TMI Blog2010 (2) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Denial of deduction u/s 080JJA in respect of job work charges - Held that:- Business of collecting and the business of processing or treating are qualified by 'and' and not 'or'. Therefore, it is essential, the business of collecting should be done by assessee as part of his business activities, whereas in the job work related activities, this part is done by the job work customers and assessee has no role in such activity. - Decided against Assessee. - ITA Nos. 1076 and 1151/Pn/2007; - - - Dated:- 9-2-2010 - D. Manmohan, D. Karunakara Rao, JJ. Amrender Kumar for the Revenue Sunil Pathak for the Assessee ORDER D. Karunakara Rao, Accountant Member:- 1. There are four appeals under consideration involving asst. yrs. 2003-04 and 2004-05 and the main appeals are filed by the Revenue and the assessee filed the cross-appeals for both assessment years. Grounds in both the main appeals are identical and the same read that the 'CIT(A) erred in allowing the deduction under s. 80JJA in respect of business of making fuel briquettes from bagasse'. Similarly, the objections in both cross-objections are also identical and the same are against the denial of be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw material for the production process should be a 'waste', (ii) Waste should be a bio-degradable waste, meaning thereby that any bio-degradable substance cannot be considered as bio-degradable waste unless such bio-degradable substance is classified as a waste also. (iii) The word 'waste' referred in the section would refer to the one generated in municipal limits. (iv) The assessee should be engaged in business of 'collection' of waste and not in purchase of waste, (v) Such 'bio-degradable waste' collected should undergo a processing treatment involving bio-degradation such as anaerobic digestion, composting etc. (vi) The result of such process of treatment should be in the form of generation of power or production of biofertilize, bio-pesticides, bio-gas or for making pellets or briquettes for fuel or organic manure." 4. Thus, the AO is of the opinion that the bagasse is not a waste rather it is residuary product which is marketed by the sugar factories for consideration after capital consumption. Further, the bio-degradable waste generated outside the municipal limits and more so when the same is purchased and collected, the same is not eligible for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and sale and hence the view of AO that it is applicable only when the waste is collected free of cost and not purchased is untenable. As per the assessee the word collection does not mean that assessee should physically collect the waste. (e) Since bagasse is bio-degradable substance therefore making briquettes from it would satisfy the condition of processing a biodegradable waste it to make briquettes. (f) The bagasse generated from sugar factories and the briquettes made by assessee are entirely two different commodities. The later is more compact, has more calorific value and less moisture content and convenient to use and store or transport." The above reply of the assessee proposes that the when the expression 'waste' is undefined in the Act, general meaning needs to be adopted and the provision of s. 80JJA has to be interpreted by applying the principles of literal interpretation of jurisprudence and finally, the other conditions relating to purposes of making briquettes are met too. Further, as per the assessee, the briquettes processed are of more caloric value though they are more compact in size and end-product of the processing is not merely the one with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not involve any bio-degradation as required in case of treatment or recycling of a bio-degradable waste. Rather activity of assessee cannot be said to be even recycling as the raw material and the end-products are hardly any different in intrinsic content and usage." Accordingly, AO denied the claim of deduction under s. 80JJA for the asst. yr. 2003-04 as well as asst. yr. 2004-05. Aggrieved with the same, assessee filed an appeal before the CIT(A). 7. Job works receipts:- On the job works receipts, whether they are eligible for deduction under s. 80JJA, the AO noted that the assessee is engaged in briquetting job works and earned profit of Rs. 3,43,750 for the asst. yr. 2003-04 out of this business activity of job works. In view of the assessee's failure to file details relating to the direct expenses attributable to the job works and also in view of the AO's opinion on the 'waste', 'collection of bio-degradable waste' etc., AO held that the assessee is not entitled for benefits of deduction for the asst. yr. 2003-04 and also for the asst. yr. 2004-05. Aggrieved with the same, assessee filed an appeal before the CIT(A). 