2012 (12) TMI 666 - HC - Income Tax

Deduction u/s.80JJA - manufacturing fuel briquettes from bagasse - Held that - Bagasse is a waste of the sugar factory. This waste is a bio-degradeable waste and the same is collected on consideration by the assessee from the factory. There could be no universal definition of the word waste & has to be understood contextually i.e. place where it arises and the manner in which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy & CETA 1985 classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof & Chapter 23 heading 23.01 respectively. Whether collection would mean collecting free of charge and not by purchasing the same. - held that - The word collecting means to gather; to fetch. It is a neutral word and does not mean collection for consideration or collection without consideration. Thus it is an undisputed position that the 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 - in favour of assessee.

Issues:
1) Whether the Tribunal was justified in allowing deduction u/s.80JJA of the Income Tax Act on profits derived from manufacturing fuel briquettes from bagasse?
2) Whether bagasse is considered waste for the purpose of Section 80JJA of the Act?
3) Whether the conditions for availing the benefit of Section 80JJA of the Act were satisfied by the respondent-assessee?
4) Whether the Circular No.772 restricts the operation of Section 80JJA only to local bodies and excludes individuals from its benefit?
5) Whether the appeal of the revenue should be admitted or dismissed?

Analysis:
1) The appeal challenged a Tribunal's order related to assessment years 2003-04 and 2004-05 under Section 260A of the Income Tax Act. The respondent-assessee was engaged in manufacturing fuel briquettes from bagasse and claimed deductions under Section 80JJA of the Act. The Assessing Officer initially disallowed the deductions, but the Commissioner of Income Tax (Appeals) allowed them, stating that the conditions under Section 80JJA were met.

2) The Tribunal dismissed the revenue's appeals, affirming that bagasse generated in the sugar industry qualifies as waste, meeting the conditions for availing the benefit of Section 80JJA. The Tribunal held that purchasing bagasse does not negate its waste classification, and the respondent satisfied the requirements for the deduction.

3) The Section 80JJA of the Act allows deductions for profits derived from collecting and processing biodegradable waste for specific purposes. The respondent collected bagasse from sugar factories, processed it into briquettes for fuel, and met the conditions laid down in the Act. The evidence presented supported the finding that bagasse was indeed a biodegradable waste used for making briquettes for fuel.

4) The revenue argued that bagasse was not waste but a byproduct of the sugar industry, and the Circular No.772 restricted the benefit of Section 80JJA to local bodies only. However, the Court disagreed, stating that bagasse was classified as waste by relevant authorities and met the criteria for deduction under Section 80JJA.

5) The Court concluded that no substantial question of law arose for consideration, and the appeal was dismissed. The judgment upheld the Tribunal's decision, emphasizing that the respondent satisfied the conditions for claiming the deduction under Section 80JJA of the Income Tax Act.

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