9911796707
TMI Blog2021 (12) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 filled up into the pit and when pit is completely filled up, its top is covered. This activity being carried out on a continuous basis. The assessee has set up its own Common Incinerator Project for treating hazardous solid waste. The commercial activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, lime and carbon injection system, bag filter, wet scrubber, ID fan etc., chimney, continuous monitoring system, feeding arrangement etc., During the previous year relevant to assessment year under consideration, the assessee treated solid waste amounting to Rs. 13,18,82,217/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 centigrade. Sludge is in the nature of semi solid or solid+ terry or LCV+ Aquas etc., Sludge is first passes through incinerator plant where it's burnt on high temperature. On burning the waste is converted into ash, which is dumped into a pit. The Assessing Officer concluded that the assert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. 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, forming part of statement of total income, assessee-company has filed with return of income, the assessee claimed that it was required to maintain site for thirty years after its closure and was required to create a super fund to meet the damages, if any, caused in case of loss of to the ecology due to failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 Rs. 1,07,44,898/- (Rs. 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 Rs. 2,71,67,344/- as against the provision of Rs. 1,07,44,898/- and write back of amounting to Rs. 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. The assessee was asked to claim as to why such expenses should not be disallowed for the reasons that only provision was made for expense and not incurred during the year under consideration. The assessee filed its reply dated 09.10.2010. The reply of assessee is extracted on pages 32 to 39 of the assessment order. In reply the assessee conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07, the Assessing Officer allowed expenses on actual payment basis except assessment year 2005-06. The Assessing Officer disallowed Rs. 13,39,170/- after deducting actual expenses amounting to Rs. 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 Rs. 1.07crores and incurred actual expenses of Rs. 2.71 crores. It is not clear as to why provision is required to be made when actual expenditure is being incurred and when the pit cover expenses arises. The assessee is in the business of providing facilities of disposal in solid waste management by the Industries of Ankeleswar in order to prevent pollution control provision. The guidance of PCB is the assessee has not been able to explain the difference betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved, 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 facts and in the circumstances of the case and in law, the CIT(A), erred in holding that Incinerator Project 2 is not a separate undertaking and not eligible for deduction under section 80IA of the Act separately despite the fact that the said undertaking had started its operation from AY 12-13 and the said issue was not raised in the appeal before the CIT(A). 4. On the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-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 purpose of computing the chargeable income, the AO may modify the same." 14. We have heard the submissions of Ld. Senior Counsel (AR), Saurabh N Soparkar and assisted by Shri Parin Shah, Advocate for assessee and Shri Deependra Kumar, Ld. Sr. Departmental Representative (DR) for the Revenue. We have also gone through the orders of lower authorities and the other material placed before us. Firstly, we are discussing the various grounds of appeal raised by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 highway project---; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port , airport, inland waterway, inland port or navigational channel in the sea; " 16. The learned Senior Counsel submitted that the assessee has fulfilled all the conditions as laid down under the provisions of section 80-IA(4)(i) of the Act and accordingly, is eligible to claim the deduction under section 80-IA of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e". 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-section (2) of section 80- IA lays down that the deduction specified in sub-section (1) may at the option of the assessee be claimed for any 10 consecutive years out of 20 years beginning from the year in which the undertaking develops or begins to operate the infrastructure facility. Thus, the assessee can choose to claim deduction for any 10 consecutive assessment years between AY 1998-99 to AY 2017-18. In the instant case, the assessee-company has opted to claim deduction from AY 2002-03 being th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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. We have considered the rival submissions of the parties and deliberated on the various case laws relied by learned Senior Counsel. We find that during the assessment the AO raised quarry about the eligibility of deduction under section 80IA of Unit No.I, Unit-II and incinerator. The assessee is its reply specifically stated that pursuant to insertion of sub-clause (c) in Explanation to section 80IA(4)(i) with effect from 01.04.2001 by new sub-clause so as to include Solid Waste Management System wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 