THE SIDE OF THE ASSESSEE. HE RE, IT IS RELEVANT TO MENTION THAT THE APPEAL WAS PREPONED FOR TODAY AT T HE WRITTEN REQUEST OF THE ASSESSEES COUNSEL. DESPITE THAT, A REQUEST FO R ADJOURNMENT HAS BEEN FILED, WHICH HAS BEEN REJECTED BY US. WE ARE, THERE FORE, GOING AHEAD WITH THE DISPOSAL OF THESE APPEALS EX PARTE QUA THE ASSESSEE, ON MERITS. 7. IT IS SEEN THAT THE ENTIRE CONTROVERSY LIES IN A NARROW COMPASS, AS TO WHETHER THE ABOVE ITEMS OF INCOME QUALIFY FOR DEDUC TION U/S 80-IA. AT ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 5 THIS JUNCTURE, IT IS RELEVANT TO SET OUT SUB-SECTIO N (1) OF SECTION 80IA WHICH PROVIDES THAT : `WHERE THE GROSS TOTAL INCOM E OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (4) (S UCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. A PERUSAL OF THE MANDATE OF SUB-SECTION (1) MANIFESTLY DIVULGES THAT THE DEDUCTION IS AVAILABLE AT THE RATE OF 100% OF THE PROFITS AND GA INS DERIVED FROM THE ELIGIBLE BUSINESS. THE EXPRESSION DERIVED FROM H AS RECEIVED THE ATTENTION OF THE HONBLE APEX COURT IN SEVERAL CASE S. IN LIBERTY INDIA (SUPRA) , THE QUESTION WAS AS TO WHETHER DEPB/DUTY DRAWBACK IS ELIGIBLE FOR DEDUCTION U/S 80-IB. REPELLING SUCH CONTENTION RAISED ON BEHALF OF THE ASSESSEE, THE HONBLE APEX COURT HELD THAT DEPB /DUTY DRAWBACK ARE INCENTIVES WHICH ARE NOT PROFITS DERIVED FROM THE E LIGIBLE BUSINESS AND ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 6 THEREFORE, FAIL TO FORM PART OF NET PROFITS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF S. 80-IA OR 80-IB. IT WAS SPECIFIC ALLY HELD THAT : `IT IS EVIDENT THAT S. 80-IB PROVIDES FOR ALLOWING OF DEDU CTION IN RESPECT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINES S. THE WORDS 'DERIVED FROM' ARE NARROWER IN CONNOTATION AS COMPARED TO TH E WORDS 'ATTRIBUTABLE TO' . IN OTHER WORDS, BY USING THE EXPRESSION 'DERIVED FROM', PARLIAMENT INTENDED TO COVER SOURCES NOT BEY OND THE FIRST DEGREE. ON ANALYSIS OF SS. 80-IA AND 80-IB IT BECOMES CLEAR THAT ANY INDUSTRIAL UNDERTAKING, WHICH BECOMES ELIGIBLE ON SATISFYING S UB-S. (2), WOULD BE ENTITLED TO DEDUCTION UNDER SUB-S. (1) ONLY TO THE EXTENT OF PROFITS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. IN THE CASE OF PANDIAN CHEMICALS VS. CIT (2003) 262 ITR 278 (SC), THE ISSUE WAS WHETHER THE INTEREST EARNED BY INDUSTRIAL UNDERTAKING ON DEPOSITS WITH ELECTRIC ITY BOARD QUALIFIES FOR RELIEF UNDER S. 80HH. IN THIS SECTION ALSO, THE EXP RESSION USED IS `DERIVED FROM. ANSWERING THE QUESTION IN FAVOUR OF THE REVE NUE, THE HONBLE SUMMIT COURT HELD THAT : ` THE WORDS 'DERIVED FROM' IN S. 80HH MUST BE UNDERSTOOD AS SOMETHING WHICH HAS DIRECT OR IMMEDIA TE NEXUS WITH THE ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 7 APPELLANT'S INDUSTRIAL UNDERTAKING . ALTHOUGH ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTAKING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE I NDUSTRIAL UNDERTAKING. THE DERIVATION OF PROFITS ON THE DEPOSIT MADE WITH ELECTRICITY BOARD CANNOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF. WHERE THE WORDS ARE UNEQUIVOCAL, THERE IS NO SCOPE FOR IMPORTING ANY RULE OF INTERPRETATION AS SUBMITTED BY THE APPELLAN T. IT IS DISCERNIBLE FROM A SURVEY OF THE ABOVE AND SEVERAL OTHER DECISI ONS ON THE POINT THAT THE EXPRESSION