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Income Tax Appellate Tribunal, DELHI BENCHES “E” : DELHI
Before: SHRI ANIL CHATURVEDI & SHRI ANUBHAV SHARMA
Date of Hearing : 13.10.2022 Date of Pronouncement : 18.10.2022 ORDER PER ANIL CHATURVEDI, A.M. : This appeal filed by the Assessee is directed against the Order of the Ld. CIT(A), Faridabad, dated 13.02.2018 in Appeal No.10011/2017-18 relating to the A.Y. 2015-16.
2 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad.
Briefly stated facts of the case are that the assessee company is a Government of India Enterprise and stated to be engaged in the business of generation of electricity, construction contracts and consultancy services. The assessee company filed it’s original return of income electronically for the A.Y. 2015-16 on 09.11.2015 declaring total taxable income of Rs.1561,96,72,780/- and income under section 115JB of the I.T. Act, 1961 at Rs.2783,79,09,446/-. Thereafter, the assessee company revised its return of income on 23.11.2016 declaring total income at Rs.1554,49,38,130/- and income under section 115JB of the I.T. Act, 1961 at Rs.2744,13,64,687/-. The case of the assessee company was selected for scrutiny and thereafter, assessment was framed under section 143(3) of the I.T. Act, 1961 vide order dated 28.03.2017 and the total taxable income was determined by the A.O. at Rs.2840,74,56,640/-.
2.1. Aggrieved by the order of the A.O, the assessee carried the matter in appeal before the Ld. CIT(A) who vide
3 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. order dated 13.02.2018 granted partial relief to the assessee company.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal and has raised the following grounds :
“On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eyes of law and on facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in not allowing deduction amounting to Rs.2,41,37,671/- claimed by the assessee under Section 80-IA of the Act. (ii) That the above said disallowance of deduction has been confirmed despite the fact that the said income is directly relatable to the business of the assessee. (iii) Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in ignoring settled position of law that in 4 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. case said income is held not to be eligible for deduction under Section 80-IA, corresponding relief on account of expenses related to said incomes may also be given. 3. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
4. Before us, at the outset, Learned Authorised Representative of the assessee submitted that though the assessee has raised various grounds, but, the sole controversy which requires adjudication is the denying the claim of deduction made by the assessee company under section 80IA of the I.T. Act, 1961.
During the course of assessment proceedings, the A.O. noticed that assessee company has claimed deduction under section 80IA in respect of four power stations projects i.e. Dulhasti Power Station, Teesta-V Power Station, Chamera Power Station Stage-II, and Dhauliganga Power Station. The A.O. on perusing the Profit & Loss A/c of the respective units noticed that assessee had earned income from other sources aggregating to Rs.2,41,37,671/- in 5 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. respect of the aforesaid units, the break-up of which is as under :
Name of Units Amount in Rs. Dulhasti 45,35,900 Teesta-V 69,90,983 Chamera-II 55,38,618 Dhauliganga 70,72,170 Total 2,41,37,671 5.1. The A.O. was of the view that Section 80IA mandates for deduction only from the profit earned from that business and not from other income. The assessee company was, therefore, asked to explain as to how the income shown under the head “Other Income” of those projects is eligible for deduction under section 80IA of the I.T. Act, 1961. In response to the query of the A.O, the assessee company made it’s submissions which were not found acceptable to A.O. The A.O. thereafter, for the reasons given in the assessment order held that Rs.2,41,37,671/-, being income from other sources, to be not eligible for deduction under section 80IA of the I.T. Act, 1961. He,
6 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. accordingly, denied the claim of benefit of deduction under section 80IA of the Act on such income.
5.2. Aggrieved by the order of the A.O, assessee company carried the matter in appeal before the Ld. CIT(A) who while deciding the issue against the assessee at para- 11 of the order noted that on identical facts in assessee’s own case while deciding the appeal for the A.Ys. 2010-11 to 2014-15 and for the reasons given in those orders, he had upheld the order of A.O. He noted that since the facts of the case in the year under consideration are identical to that of earlier years, he following his decision of earlier years, upheld the order of A.O.
Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before us.
Before us, the Learned Counsel for the Assessee at the outset, submitted that an identical issue arose in assessee’s own case in A.Y. 2014-15 before the Coordinate Bench of Delhi Tribunal and the Tribunal vide order dated 15.02.2022 in ITA.No.1803/Del./2018 has decided the 7 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. issue in favour of the assessee. He submitted that the Tribunal while deciding the issue in favour of the assessee had followed the order of Coordinate Bench of the Tribunal for the earlier A.Y. 2010-11. He pointed to the relevant findings of the Tribunal. He submitted that since it is an admitted fact that the issue in the present grounds are identical to that of earlier years, therefore, following the decision of Coordinate Bench of Delhi Tribunal in assessee’s own case for the A.Y. 2014-15 (supra), the assessee company be allowed the claim of deduction.
