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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Waseem Ahmed & Shri Partha Sarathi Chowdhury
आदेश /O R D E R PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-I, Kolkata dated 24.12.2013. Assessment was framed by ACIT, Range-3, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 20.12.2011 for assessment year 2009-10. Shri S.S. Gupta, Ld. Authorized Representative appeared on behalf of assessee and Shri Amitava Bhattacharya, Ld. Departmental Representative represented on behalf of Revenue. 2. At the outset, it is observed that there is a delay of 32 days on the part of assessee in fling this appeal before the Tribunal. In this regard, assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given thereon, which is duly supported by an affidavit filed by the assessee, we are of the view that there is a sufficient cause for the delay on the part of assessee in filing
ITA No.1100/Kol/2014 A.Y. 2009-10 AHW Steel Ltd. Vs. ACIT, Rg-3 Kol. Page 2 present appeal. Hence, we condone the delay and proceed to dispose of this appeal of the assessee on merit. 3. The only inter-connected issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the addition by sustaining the disallowance of deduction claimed u/s 80-IA of the Act for ₹87 lacs. 4. Briefly stated facts are that assessee in the present case is a limited company and engaged in manufacturing and trading in iron and steel products, share trading and wind power generation. The assessee in the year under consideration claimed deduction u/s. 80-IA of the Act for ₹1,23,29,042/-. The Assessing Officer during the course of assessment proceedings observed that the aforesaid deduction u/s. 80-IA of the Act was claimed by assessee after considering the receipt of ₹ 87 lacs on account of compensation awarded by M/s Suzlon Energy Ltd. (SEL for short) due to non- generation of guaranteed electricity units. The aforesaid compensation was pertaining to the period beginning from June 2006 to May 2008. On question by the AO about the non-consideration of aforesaid compensation for the deduction u/s. 80-IA of the Act, the assessee relied on the judgment of Hon'ble Delhi High Court in the case of Magnum Power Generation Ltd. Vs. DCIT reported in 11 ITR 493. However, the Assessing Officer held that the case law cited by assessee is distinguishable from the instant case and impugned compensation is not eligible for deduction u/s. 80-IA of the Act. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that the impugned compensation received by assessee has direct nexus with the business as it was provided on account of failure of machines to generate the electricity units as guaranteed. Therefore, the compensation was awarded. However, Ld. CIT(A) disregard the submission of assessee and confirmed the order of Assessing Officer by observing as under:- “… … In the case of the appellant it is clear that the compensation was to be given to the Appellant as per the agreement with M/s Suzlon Energy Ltd., which was the supplier of the Windmills was not the Appellant’s operational income but was sonly incidental to its business activity and constitutes a source of income beyond the first degree or proximate nexus between profits and the industrial undertaking. Therefore the same cannot be considered as income “derived from” the profits on sale of power on which deduction u/s 80IA would be available to the Appellant. It is therefore held that the App was not eligible for deduction u/s. 80IA on the compensation received by
ITA No.1100/Kol/2014 A.Y. 2009-10 AHW Steel Ltd. Vs. ACIT, Rg-3 Kol. Page 3 it from Suzlon Energy Ltd. therefore, accordingly the disallowance made by the AO of Rs.87,00,000/- is confirmed.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us on the following grounds:- “1. Because that the ld. Commissioner of Income Tax (Appeals) was erred in law as well as in facts in upholding the disallowance made by the ld. A.O on account of deduction u/s. 80-IA on a sum of Rs.87 lacs, on the alleged ground that the deduction on the said sum was not eligible for deduction u/s. 80-IA. 2. Because that the ld. Commissioner of Income Tax (Appeals), was erred in law as well as in facts in holding that, the sum of Rs.87 lacs was a compensation and not the appellant’s operational income, but was only incidental to its business activity and constituted income beyond the first degree and proximity nexus between the profit and the industrial undertaking and cannot be considered as income derived from the sale of power on which deduction u/s. 80-IA would be available.”