with GIDC. 21. Before us, the learned Senior Counsel for the assessee vehemently argued that it is well settled position in law 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. It was further argued that sub-section (2) of section 80-IA lays down that the deduction specified in subsection (1) may at the op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 granted in the initial year of assessment is disturbed or changed on valid grounds. But without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted." 24. In the case of CIT vs. Paul Brothers (216 ITR 548), the Hon'ble Bombay High Court has held as under: "Either in s. 80HH or in section 80J, there is no provision for withdrawal of special deduction for the subsequent years for breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness 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 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. The assessee has also entered into a separate agreement dated 16th October 2012 with GIDC with effect from 12thMarch 2007, copy of which is filed at page No. 105 to 108 of PB. 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-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 appeal for AY 2007-08, the Ld. CIT(A) held that both the unit of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 far as finding of the ld CIT(A) with regard to Incinerator-II is concerned it was not a subject matter of appeal before ld. CIT(A) for the year under consideration, therefore, we are in agreement with the submissions of the learned Senior Counsel for the assessee that such finding given by the CIT(A) is totally incorrect and uncalled for while deciding the appeal for AY 2008-09. 36. In the result, ground No. 3& 4 of the appeal is allowed. 37. Ground No. 5 relates to reducing interest income earned of fixed deposits with Bank for the purpose of claiming deduction 80IA. The learned Senior Counsel for the assessee submits that this ground f appeal is covered in favour of the assessee by the decision of Tribunal in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime 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. 7 relates to disallowance of post closer expenses of Rs. 29,84,694/-. The learned Senior Counsel for the assessee submits that this ground f appeal is also covered in favour of the assessee by the decision of Tribunal in assessee's own case for AY 2007-08 dated 27th February 2017. 47. On the other hand the ld Sr DR for the revenue relied on the order of the lower authorities. 48. We have considered the rival submissions of the parties and have gone through the order of the lower authorities carefully. We have also seen the order of the Tribunal in assessee's own case for 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal 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 provisions of post closer and pit covering expenses under book profit under section 115JB. Considering the facts that we have already deleted the disallowance of provisions of post closer and provision for pit covering expenses, therefore, this issue has become academic. 58. In the result, the appeal of the assessee is allowed. ITA No. 1867/Ahd/2014 by Revenue 59. Ground No.1 relates to direction of ld CIT(A) in allowing deduction under section 80IA in respect of Incinerator Project by holding it as a separate enterprises. The learned Senior Counsel for the assessee submits that this ground f appeal is also covered in favour of the assessee by the decision of Tribunal in assessee's (appeal by revenue) own case for AY 2007-08 dated 27th February 2017. 60. On the other hand the ld Sr DR for the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery 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 Thus, I find merit in the Assessee's submission wherein it is established that both the Units are different and independent by way of process, method, mechanics, different machinery/ infrastructure, having entered into separate agreements with the authorities concerned. I also have gone through various case laws relied by the assessee which squarely cover the issues under consideration. In the light of aforesaid discussion and on the facts of the case and respectfully following the decision relied by the assessee, I direct the Assessing Officer to re-compute the deduction u/s.801A of the Act separately for both the units and allow the same accordingly." 5. We have heard rival submissions. It emerges that the assessee has amply demonstrated during the course of lower proceedings that two projects in question are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the appellant is consistently following the mercantile method of accounting since inception of the company and following accounting standard AS-9 which is being duly disclosed in the Notes forming part of the Annual Accounts, the Income of the appellant accrues only when the wastes received is burnt. Accordingly, the Appellant has rightly accounted the proceeds of the solid wastes which are being not burnt till the close of year as advance in the accounts. Further, I find that in the assessment order passed u/s. 143(3) of the Act, the Assessing Officer has neither discussed nor given findings that on the adoption of accounting standard AS-9 in respect of the specific nature of business of the appellant, the accounts give incorrect or improper results so as to reject the method adopted for recognizing the revenue in view of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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