The Ld. D.R. on the other hand did not controvert to the submissions made by the Learned Counsel for the Assessee, but, however, supported the orders of the lower authorities.
9. We have heard the Learned Representatives of both the parties and perused the material on record. The issue in the present ground is with respect to denial of claim of deduction under section 80IA of the I.T. Act, 1961 on the income from other sources. We find that Ld. CIT(A) while upholding the order of A.O. has followed his own decision in 8 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. assessee’s own case for the A.Ys. 2010-11 to 2014-15 and noted that the facts in the year under consideration are similar to that of earlier years. We find that against the order of Ld. CIT(A) in assessee’s own case for A.Y. 2014-15, assessee had carried the matter in appeal before the Tribunal. The Coordinate Bench of Delhi Tribunal on identical facts in assessee’s own case vide order dated 15.02.2022 in ITA.No.1803/Del./2018 for the A.Y. 2014-15 had decided the issue in assessee’s favour by observing as under :
“6. We have gone through the order of the Co-ordinate Bench of ITAT for the A.Y. 2011-12 in and 297/Del/2016 order dated 26.07.2019 wherein the appeal of the assessee has been allowed. For the sake of ready reference, the relevant part of the said order involving the same issue is reproduced below:
AO disallowed an amount of Rs.2,99,54,875/- by not considering the same for the purpose of computation of deduction u/s 80IA of the Act on the ground that only profit
9 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. obtained from generation and distribution of power and not from other income is eligible for deduction u/s 80IA.
10. Ld. CIT (A) by following his own order rendered in AY 2010-11 upheld the order passed the AO that income derived from sources other than generation and distribution of power is not eligible for deduction u/s 80IA and dismissed the ground raised by the assessee.
11. However, the ld. AR for the assessee contended that the said order passed by the ld. CIT (A) for AY 2010-11 has been set aside by the coordinate Bench of the Tribunal vide order dated 08.05.2019 in & 3738/Del2015 for AY 2010-11 and now the issue in controversy is fully covered.
On the other hand, ld. DR for the Revenue in order to repel the arguments addressed by the ld. AR for the assessee contended that income directly derived from industrial undertaking is liable u/s 80IA and relied upon the decision of Hon’ble Supreme Court in Conventional Fastners vs. CIT, Dehradun (2018) 256 taxman 61 (SC), Hon’ble Uttaranchal High Court in Conventional Fastners vs. CIT, Dehradun 88 taxmann.com 163 and coordinate Bench of the Tribunal in the case of Conventional Fastners vs. ITO in ITA No.6016/Del/2017 order dated 18.05.2018.
Undisputedly, assessee has claimed deduction u/s 80IA qua URI-I, Chambera-II, Dhauliganga and Rangit
10 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. projects and given the project-wise income detail of such other income as under :-
S. Particulars URI-I Chamera-II Dhauli- Rangit Total No. Ganga 1 Rent / Hire - - 3,545 16,500 20,045 Charges from contractors 2 Rent / Hire - - - 340 340 Charges Employees 3 Rent / Hire 1,477,599 64,212 - 149,378 1,691,189 Charges – Others 4 Other Income 13,689,631 1,191,081 3,917,023 1,657,727 20,455,462 (Balances, Expenses, Liabilities No longer required written back 5 Township 368,347 1,205,197 963,426 836,301 3,373,271 recoveries 6 Excess on - 3,959 - - 3,959 physical verification of stores-O&M- Written Back 7 Lease recovery 425,227 174,301 606,806 177,603 1,383,937 8 Electricity 315,877 555,341 601,893 499,518 1,972,629 recovery 9 Telephone - - 41,803 5,157 46,960 recovery 10 Cable charges 88,500 127,840 87,800 113,700 417,840 11 Guest house 22,912 126,019 335,464 104,848 589,243 recovery Total 16,388,093 3,447,950 6,557,760 3,561,072 29,954,875
The ld. AR for the assessee relied upon the decision rendered by Hon’ble Delhi High Court in the case of Pr. CIT vs. Bharat Sanchar Nigam Ltd. 388 ITR 371 wherein meaning of word “derived from” while computing deduction u/s 80IA of the Act has been explained.
