TMI Blog2021 (12) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... ed into a separate agreement dated 16th October 2012 with GIDC with effect from 12th March 2007 and commenced its Land Fill Project-II in FY 2006-2007 and claimed deduction under section 80-IA of the Act from AY 2008-09 since the said unit is a separate infrastructure facility. Thus, Land fill II is a distinct and separate undertaking from Landfill I. In the result, the assessee succeeds on this ground of appeal. Land fill project No. I and land fill project-II are not separate undertaking for deduction under section 80IA(4) - As brought to our notice that the assessee has also entered into a separate agreement dated 16th October 2012 with GIDC with effect from 12thMarch 2007. The assessee had commenced its Land Fill Project-II in FY 2006-2007 and claimed deduction under section 80-IA of the Act from AY 2008-09 since the said unit is a separate infrastructure facility. These facts are not controverted by ld SR DR for the revenue. Moreover, the Land Fill Project-II is set up on the separate land allotted by GIDC in Bharuch District, which was allotted to the assessee and separate agreement was entered with GIDC on 16th October 2012 with effect from 12.03.2007. We find that in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef facts of the case as extracted from the orders of lower authorities are that assessee is a Company registered under the provisions of Companies Act. The assessee was set up to create, execute and operate a Centralized Secured Land fill facility for the disposal of solid waste generated by the Industries in District Bharuch, Gujarat. The assessee-company had agreement with Gujarat Industrial Development Corporation ( GIDC for short) for disposal of hazardous waste management and disposal vide agreement dated 15.05.2002. The assessee filed its return of income for assessment year 2008-09, claiming deduction under section 80IA of ₹ 1.75 crores. Along with return of income the assessee furnished prescribed Form 3CA 3CD as required under section 44AB of the Income -tax Act. The assessee also furnished report in prescribed Form No. 10CCB for claiming deduction under section 80IA. The case of assessee was selected for scrutiny. 3. During the assessment the assessing officer noted that assessee commenced its activities on 01.04.1998.The assessee is digging and huge pits are constructed as per the International Standard with the help of German Technology. The hazardous waste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... designated liners. This activity is being carried out on a continuous basis. During the previous year relevant to assessment year i.e., 2008-09, the assessee treated the solid waste amounting to ₹ 29,18,082/- under the said Land Filling Solid Waste Project No.1. 5. For Land Filling Solid Waste Project No.II, the assessee stated that during the previous year relevant to assessment year 2007-08, the assessee was allotted plot of land ad measuring 1,26,256 Sq.mtrs. for its Land Filling Project-II, from Gujarat Industrial Development Corporation(GIDC). The assessee fulfilled all the conditions specified in sub clause (a) to (c) of section 80IA(4)(i) of the Act and assessee is entitled for deduction. 6. For Incinerator Plant (undertaking), the assessee submitted that in line with main object and to provide clean environmental atmosphere, the assessee-company has set up its own common Incinerator Project for treating hazardous solid waste of special nature which cannot be dumped. The assessee s commercial activity of this unit commenced on 22.01.2005.The Incinerator system consists of rotary kiln type main incinerator followed by post-combustion chamber, evaporation cooler, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case law. 7. The Assessing Officer after considering the reply of assessee with regard to Land Filling Units No. I II held that assessee s claim that both Undertakings are separate project and accordingly claimed separate deduction under section 80IA for each unit, although in previous year, the assessee has one pit and all solid project waste was dumped in it but before this undertaking, the assessee has filled up six pits from its beginning of i.e., from 01.04.1998 to 31.03.2008. On the basis of land agreement made separately for each pit, the assessee claimed deduction under section 80IA for each separately although there is no change in method of disposing off hazardous solid waste. The assessee carrying its activity on a continuous basis. Thus, the claim of assessee for treating each pit as separate project on the basis of separate land agreement and books of account does not entitle the assessee for deduction under section 80IA of each project separately. 