TMI Blog2017 (1) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... efits only to local bodies. In any event the circular cannot override the clear words of Section 80JJA of the Act which provides deduction in respect of profits and gains derived from the business of collecting and processing/treating of biodegradable waste i.e. bagasse into briquettes for fuel. - Decided in favour of assessee Claim of depreciation on windmills - assessee was not a registered owner of the windmills and it was purchasing electricity from Nav Maharashtra Chakan Oil Mills Ltd. (NMCOML), thus having no title/dominion and right to use the asset - Held that:- We find the Ld.CIT(A) following his order for A.Y. 2008-09 & 2009-10 allowed the claim of depreciation. We find the Tribunal in assessee’s own case upheld the order of the CIT(A) for A.Y. 2008-09 and 2009-10 and dismissed the appeal filed by the Revenue wherein held The very concept of depreciation suggest that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby losing gradually investment caused by wear and tear, and would need to replace the same by having lost Its value over a period of time. It is well settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first one is filed by the Revenue and the second one filed by the Assessee and are directed against the order dated 30-05-2014 of the CIT(A)-II, Pune relating to Assessment year 2010-11. 2. Ground of appeal No1. by the Revenue reads as under : The Ld.CIT(A) erred in allowing the deduction u/s.80JJA of the Act without appreciating that baggase/husk is not a waste but is a by-product of agriproduce processing industry which was purchased and not collected processed or treated by the assessee, which is a pre-requisite for claiming deduction u/s.80JJA of the Act. 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and dealing in animal feeds, food supplements, edible oils, fuel pellets and generation of wind power etc. The company is having its major parts at Sangli and is having solvent extractions, refineries and animal feed plants. It filed its return of income on 14-10-2010 declaring total income of ₹ 1,70,58,190/-. During the course of assessment proceedings the Assessing Officer noticed that the assessee has claimed deduction u/s.80JJA amounting to ₹ 2,32,74,413/- being profit and gains from bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, allowed the claim of the assessee. 7. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 8. The Ld. Counsel for the assessee at the outset filed a copy of the order of the Tribunal in assessee s own case for A.Yrs. 2008-09 2009- 10. He submitted that the Tribunal vide ITA No.714/PN/2012 and CO No.29/PN/2015 for A.Y. 2008-09, ITA No.362/PN/2013 and ITA No.166/PN/2013 for A.Y. 2009-10 order dated 09-05-2016 has discussed the issue at Para 11 to 13 of the order and has allowed the claim of deduction u/s.80JJA. Therefore, this being a covered matter the grounds raised by the Revenue should be dismissed. 9. The Ld. Departmental Representative fairly conceded that the issue stands decided in favour of the assessee by the decision of the Tribunal in assessee s own case for A.Y.2 008-09 and 2009-10. 10. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the issue relating to denial of deduction u/s.80JJA had come up before the Tribunal in assessee s own case in the 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (appeals) as well as Tribunal have reached a finding of fact that bagasse is a biodegradable waste used for making briquettes for fuel by the respondent assessee. This finding of fact was based on evidence led before the authorities by the respondent assessee. We find that bagasse is a waste of the sugar factory. This waste is a biodegradeable waste and the same is collected on consideration by the respondent assessee from the factory. There could be no universal definition of the word waste . The term 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 also classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof. Further, the Central Excise Tariff Act 1985 also regards bagasse as waste of sugar manufacture and is classified under Chapter 23 heading 23.01 of the Central Excise Tariff Act, 1985. We do not agree with the submissions of the appellant's Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maharashtra Chakan Oil Mills Ltd. (NMCOML), thus having no title/dominion and right to use the asset. 3. The Ld.CIT(A) erred in failing to appreciate the so called purchase of windmills by the assessee from its sister concern NMCOML, a loss making company was a sham transaction carried out in order to merely avail the benefit of depreciation. 