PR COMMISSIONER OF INCOME TAX-II vs. RAJASTHAN STATE MINES andMINERALS LTD

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ITA/317/2017HC RajasthanRJHC02064272201713 December 20174 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue was covered by its decision in ITA No. 146/2016, wherein it was held that liquidated damages received were business losses that the undertaking ought to have incurred if the mines had performed well. The Court reasoned that these were not damages for compensation for business loss. Therefore, the issue was answered in favour of the assessee and against the department. The appeals were dismissed. The ratio decidendi is that liquidated damages received due to shortfall in guaranteed performance, which represent a failure to meet an obligation, are not considered income derived from the business for the purpose of Section 80IA deduction, but rather a consequence of business operations. No issue was expressly left undecided.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax-II, Jaipur (the Revenue) against the judgment and order of the Income Tax Appellate Tribunal (the Tribunal) which had partly allowed the appeals of the assessee, Rajasthan State Mines & Minerals Ltd. The assessment years are not explicitly stated. The dispute concerns the deletion of additions made on account of disallowance of deduction under Section 80IA. The additions were based on the Revenue's contention that liquidated damages received by the assessee for shortfall in minimum guaranteed power generation were not income derived from the power generation business of windmills. The High Court admitted these appeals and framed substantial questions of law.

What were the issues?

The Tribunal had to decide the following questions of law: 1. Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs.5,91,46,480/- (in ITA No. 314/2017), Rs.3,92,20,020/- (in ITA No. 316/2017), Rs.2,71,43,220/- (in ITA No. 317/2017), and Rs.1,68,53,256/- (in ITA No. 318/2017) made on account of disallowance of deduction under Section 80IA, ignoring the fact that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the Power Generation business of windmills? The Revenue contended that the liquidated damages received were not income derived from the power generation business. The judgment does not record specific arguments from the assessee, but it refers to a previous decision in ITA No. 146/2016 concerning the same assessee and a similar issue.

Which sections of the Income-tax Act were involved?

Section 80IA

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 317 / 2017 Principal Commissioner of Income Tax-II, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Rajasthan State Mines & Minerals Ltd., C-89-90, Lal Kothi Scheme, Jaipur. ----Respondent Connected With D.B. Income Tax Appeal No. 318 / 2017 Principal Commissioner of Income Tax-II, New Central Revenue Building, Statue Circle, Jaipur (raj.) ----Appellant Versus Rajasthan State Mines & Minerals Ltd., C-89-90, Lal Kothi Scheme, Jaipur ----Respondent D.B. Income Tax Appeal No. 314 / 2017 Principal Commissioner of Income Tax-II, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Rajasthan State Mines & Minerals Ltd., C-89-90, Lal Kothi Scheme, Jaipur. ----Respondent D.B. Income Tax Appeal No. 316 / 2017 Principal Commissioner of Income Tax-II, New Central Revenue Building, Statue Circle, Jaipur (Raj.) ----Appellant Versus Rajasthan State Mines & Minerals Ltd., C-89-90, Lal Kothi Scheme, Jaipur.

(2 of 4) [ITA-317/2017]

----Respondent _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 13/12/2017 1. In all these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has partly allowed the appeals of the assessee. 3. This court while admitting the appeals framed following substantial questions of law:- 3.1 In appeal No.314/2017 admitted on 28.11.2017 (i) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in deleting the addition of Rs.5,91,46,480/- made on account of disallowance of deduction u/s 80IA ignoring the fact that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the Power

Generation

business

of windmills? 3.2 In appeal No.316/2017 admitted on 28.11.2017

(3 of 4) [ITA-317/2017]

(i) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in deleting the addition of Rs.3,92,20,020/- made on account of disallowance of deduction u/s 80IA ignoring the fact that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the Power

Generation

business

of windmills? 3.3 In appeal No.317/2017 admitted on 28.11.2017 (i) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in deleting the addition of Rs.2,71,43,220/- made on account of disallowance of deduction u/s 80IA ignoring the fact that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the Power

Generation

business

of windmills? 3.4 In appeal No.318/2017 admitted on 28.11.2017 (i) Whether on the facts and circumstances of the case and in law, the Tribunal is justified in deleting the addition of Rs.1,68,53,256/- made on account of disallowance of deduction u/s 80IA ignoring the fact that liquidated damages received on account of shortfall in the minimum guaranteed generation of power units is not an income derived from the Power

Generation

business

of windmills?

(4 of 4) [ITA-317/2017]

4.

Now, the issue is covered by the decision taken today in ITA No.146/2016 in the case of same assessee wherein it has been held as under:- “17. On issue no.4 regarding liquidated damages which are given are business losses which the undertaking ought to have done, if the mines which are given to the assessee would have performed very well, therefore, damages which were given under loss of business which was guaranteed by the supplier in view of Madhya Pradesh High Court judgment will not apply. This is not damages for compensation for business loss. In that view of the matter, this issue is also answered in favour of the assessee and against the department.” 5. In that view of the matter, the issue is answered in favour of the assessee and against the department. 6. The appeals stand dismissed. (VIJAY KUMAR VYAS) J. (K.S. JHAVERI)J. Bmg 159-160, 101 & 103

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