8. For Incinerator plant, the Assessing Officer held that in this plant hazardous solid waste of special nature is treated. The sludge is burnt at a very high temperature ranging from 1200 to 1400 degree centigrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to maintain the site upto thirty years after closure of site. Accordingly, the assessee is required to keep the amount of funds, generated out of eligible profit, into the fixed deposit to meet the expenditure to be spent in future period for which provision is being made every year in the books of accounts. The assessee submitted that interest received on deposit and membership fees is attributable to eligible business and ought not to be reduced while computing eligible profit for the purpose under section 80IA. In alternative, the assessee submitted that when it came the interest is to be excluded while computing the profit eligible for deduction under section 80IA of the Act, then at least 10% of the same ought to be allowed and deduction for earning said income. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that Undertaking must itself be source of that profit and undertaking must directly yield such profit and does not mean to earn any other profit. Accordingly, the interest income from other source was not treated as a part of profit and gain earning from Undertaking. 10. The Assessing Officer further noted that as per Note-6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture for post-care closer of project expenditure on the ground that it is an expenditure to be incurred in future out of income received during the year. The assessee has not established that provision is an ascertain liability. The method of determination was also treated as assumption and without any basis and accordingly held that post-closure expenditure cannot be estimated with reasonable ascertain and cannot be allowed against current profit and accordingly disallowed the post-care expenditure. The Assessing Officer also made addition on disallowance of such post-closure expenses in book profit under section 115JB. 11. The Assessing Officer further noted that assessee has debited expenses of ₹ 1,07,44,898/- (₹ 1.07 crores) under the head pit covering expenses in Schedule-15 of profit and loss account. The Assessing Officer noted that assessee has incurred actual expense for pit covering of ₹ 2,71,67,344/- as against the provision of ₹ 1,07,44,898/- and write back of amounting to ₹ 30,25,245/- in respect of excess provision made in earlier years and disallowed in the order passed under section 143(3) of the Act in the financial year 2007-08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dumped into the pits during previous year on compilation of Land Filling Project No.I the balance remaining in the provision for pit covering expenses of ₹ 30,25,245/- is written back in the accounts and same is duly offered to tax in the return of income. The assessee further explains that in respect of aforesaid expense in assessment years 2001-02 to 2006-07, the Assessing Officer allowed expenses on actual payment basis except assessment year 2005-06. The Assessing Officer disallowed ₹ 13,39,170/- after deducting actual expenses amounting to ₹ 82,73,744/- from the provision made for the previous year. The assessee further submitted that the action of Assessing Officer in earlier years was upheld by Ld. CIT(A) and that the assessee s appeal is pending before the Tribunal. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that provision is estimated on the basis of amount of solid waste received and it cannot be said that pit closure expenses are determined with reasonable certainty in this manner. The assessee made provision of ₹ 1.07crores and incurred actual expenses of ₹ 2.71 crores. It is not clear as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 34,84,029/-. The Ld. CIT(A) also upheld the disallowance of provision of post-closure clear expense of ₹ 29,84,694/- and provision for pit covering expense. However, the assessee was given allowed relief to the assessee by treating the advance received from customers/ members as income of assessee as the same is not refundable as it was received for specific purpose. Further aggrieved, both parties have filed their respective cross-appeals. The assessee has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) ( CIT(A) )erred in holding that the appellant is not entitled for deduction under section 80IA(4)(i)(b) in respect for Landfill Project 1 since it is not a new undertaking as per provisions of section 80IA(4) of the Act. 2. On the facts and in the circumstances of the case and in law, without prejudice, the CIT(A) erred in upholding the action of the Assessing Officer ( AO ) in holding that Landfill Project 1 and Landfill project 2 are not separate undertakings and hence not eligible for deduction under section 80IA(4) of the Act separately. 