TMI Blog2013 (2) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... m of interest free suppliers’ credit as capital receipt or revenue receipt - Held that:- An agreement with windmill supplier states that in case wind mill fails to generate electricity of the units mentioned in the agreement, the supplier of the wind mill shall compensate the assessee for such failure of generation - As per Ao the said amount received is only a compensation for loss of profit and hence a revenue receipt - The performance guarantee clause of agreement clearly suggests that compensation would be paid for generation loss which is loss of earnings only - Thus is is revenue receipt exigible to tax - Decided against the assessee - ITA No. 1652/Mds/2012, ITA No. 2028/Mds/2012, ITA No. 1679/Mds/2012, ITA No. 2029/Mds/2012 - - - Dated:- 21-2-2013 - Dr. O.K. NARAYANAN, VICE PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER Appellant by : Mr. A. Arjunraj Respondent by : Mrs. Vidisha Kalra, CIT DR ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : These appeals by different assessees and the Department are directed against different orders of the Commissioner of Income Tax (Appeals)-I, Coimbatore, in respect of the above assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptable, which is not proper and justified. The Counsel for the Assessee submits that when the parties are not available the Assessing Officer should have given an opportunity to the assessees to produce the parties. In the absence of any such effort made by the Assessing Officer, there is no justification in making disallowance. Therefore, the Counsel for the Assessee submits that Commissioner of Income Tax (Appeals) is not justified in restricting the disallowance to 10%. 5. The Departmental Representative supported the orders of Assessing Officer and submits that the assessees did not prove that they have purchased water from outside when there is sufficient water in the well owned by the assessee. Therefore, the Assessing Officer is justified in making disallowance. 6. We have heard both sides. Perused the materials on record and the orders of authorities below. The only reason for disallowance of water expenses by the Assessing Officer is that the assessee is having well and there is no need for purchase of water from outside. The Commissioner of Income Tax (Appeals) restricted the disallowance to 10% and while doing so, he observed that the Assessing Officer had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses on purchases from regular registered dealers. The Assessing Officer s observation that the weigh bridge bills were from M/s. Narmada Electronic Weigh Bridge which belongs to the assessee could not be a reasonable ground for making a disallowance of the expenditure. The learned A.R. submitted that the weight of firewood also depends on the moisture content and the weighment is necessary to make proper payments. A comparison of purchases made from cheque and cash was made by the Assessing Officer and he found that the purchases made from regular registered parties were costing more. I have gone through the vouchers furnished by the appellant with regard to cash purchases. The appellant has written only the name of the suppliers and many of these suppliers have brought the firewood in bullock carts. These are all local villagers belonging to nearby villages. The learned A.R. submitted that the weighment slips for all the purchases and the rate of firewood varies from J.1,500/- per tonne to J.3,500/- per tonne depending upon the nature of wood. The requirement of the appellant was around 42 tonnes of firewood per day. It is a fact that the low quality wood will completely burn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the claim put forth by the assessee before him with regard to deduction under sec.80IA read with sec.80AC of the Act. 15. We have perused the grounds of appeal filed by the assessee before the Commissioner of Income Tax (Appeals) and find that the assessee has not raised any such ground filed along with Form No.35 before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) also did not adjudicate on this aspect as there was no ground before him. Therefore, this ground of appeal raised before us does not arise out of the order of the Commissioner of Income Tax (Appeals) and, therefore, we decline to adjudicate this ground raised by the assessee on this aspect. 16. The only issue remaining in the assessee s appeal in the case of K. Subramanian in ITA No.1652/Mds/2012 is that the Commissioner of Income Tax (Appeals) erred in not considering the claim of interest free suppliers credit as capital receipt. 17. The facts of the case are that the assessee is engaged in the business of wind mill and Dyeing Units. The assessee has been installing wind mills from the Asst. Year 2004-05. The assessee entered into an agreement with the supplier of wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the machinery is provided as liquidated damages by the agreement through waiver of supplier credit over a period of years. The Counsel for the Assessee submits that the compensation is linked to the capacity of the machinery while the price for purchase are agreed between the supplier and purchaser. Entering into agreement for purchase, supply, erection and commissioning are anterior to the generation of electricity and more clearly before the commencement of production and sale of electricity. The Counsel for the Assessee submits that the compensation given is purely for the sterilization of profit making apparatus and the loss of very source of income through generation of electricity over the life time of the machine which otherwise the purchaser would have earned over time and, therefore, is a capital receipt. 20. The Counsel for the Assessee submits that the compensation received by the assessee from the suppliers is on capital field. It cannot be treated as revenue receipt. He relied on the following decisions :- i) CIT v. Bombay Burmah Trading Corporation - 161 ITR 387(SC) ii) CIT v. Saurashtra Cement Ltd 325 ITR 422 (SC) iii) CIT v. South India Flour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... units, then No.1 shall adjust for the shortfall of 1,25,000 units at rate, which shall be thrice of the prevailing TNEB rates, against the above supplier credit. 4. Notwithstanding anything mentioned hereinabove No.2 shall not under any circumstances be entitled to claim any amount more than J.25,00,000/- from No.1 towards generation loss. SWFL Windmill V : 2.No. 1 has guaranteed a minimum generation of 5,00,000 units per annum. (Ref. Clause no.6 of No.2 s PO No.2008/01/KD dated 23rd July 2008). 3. The Parties have agreed that for any shortfall in actual generation against the minimum guaranteed generation, No.1 shall be liable to adjust the shortfall in unit generation at the rate, which shall be thrice of the prevailing TNEB rates. In the same manner, if the actual generation is only 4,00,000 units, then No.1 shall adjust for the shortfall of 1,00,000 units at rate, which shall be thrice of the prevailing TNEB rates, against the above supplier credit. 4. Notwithstanding anything mentioned hereinaboveNo.2 shall not under any circumstances be entitled to claim any amount more than J.30,00,000/- from No.1 towards generation loss. 23. As can be seen from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. 25. In the case of CIT v. Saurashtra Cement Ltd (supra), the assessee engaged in the manufacture of cement, entered into an agreement with the supplier for the purchase of an additional cement plant. The agreement contained a condition that in the event of delay caused in the delivery of machinery, the assessee was to be compensated at 5% of the price of the machinery without proof of actual loss and the total amount of damages shall not exceed 5% of the total price of the machinery. The supplier could not supply the machinery within the stipulated time and the assessee received Liquidated Damages from the supplier. The Hon'ble Supreme Court held that the damages to the assessee were directly and intimately linked with the procurement of capital asset ie., cement plant and therefore is a capital receipt. In the present case, the assessee has not received compensation for delay in commissioning of wind mill. The assessee has not received any Liquidated Damages for delay in supply of machinery. Here, the compensation received by the assessee is for loss of earnings. 26. The decision in the case of CIT v. South India Flour Mills Pvt. Ltd. (supra) is distinguishable on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
