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TMI Blog2023 (7) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... has been accepted by the revenue. If the assessee would have reduced the cost of such expenditure by the amount of refund/recovery, there would not have been any question of showing the impugned income and consequently denying the deduction claimed by the assessee under section 80IA - It is just a manner of presentation of the income and expense. As such, the assessee has represented the recovery/receipt out of such expenses separately as income instead of reducing the cost. Admittedly, the corresponding expenses have been allowed as deduction against the income from generation and sale of electricity. Thus, it has a live link with the activity of the assessee. Accordingly, we hold that the assessee is eligible for deduction on such receipts. In view of the above, the ground of appeal raised by the assessee is hereby allowed. Income from writing of balance of sundry creditor - As we note that there is no dispute about the fact that the creditors whose balances were written back are from eligible unit. It is without any ambiguity that the sundry creditor arises out of purchases of material, consumables stores. Thus, the expenditure on account of purchases of material, consumable st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of generation and sale of power. The assessee for the year under consideration claimed deduction under section 80-IA of the Act for its two units detailed as under: 1. Baroda Plant Rs. 2,62,71,389/- 2. Surat Plant Rs. 81,10,63,255/- 4.1 However, the AO found that the profit loss account of the above units includes other income of Rs. 4,10,41,033/- and Rs. 8,15,61,768/- respectively whereas the assessee while computing the eligible profit for deduction reduced other income only for Rs. 4,0013,187/- and 2,04,49,934/- respectively instead of reducing the entire other income. Therefore, the AO reduced the amount of eligible profit of both the with unit by full value of other income and accordingly worked out the amount of deduction under section 80-IA of the Act which is detailed as under: 1. Baroda Plant Rs. 2,52,43,543/- 2. Surat Plant Rs. 74,99,51,421/- 5. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted the details of other income which stand as under: 1. Particulars Baroda Plant Amt. in Rs.) Surat Plant (Amt. in Rs.) 1. Interest on deposits/Bonds 4,00,13,187/- 2,04,49,934/- 2. Other interest - 67,63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Industries [2018] taxmann.com 63 (Ahd) subsequent to the decision in the case of Nirma Industries Ltd. (supra), the jurisdictional tribunal has held as follows: The assessee was not entitled to claim of deduction under section 80-IA of insurance claim because immediate source of receipt was the insurance company with whom the claims were filed. The argument that it was a reimbursement for the compensation for the loss caused to it, therefore it had direct nexus with the business of industrial undertaking could not be accepted because insurance claim was not derived from business of industrial undertaking but it was derived from insurance companies: Insurance company may accept or may not accept the claim and reimbursement is done only on the fulfilment of conditions as per agreement and, therefore, it has no immediate nexus with carrying on of the business. The moment the reply to the query as to the source of receipt ends which is insurance company and not the business of industrial undertaking, no further enquiry is necessary so as to finding out as to whether claims were in connection with business or not. Every activity such as putting money in the bank as security or purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industrial undertaking. Therefore, the Tribunal was right in law in holding that the income from the sale of scrap was not relatable to the industrial activities of the assessee for the purpose of section 80HH. Following this decision, this disallowance is upheld. (b) The other amount of Rs.1,35,26,999/- has been claimed to be on account of Dry Ash and Fly Ash and recovery of expenses. Again the appellant has not submitted as to how such income is derived from the industrial undertaking. Hence, following the decision in the case of Pandian Chemicals Ltd., this disallowance is upheld (c) The next disallowance is on account of old balances written off. This issue is covered in favour of the appellant by the decision of ITAT Ahmedabad in the case of M/s. Inox India Ltd. in Revenue's appeal ITA No.756/Ahd/2001 for A.Y. 1997-98. Hence, the AO is directed to allow deduction u/s.801A on this amount. (d) So far as the balance amount consisting of Tender Fees/EMD written off Rs.3,73,750/-, Rent/Room Charges Rs.28,88,726/-, Deduction on account of Retention Rs.52,750/- and Others Rs.2,76,766/- are concerned, these amounts have not been from the industrial undertaking. Hence, the AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. To this extent, we are inclined to accept the contention of the assessee. But, to our considered view, if insurance claimed received represents against the loss of revenue nature, then such receipt ultimately reduces the loss claimed by the assessee in the profit and loss account. As such, it is a manner of presentation in the books of accounts. If the assessee instead of showing insurance claim as income had adjusted the same against the loss incurred due to fire, there would not have been any income in the books of accounts of the assessee and accordingly the question of disallowances of deduction under the section 80IA of the Act would not have arisen. Thus, merely the assessee has presented the receipt of insurance claim in a particular manner, the assessee cannot be debarred from claiming the deduction under the provisions of section 80IA of the Act. In this regard, we also find support and guidance from the judgment of Hon ble Gujarat High Court in case of CIT Vs. Shri Rama Multi Tech Ltd. reported in 33 taxmann.com 194 wherein it was held as under: We have no reason to take a different view. If the assessee had either consumed the raw material in its industrial activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or failed to fulfil the terms of contract. Thus, it appears that such damages have direct link from the activity of generation of power. Besides the above, if the assessee would have reduced the cost of material purchased by the amount of liquidated damages, there would not have been any question of showing any income under the captioned head and consequently denying the deduction claimed by the assessee under section 80 IA of the Act. It is just a manner of presentation of the receipt of money in the accounts. As such, the assessee has represented the liquidated damages separately as income, but it has a live link with the activity of the assessee. Accordingly, we hold that the assessee is eligible for deduction on such liquidated damages. 10.4 Coming to the proceeds from sale of scrap and dry/fly ash, the assessee claimed that the income under the head scrap sale arises on account of sale of empty oil drums, wooden scrap, scrap developed during the maintenance of power plant and sale of ash generated on burning of lignite used for generation of power. There is no dispute about the fact that all these items are part and parcel of consumables. When consumable stores are purchased b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o there in assessee s appeal for A.Y. 2009-10 in ITA No. 472/Ahd/2013 which has been decided by us vide paragraph No. 10 of this order. Therefore, the finding given in the aforesaid para will apply equally here in also. 13. Coming to the issue of other income of Rs. 33,05,199/-, in this regard, we note that the assessee before the lower authorities have contended that impugned receipt consists of the amount recovered being rent/room charges from its employee and various persons of different contractors on account of the use of its premises in order to perform business operation. It also includes the amount of EMD forfeited and retention money. The assessee accordingly claimed that the same are directly linked to its business activity and accordingly eligible for deduction under section 80IA of the Act. However, the lower authorities disagreed by holding that the impugned income comes under the head other income and not derived from business of generation and sale of electricity. Thus, the assessee is in appeal before us. 14. We have considered the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- 3. Ash disposal Rs. 1,35,51,916/- 4. Bond money from employee Rs. 33,05,199/- 5. Recovery from contractor Rs. 1,54,293/- 6. Insurance claim Rs. 1,75,39,594/- Whereas the revenue is in appeal against the allowances of deduction under section 80IA of the Act on income from writing off the balance of sundry creditor for Rs. 5,02,042/- only. 16. At the outset, we note that the issue of liquidation damages, sale of scrap, Ash disposal and insurance claim were also there in assessee s appeal for AY 2009-10 in ITA No. 472/Ahd/2013 which have been decided by us vide paragraph No. 10 of this order. Therefore, the finding given in the aforesaid para will apply equally here in also. 17. Similarly, the issue of recovery of bond money and recovery from contractor are identical to the issue of other income raised by the assessee in ITA No. 535/AHD/2014 for A.Y. 2010-11 which have been decided by us vide paragraph No. 14 of this order. Therefore, the finding given in the aforesaid para will apply equally here in also. 18. Coming to the issue of income from writing of balance of sundry creditor, in this regard, we note that there is no dispute about the fact that the creditors whose balances we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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