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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकर अपील सं./ (िनधाBरण वषB / Assessment Year: 2011-12) ACIT The Chennai Petroleum Corporation Ltd. बनाम LTU-1, Refinery House, Manali, / Vs. Chennai. Chennai – 600 068. �थायी लेखा सं./जीआइ आर सं./PAN/GIR No. AAACM-4392-L (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ� की ओरसे/ Assessee by : Shri R. Vijayaraghavan (Advocate) & Shri Saroj Kumar Parida (Advocate)-Ld. ARs ��थ� की ओरसे/Revenue by : Shri R. Mohan Reddy (CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 17-04-2023 घोषणा की तारीख /Date of Pronouncement : 12-06-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2011-12 arises out of the order of learned Commissioner of Income Tax (Appeals)-9, Chennai [CIT(A)] dated 28-02-2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r.w.s 147 of the Act on 20-12-2017. The grounds raised by the Revenue are as under:
1. The order of the learned CIT(A) is contrary to law and facts and circumstances of the case.
2.1 The learned CIT(A} erred and held that the assessee is entitled for deduction u/s 80IA with respect to the desalination plant and consequently, eligible for the higher rate of depreciation claimed in respect of the desalination plant. 2.2 The learned CIT(A) failed to note that the assessee is using facility for its own purpose and there is no public benefit whatsoever. This clearly goes against the envisaged objective behind section 80IA(4)(i), that is development of infrastructure projects that benefit public at large. 2.3. The learned CIT(A) failed to note that the assessee is not entitled for deduction u/s 80A(4)(i) and hence it is not entitled for claiming higher depreciation for Desalination Plant at the rate of 100%.
The learned CIT(A) erred and directed to AO allow MAT credit inclusive of surcharge and education cess.
For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing officer be restored.
As is evident, two issues fall for our consideration viz. (i) Assessee’s claim of higher depreciation on desalination plant; (ii) MAT Credit of surcharge and education cess.
The Ld. CIT-DR advanced arguments and submitted that the assessee is unable to show any agreement as prescribed under the provisions and therefore, the deduction has erroneously been granted by first appellate authority in the impugned order. The Ld. AR, on the other hand, drawing attention to documents and case laws, averred that there was deemed agreement and therefore, no interference would be required in the impugned order. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident corporate assessee is stated to be engaged in refining crude into petroleum and petro- chemical products. The original assessment was framed u/s 143(3). However, the case was reopened and impugned assessment was made u/s 143(3) r.w.s. 147 on 20.12.2017.
3 - 3. Assessee’s Claim of higher depreciation on desalination plant 3.1 It transpired that for Plant & Machinery utilized for desalination plant, the assessee claimed depreciation of 100%. However, Ld. AO proposed to disallow the same on the ground that there was no agreement with the Central or State Government or a Local Authority or any other statutory body. The desalination unit for which higher depreciation was claimed was not found to be in public interest but rather it was for captive use of the assessee. 3.2 The assessee defended its position, inter-alia, by submitting that sea water desalination plant was installed to meet the water requirement of entire Manali Refinery complex. Further, the assessee obtained approval / consent / permission from many government regulators including Ministry of Environment and forest clearance, Central Pollution Control Board Clearance, Tamil Nadu Pollution Control Board Clearance, Coastal Zone Regulation Clearance etc. All these approvals would constitute an agreement with Central / State Govt. for developing, operating and maintaining a new infrastructure facility namely the desalination plant qualifying under water treatment system. Without such approvals, such plant would not have come into existence. On the issue of captive consumption, it was submitted that the assessee requires raw water for generating stream which is consumed in the refinery process units and captive power plant at Manali. The requirement of raw material is met through Chennai Metro Water and Sewerage Supply Board (CMWSSB). Further, Chennai city being water starved city, the necessity to put up a desalination plant became imperative. The raw water which would otherwise be bought 4 - from Water Board will not be available to general public at large. Therefore, the plant meets the test of an infrastructural facility benefitting public at large. The assessee benefits by way of savings achieved in the form of reduction in procurement of raw water from CMWSSB and thus generating profits which would be subjected to Income Tax Act and therefore, the contention of the Audit that no profit was generated in the activity of desalination plant is not correct. The public would be benefitted in the sense that the public would be assured of water supply to the extent of raw water not drawn by the assessee. Accordingly, the assessee pitched for deduction so claimed. 3.3 However, going by the prescribed condition of an agreement as mentioned in the statutory provisions of Sec.80-IA(4)(i) which was not present for the assessee, Ld. AO denied higher deduction. Further, the assessee would be using the facility for its own purpose and there was no public benefit which goes against the envisaged objective behind enactment of Sec. 80IA(4)(i) that is development of infrastructure projects that benefit public at large. Finally, the depreciation was restricted to general rate of 15% and remaining depreciation was denied. Aggrieved, the assessee preferred further appeal. 3.4 The Ld. CIT, relying upon the ruling of Hon’ble High Court of Madras in TANFAC Industries Ltd. TCA No.1773/2008 which held that the value of steam used for captive consumption by the assessee would be entitled for deduction u/s 80IA, allowed the impugned issue raised by the assessee. Aggrieved, the revenue is in further appeal before us.
5 - Our findings and Adjudication 4. We find that the provisions of Sec.80-IA provide that any income or gains derived by an undertaking from an eligible business would be allowed as deduction. The sub-section (4) provide that this section would apply to an enterprise fulfilling certain conditions. One of the conditions is that the assessee should start operating and maintaining the infrastructure facility on or after 01.04.2005. Another condition is that the assessee should enter into an agreement with Central Government or a State Government or a local authority or any other statutory body with respect to such infrastructural facility. The Explanation (c) to sub-section (4) explain that infrastructure facility would, inter-alia, mean a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system. The rate of depreciation on Plant and Machinery acquired and installed on or after 01.09.2002 in a water supply project or a water treatment system and which is put to use for the purpose of business of providing infrastructure facility under clause (i) of sub- section (4) of section 80-IA has been prescribed at 100% for this year. The Note No.4 to the Appendix provide that Water treatment system includes system for desalination, demineralisation and purification of water. The assessee claim higher depreciation of 100% on the ground that it fulfills the eligibility conditions as prescribed u/s 80-IA(4).