3. On the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the functioning of the units, both the projects, viz., Landfill Project and Incinerator project, were of same nature and co-related, one, where solid waste was directly dumped into a pit and other, where sludge was first treated and remaining ash was dumped into a pit. (ii) Not appreciating the fact that the receipt of ₹ 2,82,29,057/- being advance receipts from customers/members is to be treated as income of the assessee since the same is non-refundable and received from customers for specific purpose, and hence, the nature of receipt is very certain. Also ignoring the fact that the clients/customers makes the payment to the assessee after deduction of TDS and treat this payment as revenue expenditure in their books of account. Moreover, assessee is claiming all the expenses incurred during the year pertaining to the burning of sludge or keeping it in godown, but the income is deferred to future period, which is not tenable and against the provisions of law and as held by Hon'ble Apex Court decision in the case of British Paints India Ltd. 188 ITR 44, any system of accounting results in distorted picture of the true state of affairs of the business for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was not entered in FY 2001-02. Further, the learned Senior Counsel invited our attention to the provisions of Section 80-IA(4)(i) and Explanation (c) to the aforesaid provision which reads as under; (4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii)developing, operating and maintaining any infrastructure facility which fulfills all the following conditions, namely:- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or local authority or any statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility: (c) it has started or starts operating and maintaining the infrastructure facility on or after 1st day of April, 1995: . Explanation- For the purpose of this clause, infrastructure facility means- (a) a road including toll road-------------; (b) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee sought registration as a STP on 27thMarch 2002 whereas it had commenced production in the Financial Year 1999-00 itself. The revenue contended that since the assessee was already in the said business, it does not qualify to be a new industrial undertaking. The Tribunal decided the issue in favour of the assessee and has held that the fact of the assessee being in the business prior to the date of the registration of the STPI would not stand in the way of granting relief to the assessee . On further appeal before the High Court issue was held in favour of the assessee. 17. The learned Senior Counsel submitted that it is well settled position that if a deduction or exemption is granted subject to fulfillment of conditions, an assessee is entitled to claim the deduction/ exemption from the year in which he satisfies the conditions, so long as he is within the overall exemption period. In the instant case, as stated above the assessee entered into an agreement with GIDC on 15thMay 2002 and started claiming deduction under section 80-IA of the Act from AY 2002-03 onwards being the fifth year of operations and the first year of the claim. It is further submitted that sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be allowed to the appellant. To buttress his submissions the ld Counsel relied on the following decisions; Shri Nagesh Chunder Vs CIT 358 ITR 521 (Mad), CIT Vs Satellite Engineering Ltd (113 ITR 208 Gujarat), PCIT Vs Maps Enzymes Ltd [2019] 111 taxmann.com 73 (Gujarat High Court), Saurashtra Cement Chemical Ltd Vs CIT (123 ITR 669) (Gujarat), CIT Vs Paul Brothers (216 ITR 548 Bombay). 18. On the other hand the ld Sr DR for the revenue submits that the assessee tried to make both the project separately by entering in to agreement with GIDC with retrospective effect from 12.03.2007. The assessee has made agreement with GIDC only after the claim of the assessee was disallowed by A.O. At the time of establishment of Land fill Project II, no new establishment came in to existence. The nature of work being done by both the project is identical, therefore, the claim of the assessee based on the backdate agreement cannot be considered. Thus, no cognizance can be taken of the agreement dated 12.10.2012 and both the land Fill Project is to be treated as same infrastructure facility and deduction under section 80IA would be available till A.Y. 2011-12 only. 