11 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. 15. Coordinate Bench of the Tribunal in assessee’s own case for AY 2010-11 (supra) decided the identical issue in favour of the assessee by returning following findings :-
47. We find that the AAR in the case of National Fertilizers Limited 193 CTR 498(AAR) held that the expenses incurred to earn these other incomes should be excluded from the debit side of the profit and loss account for computing the deduction u/s 80-I of the Act. The relevant extract of the judgment is as below: “(2)question No.2 in AAR/532/2001 that the expenses of Rs.2,76,03,364 and Rs.12,12,74,426 (it is stated that the correct figure is Rs.11,02,56,561) allocated by marketing office and corporate office and interest expenditure of Rs.71,65,99,045 allocated by the corporate office and on question No. 2 in AAR/533/2001 that expenses of Rs.2,56,44,186 and of Rs.12,94,59,292 allocated by corporate office and marketing office and interest expenditure of Rs.8,49,30,952 allocated by corporate office should be excluded from the debit side of the profit and loss account of the industrial undertaking for the purpose of deduction under section 80-I of the Income-tax Act, 1961; the fact that the allocated interest income from corporate office Rs.5,22,94,939 and Rs.3,97,44,811 credited to profit and loss account of Vijaipur unit in the assessment years 1995-96 and 1996-97 is of no consequence as both interest income and interest expenditure are liable to be excluded for the purpose of deduction under section 80-I of the Act.
Further, the Hon’ble Delhi High Court in the case of Pr. CIT vs. Bharat Sanchar Nigam Limited reported in 388 ITR 371 explaining the meaning derived from while computing the deduction u/s 80-IA of the Act, has held as under:
“8. The question arose in the context of the Assessee being asked to explain why certain specific items categorized as 'other income' and 'extraordinary item' in the Profit and Loss Account in assessment year 2004-05 should not be excluded from the profit and gains of the Assessee. According to the Revenue, these items could not be considered as profits and gains 'derived from' the eligible business for the purpose of deduction under Section 80 IA. The said six items were :
12 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. (i) Extra Ordinary Items (ii) Refund from Universal Service Fund (iii) Interest from others (iv) Liquidated Damages (v) Excess provision written back (vi) Others including sale of directories, publications, form, waster paper, etc.
9. The AO held that the six items of income could not be said to be derived from the business of the Assessee and added the income therefrom to the returned income of the Assessee. In the appeal by the Assessee, the Commissioner of Income Tax (Appeals) [“CIT (A)”] agreed with the AO that three of the above items, viz. Extraordinary Items, Refund from Universal Service Fund and Interest from Others, did not form part of the profit derived from eligible business. However, the Assessee’s plea regarding the other three items as being derived from the business was accepted by the CIT(A).
10. The Assessee filed appeals and the Revenue filed cross-appeals before the ITAT. The ITAT in the impugned orders concluded that with sub-section (2A) beginning with a non-obstante clause, the legislative intention of making available to an undertaking, providing telecommunication services, the benefit of deduction of 100% of the profits and gains “of the eligible business” was explicit. Indeed, the legislature appears to have made a conscious departure in adopting for sub-section (2A) a wording different from that appearing in sub section (1). Under Section 801A (1), what is available for deduction are profits and gains “derived by an undertaking or an enterprise from any business referred to in sub-section (4)” whereas in Section 80-IA (2A) what is available for deduction is “hundred percent of the profits and gains of the eligible business”. The following conclusion reached by the ITAT in para 13.11 of the impugned order correctly encapsulates the legal position as far as the interpretation of Section 801A (2A) is concerned. “13.11 Thus, we find that the legislature being alive to providing tax deductions to business enterprises and undertakings, it wanted to curtail the time line during which deduction can be claimed and also addressing the extent upto which it can be claimed has consciously carved out an exception to specified undertakings/enterprises whose 13 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. needs and priorities differ has taken care to expand the time line for claiming deductions. It has consciously enabled those undertakings/ enterprise 'who fall under subsection (2A) to claim 100% deduction of profits and gains of eligible business for the first five years and upto 30% for the remaining five years in the ten consecutive assessment years out of the fifteen years starting from the time the enterprise started its operation. The legislature having ousted applicability of sub-section (1) and (2) in the opening sentence brought in for the purposes of time line sub-section (2) into play but made no efforts whatsoever to put the assessee under sub-section (2A) to meet the stringent requirements that the profits so contemplated were to be “derived from”. The requirements of the first degree nexus of the profits from the eligible business has not been brought into play.”
As a result, the orders of both the AO and the CIT (A) to the extent they deny the Assessee, which in this case is in the business of providing telecommunication services, deduction in respect of the above items in terms of Section 80IA(2A) are unsustainable in law and have rightly been reversed by the IT AT.”