13. Facts of the case, in brief, are that during the assessment proceedings the Assessing Officer noticed that the assessee has claimed depreciation on windmills at ₹ 83,97,926/-. The Assessing Officer asked the assessee to explain as to why the depreciation claimed on 2 windmills to the extent of ₹ 4,38,400/- should not be disallowed for the year under consideration on the basis of the disallowance made in A.Y. 2009-10 since the 2 windmills are not owned by the assessee. The assessee explained that the windmill was purchased from M/s Nav Maharashtra Chakan oil Mills (NMCOML) and the sale bill has been issued in its favour and the windmill was in its possession and it was being used as an owner to the exclusion of all others. 14. The Assessing Officer observed that the monthly 'windmill reading sheets' for the ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee during the year. The A. O. is thus disputing the fact that the appellant being not the absolute owner of the asset and is in a way not entitled to depreciation. The view that the assessee must be the owner is not. controversial as had been laid down long since, in the case of CIT Vs Buckingham Carnatic Co.Ltd. (1935) 3 ITR 384 (PC). In the case of CIT Vs Nandanam Constructions (1996) 222 ITR 737 (AP), the High' Court had followed the Supreme Court's decision in the case of R.B. Jodha Mal Kuthiala (1971) 82 ITR 570, as clear and binding in that it has held the beneficial ownership is alone relevant and that such decision should be treated as applicable in all tax matters by recognizing the beneficial owner for liability as well as any deduction. It took the view that, such view is clear, equitable and consistent with justice and such a view cannot be lightly dismissed, while the Finance Act, 1987 recognised beneficial ownership for computation of property income for income-tax, capital gains tax, wealth-tax and gift-tax, the need for clarification in respect of depreciation allowance was overlooked. The controversy got settled in respect of right to depreciation for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he term. The intention of the legislature in enacting section 32 would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for his business or profession. Assigning any different meaning would not sub-serve the legislative intent. In CIT Vs National Cooperative Consumers Federation Ltd. (2002) 254 ITR 599 Del), the Delhi High Court followed its Full Bench decision in Gowersons Publishers (P) Ltd. Vs CIT (1999) 240 ITR 191 (Del)(FB) and held that the assessee was entitled to depreciation allowance in respect of godown-cum-showroom purchased but, not registered in its name. 5.4 In view of the above facts and the ratio of the judicial citations the disallowance made by the A.O. with respect to the depreciation on windmills amounting to ₹ 21,92,000/- is liable to be deleted. Ground No.4 raised by the appellant is allowed. 5.3 In view of the above, as the facts and the legal position has not undergone any change in the year under consideration, the ground being the same as in A.Y. 2009-10, following the decision tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his submissions the ld. AR has referred to the ledger account at pages 121 and 122 of the paper book. A perusal of the same shows that the payment towards the consideration of windmill has been made by the assessee through bank on various dates starting from 06-08-2007 to 14- 03-2008. The ld. AR has also placed on record the letters addressed by the NMCOML to MEDA, the implementing agency for transfer/approval of transfer of windmill in favour of the assessee. The said letters are dated 22-01-2007 and 02-08-2007. A further perusal of Sales Tax entitlement certificate for availing sales tax benefit dated 12-12-2007 issued by Joint Commissioner of Sale Tax (HQ)2, Maharashtra State, Mumbai clearly shows the modification carried out in respect of the undertaking eligible to claim sales tax benefit. The said modification as per the certificate issued by the sales tax department is effective from 05-12-2007 in favour of the assessee. The ld. AR also referred to Memorandum of Understanding dated 01-06- 2007 between NMCOML and the assessee with regard to transfer of windmill and mobility in respect thereof at pages 137 to 143 of the paper book, as well as the letter written by NMCOML d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession. Assigning any different meaning would not sub-serve the legislative intent. In CIT Vs National Cooperative Consumers Federation Ltd. (2002),254 ITR 599 (Del), the Delhi High Court followed its Full Bench decision in Gowersons Publishers (P) Ltd. Vs CIT (1999) 240 ITR 191 (Del)(FB) and held that the assessee was entitled to depreciation allowance in respect of godown-cum-showroom purchased but, not registered in its name. 5.4 In view of the above facts and the ratio of the judicial citations the disallowance made by the A.O. with respect to the depreciation on windmills amounting to ₹ 1,09,60,000/- is liable to be deleted. Ground no. 4 raised by the appellant is allowed. The ld. DR has not been able to controvert the findings of First Appellate Authority. Thus, in view of the documents on record we do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) in accepting the claim of depreciation of the assessee. Accordingly, ground nos. 2 and 3 raised by the Department in the respective appeals are dismissed being devoid of any merit. 