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome should not be disallowed and the assessment accordingly enhanced. The assessee filed detailed explained dated 24.12.2013 as recorded in para 4.2.2 of order of CIT(A). the ld CIT(A) after considering the explanation of assessee held the assessee started claiming deduction under section 80IA(4) on an infrastructure facility which was already on operation since 01.04.1998. Before him the assessee s AR claimed that the assessee started claiming deduction under section 80IA(4) when it became eligible on account of amendment made in the relevant provisions. The ld CIT(A) held that eligibility was available to the assessee from F.Y. 2001-02 itself and hence if the assessee had entered into an agreement with GIDC during this Financial Year, it could have been eligible for deduction under section 80-IA(4) on account of such infrastructure facility already inexistence, as this infrastructure facility had been started after 1st of April, 1995. But since this has not been done, hence the assessee is not eligible for deduction under section 80-IA(4) on Landfill Project No. 1 as this is not a new infrastructure facility established in pursuance of an agreement entered into by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Gujarat High Court in Saurashtra Cement Chemical Industries Ltd vs. CIT (123 ITR 669) has held as under: The Tribunal was perfectly justified in taking the view that if the relief of tax holiday was granted to the assessee company for the asst. yr. 1968-69, the assessee was entitled to continuance of that relief for the subsequent four years and the ITO would not be justified in refusing to continue the allowance for the assessment year under reference, i.e., 1969-70, without disturbing the relief for the initial year The next question to which the Tribunal addressed itself, and in our opinion rightly, was whether the ITO was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the asst. yr. 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. It should be stated that there is no provision in the scheme of s. 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions. No doubt, the relief of tax holiday under s. 80J can be withheld or discontinued provided the relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground of appeal. 26. In the result, ground No.1 of the appeal is allowed. 27. Ground No. 2 relates to the facts that land fill project No. I and land fill project-II are not separate undertaking for deduction under section 80IA(4). The learned Senior Counsel submitted that for the assessee submits that as per the provision of section 80-IA(1) the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall in accordance with and subject to the provisions of the section, be allowed in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment year. For eligibility of the deduction under section 80-IA for Land Fill Project-II for considering the same as a separate undertaking, it was submitted that the assessee-company was allotted additional lands bearing Plot No.7905E to 7905H, 7924 to 7927, 9401 to 9412, 9501 to 9506 admeasuring 1,36,402 Sq Mts in Ankleshwar Estate by GIDC to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground No. 1 (supra) and submits to upheld the finding of Ld. CIT(A). 30. We have considered the rival submissions of both the parties and have gone through the order of the lower authorities. As recorded above the AO treated all three Project of the assessee as composite undertaking. The ld CIT(A) in its specific finding held that the assessee is eligible for Land Fill Project-II and is eligible for such deduction till AY 2011-12 only. For eligibility of the deduction under section 80-IA for Land Fill Project-II, the ld Senior Counsel for the assessee vehemently submitted that it is a separate undertaking. It was submitted that the assessee-company was allotted additional lands bearing Plot No.7905E to 7905H, 7924 to 7927, 9401 to 9412, 9501 to 9506 admeasuring 1,36,402 Sq Mts in Ankleshwar Estate by GIDC to create, execute and operate a Centralized Secured Land Fill Facility Project-II for the disposal of solid waste generated by the industries of Bharuch District. It was also brought to our notice that the assessee has also entered into a separate agreement dated 16th October 2012 with GIDC with effect from 12thMarch 2007. The assessee had commenced its Land Fill Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had claimed deduction only in respect of Incinerator I project. Incinerator II has started its operation from Assessment Year 2012-13 and the same was not a subject matter of appeal before ld. CIT(A) for the year under consideration. Therefore, the aforesaid finding given by the CIT(A) is totally incorrect and irrelevant and ought to be deleted. In view of the above, the ld Senior Counsel for the assessee submits that the aforesaid observations made by ld. CIT(A) may be deleted. 34. On the other hand the ld Sr DR for the revenue supported the order of Ld. CIT(A). 35. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. The assessing officer while passing the assessment order allowed deduction under section 80IA in respect of Land Fill I, Land Fill II and Incinerator project by treating the said undertakings as a composite undertaking. The ld CIT(A) held that Incinerator is a new infrastructure facility and hence eligible for deduction under section 80- IA(4) of the Act for 10 years from AY 2007-08. This finding of ld CIT(A) is not challenged by revenue before Tribunal, thus, it has attained finality. So fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identical interest income as eligible profits for the purpose of Section 80IA deduction. We quote the very reasoning herein as well assessee's former limb of the impugned disallowance pertaining to interest income. 