Ld. AR for the assessee before us filed a paper books which are running from pages 1 to 118 and compilation of case comprising of pages from 1 to 125 respectively and prayed that issue may be decided according to law. On the other hand, Ld. DR submitted that the aforesaid compensation is in the nature of incentive given to assessee and it was limited for a period of two years. Thus, the aforesaid incentive cannot be considered for the purpose of deduction u/s. 80-IA of the Act. He vehemently relied on the order of Authorities Below. 7. We have heard the rival contentions of both the parties and perused and carefully considered the materials on record; including the judicial pronouncements cited and placed reliance upon. The issue before us is whether the compensation received by the assessee is business income and therefore eligible for the deduction under section 80IA of the Act. It is undisputed fact that the compensation was received by the assessee from SEL as the machines failed to generate the guaranteed electricity units. It is also admitted fact that the assessee is into the business of wind power generation business. Thus it can be inferred that the impugned compensation has direct nexus with the business operations of the assessee and accordingly eligible for deduction under section 80IA of the Act. We also find that in the identical facts & circumstances the Hon’ble ITAT decided the issue in favor of assessee by allowing the compensation on account of power generation loss is entitled for deduction u/s.
ITA No.1100/Kol/2014 A.Y. 2009-10 AHW Steel Ltd. Vs. ACIT, Rg-3 Kol. Page 4 80-IA of the Act in the case of Lahoti Overseas Ltd. Vs Dy. Commissioner of Income Tax in ITA No.3821/Mum/2012 vide order dated 30-3-2016 for the A.Y. 2008-09. The relevant extract of the order is reproduced below:- “In the instant case the amount is paid by Suzlon India Limited towards specific performance due to short generation of power than minimum guaranteed power generation certified by the equipment supplier i.e. Suzlon Energy Limited and it has a direct and close nexus of first degree with the generation of power being shortfall in generation of power than the guaranteed rated capacity by equipment supplier and the subsidy goes on to reduce the cost of generation of power as the fixed costs and other cost which are still incurred despite short generation of power are recouped by the said subsidy from Suzlon Energy Limited and thus has direct and close nexus with the business of generation of power by the windmill undertaking of the assessee company and deduction u/s. 80IA of the Act is allowable. Keeping in view of the ratio of law laid down by the Hon'ble Supreme Court in the case of Meghalaya Steels Limited (supra) and the cited judgment of co-ordinate benches of the Tribunal in favour of the assessee company, we hold that the amount received by the assessee company from M/s Suzlon Energy Ltd. Of Rs.35,55,880/- on account of specific performance being compensation on account of shortfall in the power generated by the assessee company vis-à-vis the minimum guarantee rated capacity of production of power assured by Suzlon Energy Limited is to be held to be derived from the windmill power undertaking engaged in generation of power and is entitled for deduction u/s. 80IA of the Act.”
The principles laid down by the Hon’ble ITAT are binding on us. Moreover, the ld. DR before us has alleged that the impugned compensation is in the nature of incentive which in our considered view is not true. It is because of the fact that it was given due to non-generation of units as guaranteed by the SEL. Thus by no stretch of imagination the compensation can be equated with the incentive. Thus respectfully following the order of Hon’ble ITAT Mumbai Benches (supra) we reverse the order of authorities below. Hence the ground of appeal of the assessee is allowed. 8. In the result, assessee’s appeal stands allowed. Order pronounced in open court on 26/05/2017
Sd/- Sd/- (Partha Sarathi Chowdhury) (Waseem Ahmed) Judicial Member Accountant Member
*Dkp, Sr.P.S �दनांकः- 26/05/2017 कोलकाता / Kolkata
ITA No.1100/Kol/2014 A.Y. 2009-10 AHW Steel Ltd. Vs. ACIT, Rg-3 Kol. Page 5 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-AHW Steel Ltd. G.P. Agrawal & Associates, 7A, Kiran Shankar Roy Road, Kolkata-700001 2. ��यथ�/Respondent-ACIT, Range-3 P-7,Chowringhee Sq. Aayakar Bhawan, Kol-69 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file.
By order/आदेश से, /True Copy/ Sr.Private Secretary Head of Office/DDO आयकर अपील�य अ�धकरण, कोलकाता