8. During the first appellate proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness activity of 'collecting of bio-degradable waste but only the business activity of 'processing or treatment...' CIT(A) is of the opinion that the deduction is available to the persons who are engaged in the business of collection and processing or treating of bio-degradable waste. In respect of the job work done by the assessee, the collecting activity is made by someone else and processing or treatment is carried out by the assessee'. Since both the conditions i.e., collecting and processing or treating have to be performed by the assessee and they are not met in the instant case, therefore, the assessee is not entitled for deduction under s. 80JJA in respect of the job work receipts. He accordingly confirmed the AO's decision on the issue. The same is the decision of the CIT(A) in respect of the asst. yr. 2004-05 too. 11. Thus, there are two categories of receipts i.e.,- (i) receipts of the assessee relatable to the collection of degradable waste, and (ii) the job works receipts relatable to the collection of degradable waste relatable to the others. At the end of the first appellate proceedings, the assessee is found entitled to the benefits of deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market as it has multiple uses. 15. On the other hand, learned counsel for the asscssee reiterated all the submissions made by him before the Revenue authorities and requested for confirming few points of the CIT(A) with regard to above ground. Further, he took us through a paper book filed before us and attempted to demonstrate that bagasse is a residual waste generated in the sugar industries (p. 15A of paper book) and it is a bio-degradable product (pp. 16 and 17 of paper book). The counsel stated that the bagasse is waste of sugar manufacturing. Referring to pp. 19 and 20, a letter mentioned of non-conventional energy sources, the counsel mentioned that the bagasse is a type of waste of renewal nature. Similarly, referring to Technology Innovation Management and Entrepreneurship Information Services', the learned counsel read out that the agricultural engineers in India developed an agro-waste compaction device for converting agro-forest waste such as bagasse, dry leaves and saw dust into briquettes. Referring to p. 28, the counsel read out that sugar factories follow textile manufacturing industry and typical sugar and distillery complex generates large quantities of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure. The expression 'bio-degradable waste' is not defined in the Act and the Act is silent on if the 'waste' in question must be the:- (a) municipal waste, (b) available free of cost, and (c) only from the locations within the municipal limits as held by the AO. 18. Next, we take up the examination of the contents of Circular No. 772, dt. 23rd Dec., 1998 explaining the provisions of s. 80JJA and the relevant parts read as follows:- "80JJA Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste:- Increasing population and urbanization pose challenges for planners. Waste management has been an area of serious concern, which so far has been primarily the responsibility of local bodies. Waste is now being thought not as a useless resource but a resalable and reusable one given the proper framework the waste can be utilized for generating energy and useful resources by way of composting, vermin compost and anaerobic digestion. The potential for power generation is also tremendous........." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO considering the fact that said provisions are aimed at solving the problems of the planners of local bodies in the areas of population and urbanisation. In the instant case, undisputedly, the assessee did collect the said waste and complied with the twin conditions discussed above. In continuation, it is not fair to restrict the location of municipal limits only, when the Circular No. 772 refers to 'local bodies' which include the Panchayats as well. The Panchayats refer to the villages or rural areas where the sugar industries are essentially located. There are planners for every nook and corner of the country. Therefore, the problem is common both for municipalities and the other areas of the country. Regarding the definition of waste, we find that there is nothing like waste in the universe and everything has a use and that is how system is created or evolved on this planet-earth and expression 'waste' has to be understood depending on the person owning such waste as such the expression is generic in its use. In any case, the Government terms the bagasse generated from the sugar industry as a waste. Regarding the cost to the waste, it again depends on the demand and supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business activity of collecting of the biodegradable waste and this activity is done by the job work customers and therefore assessee is not eligible for deduction in respect of the job work receipts. As per the learned counsel, the assessee becomes party to the collection of bio-degradable waste as all the customers bring their collection of the waste to the assessee for job work purposes. 26. We have heard both the parties and perused the orders of the Revenue. In the preceding paras, we have analysed the scope of the provisions of s. 80JJA and arrived at the conclusion that the said section refers to twin conditions of 'business of collecting and processing or treating...' Business of collecting and the business of processing or treating are qualified by 'and' and not 'or'. Therefore, it is essential, the business of collecting should be done by assessee as part of his business activities, whereas in the job work related activities, this part is done by the job work customers and assessee has no role in such activity. In respect of the job work receipts, the profits and gains of the assessee relatable to the activity of collecting of bio-degradable waste are not derived fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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