2017 (2) TMI 1493 - AT - Income Tax

Deduction u/s.80IA - two projects i.e. land filling 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 - HELD THAT - It emerges that the assessee has amply demonstrated during the course of lower proceedings that two projects in question are in fact separate ones. We afforded amply opportunity to learned Departmental Representative to rebut all the above extracted evidence / pleadings to the effect that the two projects i.e. land filling and incinerator one are very much separate. The Revenue fails to quote any material against the same. We accordingly find no reason to interfere with the CIT(A) s conclusion under challenge. This former substantive ground thus fails. Addition collection by the assessee in the nature of non refundable receipts treated income in the course of assessment and deleted in lower appeallate proceeding - whether the assessee s advance receipts from its customers in the nature of non refundable receipts are to be treated as income in entirety pertaining to relevant assessment year or not? - HELD THAT - We find that hon ble jurisdictional high court s decision in Unique Mercantile Services Pvt. Ltd. 2015 (1) TMI 525 - GUJARAT HIGH COURT decides a similar question pertaining to membership fee spreading over to a time span of more than one assessment year to be taxable on prorata basis. We adopt the same reasoning herein as well and direct the Assessing Officer to assess the above stated non refundable receipts by adopting similar proportionate computation formula. This Revenue s ground is accordingly accepted for statistical purposes. Excluding interest income and one time membership fee for incinerator plan for the purpose of computing Section 80IA deduction - HELD THAT - It emerges that the assessee s interest income in question arises from fixed deposits maintain with bank 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 that a co-ordinate bench in assessees cases itself for assessment years 2002-03 to 2004-05 has already reversed similar exclusion thereby treating identical interest income as eligible profits for the purpose of Section 80IA deduction. We quote the very reasoning herein as well assessee s former limb of the impugned disallowance pertaining to interest income. One time membership fee for incinerator plant - There can hardly be any dispute that the assessee charges the above fee for its enrolments of 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 assessee s books as profit and gain of business and profession which have nowhere been rejected in course of the lower proceedings. We accordingly accept assessee s arguments against this latter exclusion as well.

Issues:
1. Assessment of deduction claim u/s.80IA for land filling and incinerator projects.
2. Treatment of non-refundable receipts as income.
3. Exclusion of interest income and membership fee for Section 80IA deduction claim.
4. Disallowance of provision made for post-closure expenses.
5. Disallowance of provision made for pit covering expenses.

Analysis:

1. Assessment of deduction claim u/s.80IA for land filling and incinerator projects:
The dispute revolved around whether the land filling and incinerator projects should be considered as separate entities for the purpose of granting Section 80IA deduction. The Assessing Officer treated them as a composite project, while the CIT(A) reversed this decision. The CIT(A) based the reversal on the appellant's submission, supported by various case laws, demonstrating that the two units were different and independent in terms of process, method, machinery, and infrastructure. The tribunal upheld the CIT(A)'s decision, noting the absence of evidence from the Revenue to counter the appellant's claims.

2. Treatment of non-refundable receipts as income:
The Revenue sought to include a non-refundable receipt as income, which the Assessing Officer treated as such during assessment. However, the CIT(A) accepted the appellant's argument that the income accrues only when the waste received is burnt, following the mercantile method of accounting. Citing relevant decisions, the CIT(A) directed the Assessing Officer to treat the amount as advance received instead of income for both normal income and book profit computation.

3. Exclusion of interest income and membership fee for Section 80IA deduction claim:
The appellant contested the exclusion of interest income and membership fee for the Section 80IA deduction claim. The tribunal reversed the exclusion of interest income, considering it as eligible profits for the deduction. Additionally, the tribunal accepted the appellant's arguments regarding the membership fee, treating it as business profits.

4. Disallowance of provision made for post-closure expenses:
The appellant challenged the disallowance of the provision made for post-closure expenses. Both parties agreed that a previous decision had deleted a similar disallowance in earlier assessment years. The tribunal accepted the appellant's grounds, dismissing the disallowance.

5. Disallowance of provision made for pit covering expenses:
The appellant contested the disallowance of the provision made for pit covering expenses. The tribunal noted the appellant's success on similar issues in previous years and the Revenue's failure to provide new evidence. Consequently, the tribunal accepted the appellant's grounds, allowing the appeal.

In conclusion, the Revenue's appeal was partly allowed for statistical purposes, while the appellant's cross-appeal succeeded partially. The tribunal's decision was pronounced on February 27, 2017.

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