Further, the Hon’ble Gujarat High Court in the case of Nirma Industries Ltd. Vs DCIT (2006) 283 ITR 402 has held as under: "27. Insofar as question No. 2 is concerned, according to the Tribunal s. 80-I of the Act uses the phrase 'derived from’ and hence the interest received by the assessee from its trade debtors cannot be taken into consideration for the purpose of computing profits derived from an industrial undertaking. The Tribunal has failed to appreciate that it is not the case of the AO that the interest income is not assessable under the head 'Profits and gains of business’. It is only while computing relief under s. 80-I of the Act that the Revenue changes its stand. When one reads the opening portion of s. 80-I of the Act it is clear that words used are: "gross total income of an assessee includes any profits and gains derived from an industrial undertaking". Once this is the position then, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the prescribed percentage is to be allowed. That, in fact, the gross total income of the assessee included profits and gains from such business, and this is apparent on a plain glance at the computation in the assessment order. Both in relation to Vatva Unit and Mandali Unit the computation commences by taking profit as per statement of income filed along with return of income. Therefore, the same item of receipt cannot be treated differently: once while computing the gross total income, and secondly at the time of computing deduction under s. 80-I 14 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. of the Act. Therefore, on this limited count alone, the order of the Tribunal suffers from a basic fallacy resulting in an error in law and on facts. The Tribunal instead of recording findings on facts proceeded to discuss law. This litigation could have been avoided if the parties had invited attention to basic facts.
Neither the approach nor the reasons advanced by the Tribunal deserve acceptance. It is an incorrect proposition to state that interest paid by the debtors for late payment of the sale proceeds would not form part of the eligible income for the purpose of computing relief under s. 80-I of the Act. The reliance on the general meaning of the term interest as well as drawing distinction between the source of sale proceeds and the source of interest is erroneous in law in the case of CIT vs. Govinda Choudhury & Sons (supra) the apex Court was called upon to decide as to the nature of interest received by the assessee therein. In the case before the apex Court the assessee who was executing Government contracts found itself involved in disputes with the State Government with regard to the payments due under the contracts and upon reference to arbitrators, the award included the principal sum as well as the interest for delay in payment of the principal sum. The assessee claimed that the interest was of the same nature as other trading receipts, but it was held by the Tribunal that the same was 'Income from other sources’. The apex Court laid down: "The assessee is a contractor. His business is to enter into contracts. In the course of the execution of these contracts, he has also to face disputes with the State Government and he has also to reckon with delays in payment of amounts that are due to him. If the amounts are not paid at the proper time and interest is awarded or paid for such delay, such interest is only an accretion to the assessee’s receipts from the contracts. It is obviously attributable and incidental to the business carried on by him. It would not be correct, as the Tribunal has held, to say that this interest is totally de hors the contract business carried on by the assessee. It is well settled that interest can be assessed under the head 'Income from other sources’ only if it cannot be brought within one or the other of the specific heads of charge. We find it difficult to comprehend how the interest receipts by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the 15 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. assessee under the awards and treated as 'Income from other sources’".
In view of the above quoted decisions, we are of the considered view that the disallowance made of Rs.4,46,54,883/- while computing the deduction allowable u/s 80-IA of the Act is not justified. Hence, we set aside the orders of the lower authorities and direct the Assessing Officer to recompute the deduction allowable to the assessee u/s 80-IA of the Act without excluding Rs.4,46,54,883/-. Thus, this ground of appeal of the assessee is allowed.”
16. Following the decision rendered by the coordinate Bench of the Tribunal on the issue in controversy discussed above, the arguments addressed by the ld. DR and the case laws relied upon are not applicable to the facts and circumstances of the case, thus we are of the considered view that making disallowance by the AO and confirmed by the ld. CIT (A) to the tune of Rs.2,99,54,875/- while computing the deduction allowable u/s 80IA is not sustainable and all the items of income qua which deduction has been sought by the assessee u/s 80IA are allowable deduction and order passed by the AO and ld. CIT (A) is not sustainable. So, the order passed by the lower authorities is set side directing the AO to re-compute the deduction allowable to the assessee u/s 80IA without excluding amount of Rs.2,99,54,875/- disallowed by the AO. Consequently, ground no.2 is determined in favour of the assessee.
7. Since, the issue before us is similar to the issue adjudicated by the Tribunal, in the absence any material change in the factual contents and the legal proposition, we are of the considered view that the 16 ITA.No.1804/Del./2018 NHPC Ltd., Faridabad. disallowance made by the AO while computing the deduction is allowable u/s 80-IA of the Act.”
9.1. Before us, the Revenue has not placed any material on record to demonstrate that the decision of the Tribunal in assessee’s own case for earlier years (supra), has been stayed, overruled or set aside by higher judicial forums. It has also not pointed to any distinguishing feature in the facts of the case for the year under consideration and that of earlier years. In such a situation, we following the same reasonings given in assessee’s own case by the Coordinate Bench of Delhi Tribunal in ITA.No.1803/Del./ 2018 order dated 15.02.2022 for the A.Y. 2014-15 (supra), hold that the A.O. was not justified in denying the claim of deduction under section 80IA of the I.T. Act, 1961. We, accordingly, direct the A.O. to allow the claim of deduction under section 80IA on such income. Thus, the grounds of appeal of the assessee are allowed.
In the result, appeal of the Assessee is allowed.