The only ground on which the deduction has been denied by Ld. AO is the absence of agreement with Central / State Govt. / other authorities which is one of the prescribed conditions. The argument of the assessee is that it has obtained approval / consent / permission from many government regulators including Ministry of Environment 6 - and forest clearance, Central Pollution Control Board Clearance, Tamil Nadu Pollution Control Board Clearance, Coastal Zone Regulation Clearance etc. All these approvals would constitute an agreement with Central / State Govt. for developing, operating and maintaining a new infrastructure facility namely the desalination plant qualifying under water treatment system. Without such approvals, such plant would not have come into existence. It has further been submitted that the fact that the water is used for captive consumption would not jeopardize the claim of the assessee.
We find that Ld. CIT(A) has allowed this ground by relying on the decision of jurisdictional High Court in the case of TANFAC Industries Ltd. TCA No.1773/2008 which held that the value of steam used for captive consumption by the assessee would be entitled for deduction u/s 80IA. The aforesaid position remains controverted before us also. No contrary decision has been shown to us. Therefore, we have no hesitation in holding that the fact of captive consumption would not jeopardize the claim of the assessee u/s 80-IA (4).
The only question to be answered is the absence of contract with specified authorities. We find that similar factual matrix is covered by the decision of Hon’ble High Court of Madras in the case of CIT vs. AL Logistics Private Ltd. (374 ITR 609). In that case, the assessee claimed similar deduction u/s 80-IA(4)(i) with respect to an infrastructure facility. The Ld. AO denied the same, inter-alia, on the ground that the assessee did not enter into any agreement with the government. The matter reached up-to Tribunal wherein Tribunal allowed the appeal by relying upon the decision of Delhi High Court in the case of Container Corporation of India Ltd. vs ACIT (346 ITR 140). The assessee placed on record approved proposal by the Ministry of Commerce and Industry for setting up a container freight station (CFS). Upon further appeal, Hon’ble Court held that CFS was an infrastructural facility. On the issue of requirement of agreement, it was held by Hon’ble Court as under: - 11. The next issue is as to whether the requirement of Section 80IA(4)(i) has been satisfied. This apparently is the key issue on which the Revenue is trying to fall back on stating that certain conditions have not been complied with and there is no agreement as required under Section 80IA(4)(i) of the Income Tax Act. To this, the assessee has submitted and the Tribunal has considered the proposal approved by the Government of India, Ministry of Commerce and Industry dated 27.5.2003, which has been extracted in paragraph 6 of the Tribunal and the public notice dated 10.11.2013 issued by the Commissioner of Customs (Port), Kolkatta permitting the CSF to operate. Once the public notice was issued and is valid as on date, it is deemed to be approval granted by the competent authority of the Central Government or an undertaking or a body of the Central Government. This principle has been enunciated by the Supreme Court in the case of Union of India v. Sampat Raj Dugar, AIR 1992 SC 1417, wherein it has been held that once a license is issued, it is valid until cancelled. Therefore these two documents satisfy the requirement of Section 80IA(4) of the Income Tax Act. There is no manner of confusion as the facts culled out by the Tribunal clearly show that the respondent/assessee has complied with the requirements of Section 80IA(4)(i).
It was thus observed that the proposal was approved by concerned ministry and a public notice was issued permitting CFS to operate and the same was valid as on date. Therefore, it would amount to deemed approval by the competent authority of the Central Government or an undertaking or a body of the Central Government. The aforesaid documents would fulfil the requirements of Sec.80-IA(4). We find that similar approvals / consent has been granted to the assessee and the same are valid an on date. Therefore, respectfully following the ratio of this decision, we would uphold the claim of the assessee. Accordingly, impugned order, on this issue, require no interference on our part. The corresponding grounds raised by the revenue stand dismissed.
8 - 8. MAT Credit of Surcharge and Education Cess 8.1 The assessee claimed MAT credit of Surcharge and Education Cess component on the ground that in the context of Sec.115JB, tax paid would include these components. The definition of tax paid u/s 2(43) was inclusive definition. However, relying on Delhi Tribunal’s decision in Richa Global Exports Ltd. 25 Taxmann.com 1, Ld. AO denied the same. 8.2 The Ld. CIT(A), relying on the decision of this Tribunal in DCIT vs. Saint Gobain Gypro India Ltd. (ITA No.2122/Mds/2015 dated 03.02.2016) wherein it was held that MAT credit would also include surcharge and education cess, allowed the issue raised by the assessee. Aggrieved, the revenue is in further appeal before us. 8.3 We find that impugned issue is covered in favor of the assessee by the decision of Hon’ble High Court of Madras in CIT vs. M/s Saint Gobain Glass India Limited (TCA No.716 of 2018 dated 13.10.2020). The Hon’ble Court, relying on the decision in Pr. CIT vs. M/s Scope International Ltd. (TCA No.369 of 2019 dated 19.06.2019), held that MAT credit u/s 115JAA includes surcharge and education cess and accordingly, dismissed the appeal of the revenue. Respectfully following the same, we confirm the adjudication in the impugned order and dismiss the corresponding grounds urged by the revenue.
9 - Conclusion 9. The appeal stands dismissed. Order pronounced on 12th June, 2023.