DERIVED FROM IS NARROWER IN SCOPE VIS--VIS THE EXPRESSION ATTRIBUTABLE TO IT. AN INCOME TO BE DERIVED FROM A PARTICULAR SOURCE, MUST HAVE A DIRECT AND IMMEDIATE NEXUS WITH SUCH SOURCE. IN OTHER WORDS, SUCH INCOME MUST DIRECTLY E MANATE FROM THE ELIGIBLE UNDERTAKING AND SHOULD NOT HAVE AN INDIREC T NEXUS ALONE. IF AN INCOME IS INDIRECTLY CONNECTED WITH THE ELIGIBLE UN DERTAKING, THEN THAT INCOME LOSES THE DIRECT NEXUS AND HENCE CANNOT BE C ONSIDERED AS DERIVED FROM THE ELIGIBLE UNDERTAKING. WITH THE ABOVE UNDERSTANDING OF THE AMBIT OF THE EXPRESSION DERIVED FROM, WE N OW MOVE FORWARD TO ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 8 DETERMINE AS TO WHETHER THE TWO ITEMS ON WHICH THE LD. CIT(A) DIRECTED TO ALLOW DEDUCTION CAN BE CONSTRUED AS `DERIVED FRO M THE INDUSTRIAL UNDERTAKING. I. EXCESS PROVISION WRITTEN BACK: 8. THIS AMOUNT REPRESENTED REVERSAL OF EXCESS PR OVISION OF SALARY MADE IN THE PAST IN RESPECT OF PAY REVISION WHICH WAS IM PLEMENTED DURING THE PREVIOUS YEAR UNDER CONSIDERATION. THE CLAIM OF TH E ASSESSEE BEFORE THE LD. CIT(A) WAS THAT SINCE THE PROVISION WAS FOUND T O BE IN EXCESS, IT WAS WRITTEN BACK IN THE ACCOUNTS AS INCOME DURING THE PREVIOUS YEAR. THERE IS HARDLY ANY NEED TO EMPHASIZE THAT SALARY P AID BY AN UNDERTAKING IS PART OF EXPENDITURE OTHERWISE DEDUCTIBLE IN COMP UTING THE INCOME DERIVED FROM THE ELIGIBLE UNDERTAKING. IF IN THE P RECEDING YEAR, THE DEDUCTION WAS CLAIMED FOR A HIGHER SUM, WHICH REDUC ED THE ELIGIBLE PROFIT WITH SUCH HIGHER AMOUNT OF DEDUCTION AND THE ACTUAL EXPENDITURE TURNED OUT TO BE LESS WITH THE RESULT THAT THE EXCE SS PROVISION GETS WRITTEN BACK IN THE INSTANT YEAR, IT CANNOT BE CHARACTERIZE D AS ANYTHING OTHER THAN PART AND PARCEL OF PROFIT DERIVED FROM ELIGIBLE ENT ERPRISE. IN REALITY, THE ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 9 EXCESS PROVISION WRITTEN BACK IS NOT AN INCOME IN I TSELF, BUT, A REDUCED AMOUNT OF ELIGIBLE DEDUCTION IN THE COMPUTATION OF PROFITS DERIVED FROM ELIGIBLE ENTERPRISE. WE, THEREFORE, APPROVE THE VI EW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. II. LATE PAYMENT CHARGES: 9. THE LD. CIT(A) HAS RECORDED THAT THIS RECEIPT REPRESENTED EXTRA PAYMENT RECEIVED BY THE ASSESSEE FROM ITS CUSTOMERS ON ACCOUNT OF LATE PAYMENT OF THEIR DUES. THE CHARACTER OF THIS RECEI PT HAS NOT BEEN DISPUTED BY THE LD. DR. IN ESSENCE, THE LATE PAYME NT CHARGES ARE NOTHING, BUT, PART OF SALE CONSIDERATION WHICH CANN OT BE VIEWED DIFFERENTLY. ONCE DEDUCTION IS AVAILABLE ON SALE C ONSIDERATION, THERE CAN BE NO REASON TO DENY DEDUCTION ON SUCH LATE PAYME NT CHARGES, WHICH ARE PART AND PARCEL OF SUCH SALE CONSIDERATION. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ALLOWING DEDUCTION U/S 80IA ON THIS AMOUNT. 10. IN THE CROSS OBJECTIONS, THE ASSESSEE IS AGGRIE VED AGAINST NOT ALLOWING OF DEDUCTION U/S 80IA ON THE REMAINING AMO UNTS. ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 10 I. INTEREST ON EMPLOYEES: 11. THE FIRST ITEM IS INTEREST WHICH WAS RECEI VED AGAINST ADVANCES TO ITS EMPLOYEES FOR VARIOUS PURPOSES, SUCH AS, HOUSE BUILDING, PURCHASE OF COMPUTER, ETC. EVEN THOUGH THE EMPLOYEES WERE ENGA GED IN POWER GENERATION, THE FACT REMAINS THAT THE INTEREST RECE IVED BY THE ASSESSEE ON LOANS ADVANCED BY THE ASSESSEE TO ITS EMPLOYEES CAN NOT BE CHARACTERIZED AS INCOME `DERIVED FROM ELIGIBLE UNDERTAKING. THE RE IS NO DIRECT NEXUS OF SUCH INTEREST INCOME WITH THE ELIGIBLE UNDERTAKI NG INASMUCH AS THE IMMEDIATE SOURCE OF SUCH INCOME IS NOT THE ELIGIBLE UNDERTAKING. SUCH INCOME MAY BE ATTRIBUTABLE TO THE BUSINESS OF THE E LIGIBLE UNDERTAKING, BUT, CANNOT BE HELD AS DERIVED FROM THE ELIGIBLE UN DERTAKING. THE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE IS UPHELD. II. MACHINES HIRE CHARGES: 12. THE ASSESSEE RECEIVED HIRE CHARGES IN RESPEC T OF CERTAIN MACHINES WHICH WERE GIVEN ON HIRE TO ITS CONTRACTORS WHO WER E ENGAGED IN THE ERECTION AND CONSTRUCTION OF THE POWER GENERATION F ACILITY. WE FAIL TO APPRECIATE AS TO HOW SUCH MACHINE HIRE CHARGES CAN BE CONSIDERED AS ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 11 DERIVED FROM ELIGIBLE UNDERTAKING. THESE DO NOT HA VE ANY DIRECT NEXUS WITH THE ELIGIBLE UNDERTAKING. THE SOURCE OF SUCH INCOME IS HIRING OF MACHINES, WHICH IS STEP AWAY FROM THE ELIGIBLE UND ERTAKING. THE VIEW TAKEN BY THE LD. CIT(A) ON THIS SCORE IS UPHELD. III. RENT RECEIPT: 13. THE ASSESSEE RECEIVED RENT FROM ITS EMPLOYEE S QUARTERS AS WELL AS TEMPORARY SHEDS GIVEN TO CONTRACTORS AT PROJECT SIT ES. EVEN THOUGH SUCH INCOME MAY BE CONSIDERED AS ATTRIBUTABLE TO THE ELI GIBLE UNDERTAKING, BUT, IT CAN BY NO STRETCH OF IMAGINATION, BE DESC RIBED AS `DERIVED FROM THE ELIGIBLE UNDERTAKING. WE, THEREFORE, APPROVE T HE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. IV. SUNDRY RECEIPTS : 14. THESE AMOUNTS ARE IN THE NATURE OF ELECTRIC ITY CHARGES, GUEST HOUSE RECEIPTS, SUBSIDIZED TRANSPORT AND MISCELLANEOUS RE CEIPTS FROM THE EMPLOYEES AND CONTRACTORS. THE REASONS GIVEN BY US HEREINABOVE FOR NOT ALLOWING DEDUCTION IN RESPECT OF THE ITEMS MENTIONE D ABOVE APPLY WITH ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 12 FULL FORCE IN RESPECT OF SUCH SUNDRY RECEIPTS AS WE LL. THESE RECEIPTS CANNOT BE CONSIDERED AS DERIVED FROM THE ELIGIBLE UNDERTAKING. WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS SCORE. 15. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ASSESSMENT YEAR 2009-10 16. THE LD. DR FAIRLY SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF BOTH THE APPEALS FOR THIS YEAR ARE, MUTATIS MUTANDIS , SIMILAR TO THOSE FOR THE AY 2008-09. 17. IT CAN BE SEEN FROM THE REVENUES APPEAL THAT T HE DISPUTE IS AGAINST THE ALLOWING OF DEDUCTION BY THE LD. CIT(A) U/S 80I A ON INCOME FROM EXCESS PROVISION WRITTEN BACK AND LATE PAYMENT O F SURCHARGE. BOTH THESE ITEMS ARE SIMILAR TO THOSE WHICH WE DISCUSSED WHILE DISPOSING OF THE APPEAL FOR THE AY 2008-09. FOLLOWING THE DECIS ION TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER ON THIS I SSUE. 18. IN THE CROSS OBJECTIONS FILED BY THE ASSESSEE, THE DISPUTE IS ONLY AGAINST NOT ALLOWING DEDUCTION U/S 80IA IN RESPECT OF THE SAME ITEMS ITA NO.3956 & 6457/DEL/2012 CO NOS.91 & 92/DEL/2014 13 WHICH WERE SUBJECT MATTER OF THE ASSESSEES CROSS O BJECTIONS FOR THE AY 2008-09. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER ON THIS ISSUE AS WELL. 19. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 03.03.201 5. SD/- SD/- [I.C. SUDHIR] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 03 RD MARCH, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.