15. The third issue raised by the Department in ground no. 4 is with respect to disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- Provided further that no deduction shall, in respect of any sum referred to in clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below clause (va) of sub-section (1) of section 36, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date. 14. From a reading of above, it is clear that the employer-assessee would be entitled to deduction only if the contribution to the employee's welfare fund stood credited on or before the due date and not otherwise. It transpires that Industry once again made representations to the Ministry of Finance to remove this anomaly. The result was that an amendment was inserted which came into force with effect from 1st April, 2004 and two changes were made in section 43B firstly by deleting the second proviso and further amendment in the first proviso which reads as under:- Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed detailed submission justifying its claim of deduction. However, the Assessing Officer rejected the contention of the assessee on the ground that assessee in its computation of deduction u/s.80IA(4) has computed the profit from running of windmill after including sale of sales tax benefit received in respect of the windmill. The assessee has also claimed that the sales tax was inextricably linked to the production of the electricity by the windmill and therefore it is entitled to deduction. According to the Assessing Officer, if the gain on sale of sales tax entitlements over the years was reduced from the computation of profits attributable to windmills, then there was no positive income earned by the assessee from the windmill till the year under consideration. Relying on the decision of Hon ble Supreme Court in the case of Pandian Chemicals Ltd. Vs. CIT reported in 262 ITR 278 and Sterling Foods Ltd. reported in 237 ITR 579 and Liberty India Ltd. reported in 317 ITR 218 he held that sales tax entitlement do not constitute profit and gains derived from the assessee s industrial undertaking for the purpose of computing deduction u/s.80IA(4). He accordingly disallowed claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant is allowed. 27. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 28. The Ld. Counsel for the assessee at the outset submitted that the Tribunal in assessee s own case has restored the issue to the file of the Assessing Officer with certain directions. Therefore, this issue may be set-aside to the file of the Assessing Officer to adjudicate the issue in the light of the direction of the Tribunal. 29. The Ld. Departmental Representative also has no objection if the matter is restored to the file of the Assessing Officer. 30. After hearing both the sides, we find identical issue had come up before the Tribunal in assessee s own case in the immediately 2 preceding assessment years. The Tribunal restored the issue to the file of the Assessing Officer with the following direction : 20. The assessee has claimed deduction u/s. 80IA(4) on the entire sale proceeds which include sales tax incentive. The ld. AR of the assessee fairly conceded that the assessee is not eligible to claim deduction u/s. 80IA(4) on the sales tax incentive receipts in view of the decision of Co-ordinate Bench of the Tribunal in the case of Lap Finance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Assessing Officer during the course of assessment proceedings noted that the assessee failed to deposit employees contribution to PF and ESIC before the due dates and the auditor had also made a remark in the audit report. The total of such delayed payment worked out to ₹ 3,74,577/- which the Assessing Officer disallowed and added to the total income within the meaning of section 2(24)(x) r.w.s. 36(1)(va) of the I.T. Act. 35. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer. The argument of the assessee that it has paid the deposits before the due date of filing of return was also not accepted by him. 36. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 37. The Ld. Counsel for the assessee at the outset filed a chart showing the details of payment of employees contribution to PF and ESIC. Referring to the said chart he submitted that the entire payment has been made before the due date of filing of return of income. Referring to the decision of Hon ble Bombay High Court in the case of Ghatge Patil Transports Ltd. reported in 368 ITR 749 he submitted that since the assessee has made the payments before the due dat ..... 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