2016 (5) TMI 1303 - AT - Income Tax

Deduction u/s. 80JJA - whether baggase/husk is not a waste but is a by-product of agri-produce processing industry which was purchased and not collected & processed or treated by the assessee, which is a pre-requisite for claiming deduction u/s.80JJA - Held that - In view of the facts of the case and the judgment of Hon ble High Court in the case of Commissioner of Income Tax Vs. Smt. Padma S. Bora (2012 (12) TMI 666 - BOMBAY HIGH COURT ) wherein held he assessee has collected bagasse from sugar factories after having made payment for the same. Therefore, the aforesaid requirement of collecting as provided under Section 80JJA is satisfied. It is a undisputed finding of fact that the collected bagasse has been used by the respondent-assessee to make briquettes for fuel as that indeed is the business of the respondent-assessee, thus we are of the considered view that the assessee is eligible to claim deduction u/s. 80JJA. The findings of Commissioner of Income Tax (Appeals) on issue are well reasoned and thus, no interference is called for - Decided in favour of assessee Depreciation on windmills - Held that - In view of the documents on record it is clearly evident that the assessee had purchased windmill from NMCOML during the financial year 2007-08 we do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) in accepting the claim of depreciation of the assessee. - Decided in favour of assessee Disallowance on account of Employees contribution to Provident Fund and ESIC and Labour Welfare Fund - assessee had made contributions in the respective funds after the due date as specified under the provisions of relevant Acts - Held that - Although the contribution to the above funds were made after due date as specified under the relevant Acts, but before the due date of filing of return of income under the Income Tax Act. This fact has not been disputed by the Department. The Hon ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT ) has held that the contributions made after due date as prescribed under the Provident Fund Act but before the due date of filing of return of income, the assessee is eligible to claim deduction thereof. The Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Ghatge Patil Transport Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT ) while dealing with the similar issue has held that the contribution towards the employees share of provident fund etc. is allowable if deposited before the due date of filing of return of income - Decided in favour of assessee Deduction u/s. 80IA(4) on the entire sale proceeds which include sales tax incentive - Held that - This issue needs a revisit to the file of Assessing Officer. The Assessing Officer shall reexamine the claim of assessee in respect of deduction u/s. 80IA(4) in the light of decision of Pune Bench of the Tribunal in the case of Serum International Ltd. Vs. Addl. CIT (2013 (1) TMI 688 - ITAT PUNE ). The Assessing Officer before deciding the issue afresh shall give an opportunity of hearing to the assessee, in accordance with law.

Summary

Issues Involved:
1. Deduction u/s. 80JJA.
2. Depreciation on windmills.
3. Employees' contribution to Provident Fund, ESIC, and Labour Welfare Fund.
4. Deduction u/s. 80IA(4) on sales tax incentive.

Issue-wise Detailed Analysis:

1. Deduction u/s. 80JJA:
The first issue concerns the claim of deduction u/s. 80JJA by the assessee, which was allowed by the Commissioner of Income Tax (Appeals) but contested by the Revenue. The assessee, engaged in producing fuel pellets from bio-degradable waste, claimed this deduction on grounds that bagasse and groundnut husk are bio-degradable waste. The Assessing Officer rejected this claim, considering these as by-products, not waste. However, the Commissioner of Income Tax (Appeals) accepted the claim, referencing the Tribunal's decision in DCIT Vs. Smt. Padma S. Bora, which was later upheld by the Hon'ble Bombay High Court. The High Court clarified that bagasse is a bio-degradable waste and its collection (even if purchased) and processing into fuel briquettes qualifies for deduction u/s. 80JJA. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.

2. Depreciation on Windmills:
The second issue pertains to the claim of depreciation on windmills by the assessee. The Assessing Officer had rejected this claim on the basis that the assessee was not a registered owner of the windmills. The Commissioner of Income Tax (Appeals), however, allowed the claim, noting that the assessee had made payments through banking channels and had taken possession and used the windmills for generating electricity. The Tribunal upheld this decision, citing the Supreme Court's ruling in Mysore Minerals Ltd. Vs. CIT, which allows depreciation claims based on possession and usage rather than mere registration. The Tribunal found no infirmity in the Commissioner of Income Tax (Appeals)'s findings and dismissed the Revenue's appeal on this ground.

3. Employees' Contribution to Provident Fund, ESIC, and Labour Welfare Fund:
The third issue involves the disallowance of deductions for employees' contributions to Provident Fund, ESIC, and Labour Welfare Fund, which were paid after the due date specified under the respective Acts but before the due date for filing the return of income. The Commissioner of Income Tax (Appeals) had allowed these deductions, referencing the Supreme Court's decision in Commissioner of Income Tax Vs. Alom Extrusions Ltd., which permits such deductions if payments are made before the return filing due date. The Tribunal supported this view, also citing the Hon'ble Jurisdictional High Court's ruling in Commissioner of Income Tax Vs. Ghatge Patil Transport Ltd., and dismissed the Revenue's appeal on this ground.

4. Deduction u/s. 80IA(4) on Sales Tax Incentive:
The final issue relates to the disallowance of deduction u/s. 80IA(4) on sales tax incentives received by the assessee from windmill operations. The Commissioner of Income Tax (Appeals) had disallowed this deduction, stating that sales tax benefits are not derived directly from the business of generating power and thus do not qualify under section 80IA(4). The Tribunal upheld this view, referencing its decision in Lap Finance and Consultancy P. Ltd. Vs. Addl. Commissioner of Income Tax, which similarly disallowed such deductions. However, the Tribunal remanded the issue back to the Assessing Officer to re-examine the claim excluding sales tax incentives, in line with the decision in Serum International Ltd. Vs. Addl. CIT.

Conclusion:
The Tribunal dismissed the Revenue's appeals on all grounds, upheld the assessee's claims for deductions u/s. 80JJA and depreciation on windmills, and allowed the deduction for employees' contributions to Provident Fund, ESIC, and Labour Welfare Fund if paid before the return filing due date. The issue of deduction u/s. 80IA(4) on sales tax incentives was remanded back for re-examination. The assessee's cross-objection and appeal were partly allowed for statistical purposes.