40. Considering the consistent decision of the Tribunal on similar set of fact on similar component of income, and following the principle of consistency, we direct the AO to follow the order of Tribunal in AY 2007-08 dated 27.02.2017 and recomputed the eligible deduction under section 80IA accordingly. 41. In the result, ground No. 5 of the appeal is allowed. 42. Ground No. 6 raised in alternative to ground No.5, to allow 10% interest income as deduction for expenditure incurred for earning such interest income. At the time of hearing the appeal the ld Senior Counsel for assessee submitted that he is not pressing this ground of appeal. 43. On the contrary the ld SR DR for the revenue raised no objection for not pressing this ground of appeal. 44. Considering the submissions of learned Senior Counsel for the assessee, ground No. 6 of the appeal is dismissed as not pressed. 45. In the result, ground No. 6 of the appeal is dismissed. 46. Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2007-08 in ITA No. 2223/AHD/2010, wherein on similar set of fact similar interest income, the coordinate bench by following order of AY 2002 -03 to 2004-05 passed the following order; 14. The assessee's fourth sixth substantive ground challenge disallowance of provision made for pit covering expenses of ₹ 1,40,83,813/- as well as inclusion thereof in computing Section 115JB book profits. We notice herein as well that it has succeeded on the very issues before the tribunal in earlier assessment years (supra). The Revenue fails to rebut all these factual and legal developments post facto filing of the instant appeals. We therefore accept assesse's these two grounds as well. Its appeal ITA No.2223/Ahd/2010 succeeds. 55. Considering the consistent decision of the Tribunal on similar set of fact on similar component of income, and following the principle of consistency, we direct the AO to follow the order of Tribunal in AY 2007-08 dated 27.02.2017 and allow / delete the disallowance of provisions of pit covering expenses. 56. In the result, ground No. 8 of the appeal is allowed. 57. Ground No. 9 relates to making of adjustment of disallowance of provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appellate orders passed .by my predecessors, it is seen that the appellant has been allowed deduction u/s.80IA of the Act since A.Y.2002-03 in respect of its Land Filling Project-1. Further, on perusal of notes to computation for assessment year 2005-06 and 2006-07, the assessee has made its claim for allowability of deduction u/s.80IA of the Act for its Incinerator Unit. It is also brought to my notice that the Assessing Officer has considered this issue of claim in Para no.-4-1 in the assessment order passed u/s.143(3) of the Act for A.Y 2006-07. Further, in support, the appellant has relied on decision by Mumbai Bench-1 in the case of - JCIT Vs. Associated Capsules Pvt. Ltd (2008-TIOL-247-ITAT MUM). - CIT Vs. Anand Affiliates ( 2008-TIOL-662-HC- P H-IT), the ratio of which is applied - Textiles Machinery Corporation Ltd vs. CIT (1977-107-ITR-195(SC) - CIT Vs. Brigade Enterprises (p) Ltd ( Manu / IL/0019/2008) Relying on the said decisions, the appellant establishes asjjnder that the Appellant has two different undertakings and each of them fulfils independently all the conditions as stipulated u/s.80IA of the Act; xxxxxxxxxx xxxxxxxxxx xxxxxxxxxx T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g order; 6. The Revenue's latter substantive ground seeks to restore the addition of ₹ 10,34,19,765/-collected by the assessee in the nature of non refundable receipts treated income in the course of assessment and deleted in lower appellate proceeding. The Assessing Officer inter alia was of the view that the assessee could not refuse solid waste receipt if accompanied with payment once the carrier reached its godown or site, its client made payment after deducting TDS thereby recording it in its books of accounts as revenue expenditure, the burning of sludge in question was to be completed as assessee's behest, it claimed all expenses pertaining to the said waste disposal activity and he further denied assessee's contention that all operating expenses in its case are incurred irrespective of the fact whether or not the sludge waste stood burnt or stored in godown. The Assessing Officer therefore treated the entire advance sum as income as well as for the purpose of computing book profit. 7. The CIT(A) accepts assessee's contentions against the said addition as under: 5.3 I have considered the submission of the Id. AR and facts of the case. I find t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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