2022 (1) TMI 338 - AT - Income Tax

Deduction claimed u/s. 80JJA - Proof of manufacturing activities carried out by the assessee - whether 'bagas' used by assessee as raw material for preparation of final product, purchased from other parties can be considered as waste for manufacturing bio-mass fuel or not? - HELD THAT - We find that on similar set of fact, the Hon'ble Bombay High Court in the case Smt. Padma S. Boara 2012 (12) TMI 666 - BOMBAY HIGH COURT while considering the question of law whether Tribunal was justified in allowing deduction u/s 80JJA on the profit derived from business of manufacturing fuel briquettes from 'bagas'. Hon'ble Bombay High Court on similar set of fact, wherein bagasee/bagas was held as waste for manufacturing fuel briquettes. Therefore, we do not find any merit in the grounds of appeal raised by Revenue. Further keeping in view that we have affirmed the order of ld. CIT(A) on merit, therefore, discussions of the contention of ld. DR for the revenue about the applicability of exception clause of para 10(c) of CBDT Circular have become academic. Accordingly, order of Ld. CIT(A) is affirmed resultantly the appeal of Revenue stands dismissed.

Summary

Issues:
- Disallowance under section 80JJA for AY 2009-10 & 2010-11
- Validity of re-opening of assessment
- Applicability of monetary limit for appeal by Revenue
- Interpretation of 'bagas' as waste for manufacturing fuel briquettes

Analysis:

Issue 1: Disallowance under section 80JJA
The appeals by Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding disallowance of deduction claimed under section 80JJA. The assessee, a partnership firm engaged in manufacturing bio-mass fuel & bio coal, claimed a deduction of ?18,16,608 for AY 2009-10. The Assessing Officer disallowed the deduction, stating that the raw material "bagas" used by the assessee was not waste or bio-degradable waste. Despite non-compliance by the assessee, the deduction was disallowed, leading to an addition to the income. The CIT(A), after considering the submissions, deleted the addition, citing a precedent from the Bombay High Court. The Tribunal affirmed the CIT(A)'s order, stating that the issue was covered by the High Court's decision.

Issue 2: Validity of re-opening of assessment
The assessee objected to the validity of the re-opening of the assessment under section 147. The CIT(A) held that since relief was granted on merit, the adjudication on the validity of re-opening became academic. The Revenue appealed, arguing that the assessment was re-opened based on audit objections. The Tribunal, after considering the arguments, dismissed the appeal, emphasizing the application of the High Court's decision on the issue.

Issue 3: Applicability of monetary limit for appeal by Revenue
The Revenue contended that the monetary limit for appeal set by the CBDT was not applicable due to the nature of the case falling under an exception clause of a circular. The assessee argued that the tax effect was below the limit specified by the CBDT, rendering the appeal not maintainable. The Tribunal, after hearing both parties, upheld the CIT(A)'s order on merit, making the discussion on the monetary limit academic.

Issue 4: Interpretation of 'bagas' as waste for manufacturing fuel briquettes
The core dispute revolved around whether 'bagas' used by the assessee as raw material for manufacturing fuel briquettes could be considered waste. The Tribunal referred to a Bombay High Court decision where it was established that 'bagas' was indeed waste of the sugar factory and could be classified as bio-degradable waste. The High Court's decision influenced the Tribunal's ruling, leading to the dismissal of the Revenue's appeals for both AY 2009-10 and 2010-11.

In conclusion, the Tribunal dismissed the Revenue's appeals for both assessment years, affirming the CIT(A)'s order based on the interpretation of 'bagas' as waste for manufacturing fuel briquettes, as established by the Bombay High Court's decision.