2010 (2) TMI 715 - AT - Income Tax

Tribunal allows fuel briquette deduction but denies job work receipts for lack of bio-waste collection

The Tribunal upheld the CIT(A)'s decision, allowing the deduction under Section 80JJA for the assessee's business of manufacturing fuel briquettes from ... Deduction u/s 80JJA - business of collecting and processing or treating of bio-degradable waste for generating power or producing bio-fertilizers, bio-pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure - business of collecting and processing or treating the bagasse which is biological waste or bio-degradable waste into briquettes for fuel - Held that:- it is not fair to restrict the location of municipal limits only, when the Circular No. 772 refers to 'local bodies' which include the Panchayats as well. The Panchayats refer to the villages or rural areas where the sugar industries are essentially located. There are planners for every nook and corner of the country. Therefore, the problem is common both for municipalities and the other areas of the country.Regarding the objection relating to the end-product after processing is one and the same as the waste collected - Held that:- there is great amount of change in terms of caloric value of the briquettes before and after the said processing or treatment. - Decided in favor of assessee.Denial of deduction u/s 080JJA in respect of job work charges - Held that:- Business of collecting and the business of processing or treating are qualified by 'and' and not 'or'. Therefore, it is essential, the business of collecting should be done by assessee as part of his business activities, whereas in the job work related activities, this part is done by the job work customers and assessee has no role in such activity. - Decided against Assessee. Issues Involved:1. Eligibility for deduction under Section 80JJA for manufacturing fuel briquettes from bagasse.2. Eligibility for deduction under Section 80JJA for job work receipts.Detailed Analysis:1. Eligibility for Deduction under Section 80JJA for Manufacturing Fuel Briquettes from Bagasse:The primary issue was whether the assessee was entitled to a deduction under Section 80JJA of the IT Act for the business of making fuel briquettes from bagasse. The Revenue contended that the CIT(A) erred in allowing this deduction. The AO argued that bagasse is not a waste but a residual product marketed by sugar factories and that the benefits of Section 80JJA apply only to waste generated within municipal limits. The AO also outlined specific conditions for availing the deduction, emphasizing that the waste must be bio-degradable, collected (not purchased), and processed in a manner involving bio-degradation.The assessee countered that bagasse is a waste product of sugar factories, supported by various definitions and official documents. The assessee argued that Section 80JJA does not restrict the location of waste generation to municipal limits nor does it prohibit the purchase of waste. The CIT(A) sided with the assessee, stating that bagasse qualifies as bio-degradable waste and that the section's language is clear and should be interpreted literally.The Tribunal examined the provisions of Section 80JJA and relevant CBDT Circulars, concluding that the section aims to address waste management problems in both urban and rural areas. The Tribunal found that bagasse is indeed a bio-degradable waste and that the statute does not restrict the location of waste generation to municipal limits. The Tribunal also dismissed the AO's interpretation that waste must be collected free of cost, stating that the statute does not impose such a condition. Consequently, the Tribunal upheld the CIT(A)'s decision, allowing the deduction under Section 80JJA for the assessee's business of making fuel briquettes from bagasse.2. Eligibility for Deduction under Section 80JJA for Job Work Receipts:The second issue was whether the assessee was entitled to a deduction under Section 80JJA for profits derived from job work receipts. The AO denied the deduction, arguing that the assessee did not fulfill the condition of collecting bio-degradable waste, as this activity was performed by the job work customers.The CIT(A) confirmed the AO's decision, stating that the deduction is available only to those engaged in both collecting and processing or treating bio-degradable waste. Since the assessee only processed the waste collected by others, the CIT(A) held that the assessee did not meet the statutory requirements.The Tribunal agreed with the CIT(A), emphasizing that Section 80JJA requires the business to involve both collecting and processing or treating bio-degradable waste. Since the assessee did not engage in the collection of waste for job work receipts, the Tribunal upheld the denial of the deduction for these receipts.Conclusion:The Tribunal dismissed the Revenue's appeals and the assessee's cross-objections, affirming the CIT(A)'s decisions. The assessee was granted the deduction under Section 80JJA for manufacturing fuel briquettes from bagasse but was denied the deduction for job work receipts due to the lack of involvement in the collection of bio-degradable waste.