TaxTMI 
TaxTMI 
2023 (7) TMI 1453
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....o 2012-13 which have been adjudicated by the Tribunal vide order dated 13-04-2022. Thereafter, miscellaneous applications were preferred by the Revenue highlighting certain mistakes with respect to the deduction claimed by the assessee under section 80IA of the Act being apparent from the record. Finally, the ITAT order was recalled vide order dated 15-03-2023 for limited grounds i.e. dispute with regard to allowances/disallowances of deduction under section 80-IA of the Act on other income for de novo adjudication. 3. First, we take up ITA No. 472/AHD/2013, an appeal by the assessee for A.Y. 2009-10. The relevant ground of appeal is reproduced as under: 5. The learned Commissioner of Income Tax (Appeals) erred in fact and in law in confirming the action of the AO in not allowing deduction u/s.80IA on the following incomes on the ground that the same are not derived from industrial undertaking Particulars Surat Plant Insurance Claims 2,91,32,157 Liquidated Damages 15,16,596 Sale of Scrap 1,05,54,080 Dry Ash/Fly Ash 1,35,26,999 Total Other Income 5,47,29,832 4. The necessary facts are that the assessee, a public company, is engaged in the business of generation and s....
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....ome derived from industrial undertaking. 5.4 Similarly, the miscellaneous income of Rs. 3,03,95,446/- in respect of Surat Plant includes receipt on sale of scrap, tender fee, recovery of rent and retention money. As such, the scrap was generated during the process of generation of power, spares parts and raw materials which became substandard etc. Hence, the same is directly linked to the main activity carried out by the assessee. Other miscellaneous receipts, being tender fee, recovery of rent and retention money were accrued in the normal course of business but the same does not involve the element of income. As such the corresponding expenditures are higher than these receipts. 6. The learned CIT(A) after considering the facts in totality confirmed the disallowances made by the AO except the profit with respect to Baroda Plant for Rs. 10,27,846.00 on account of writing off of the old balances. The relevant finding of the learned CIT(A) reads as under: 7.2.2 So far as disallowance of deduction u/s. 801A on account of insurance claims of Rs.2,91,32,157/- is concerned, the appellant has relied upon the decision in the case of Nirma Industries Ltd. (supra). In a recent decision....
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....iquidated damages are in the nature of compensation/damages on account of breach alleged to have been committed by them qua assessee in performance of contract. Thus, such sum could not be at par with actual profit which the assessee earned by sale of the finished goods. Accordingly, it was held by the Court that such liquidated damages are not derived from the industrial undertaking and hence, are not eligible for deduction u/s.80HH and 801. Following this decision, the action of the AO of disallowing deduction u/s.80 A on the amount of liquidated damages is upheld. 7.2.4 The disallowance of deduction u/s.801A on account of miscellaneous income is discussed as follows: (a) Sale of scrap of Rs.1,05,54,080/- has been claimed to be on account of scrap generated during the manufacturing process. But again no details in support of such claim has been filed, hence the decision in the case of Mir Industries (supra) is not applicable here. On the contrary, Hon'ble Madras High Court in its decision in the case of Pandian Chemicals Ltd. v. CIT [2002] 25 ITR 562, has held that scrap not being a necessary by product in the process manufacturer, the income from the sale of scrap could ....
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.... On the other hand, the learned DR before us contended that the impugned income has no connection of whatsoever from the activity of transmission and distribution of power and therefore the same cannot be held as eligible for deduction under section 80 IA of the Act. The learned DR vehemently supported the order of the authorities below. 10. We have heard the rival contention of both the parties and perused the materials available on record. Admittedly, the assessee claimed deduction of profit under section 80-IA of the Act for its eligible units at Baroda & Surat which included certain receipts under the head other income but the same was not treated by the AO as income eligible for deduction under section 80IA of the Act. The item of other income which are in dispute before us are detailed as under: 1. Receipt of Insurance claim 2. Receipt of liquidation damage 3. Proceeds from sale of scrap 4. Proceeds on sale Dry/fly ash 10.1 With regard to the receipt of insurance, we note, the assessee in its submission before the learned CIT(A) has stated that the insurance claim was received against the loss of Machinery and loss due to fire which do not involve any element of in....
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....efore the learned CIT(A) and in the chart submitted by the learned AR of the assessee before us has stated that the insurance claim was in respect of loss on account of machinery and loss due to fire but the necessary details about the quantum of receipt of insurance claim against the loss of machinery and against the revenue loss have not been furnished on record. Therefore, in the interest of justice and fair play, we are inclined to restore the issue to the file of the AO for limited purpose to verify whether the impugned receipt represents the capital receipt or revenue receipt. If it is of capital in nature, then the assessee should not be allowed as deduction under section 80 IA of the Act and vice-versa as per the provisions of law. Hence, the issue raised by the assessee with respect to receipt of insurance claim is allowed for statistical purposes. 10.3 Coming to the issue of receipt of liquidation damages, we note that the damages were received by the assessee in connection with the purchases of material spares or services received by the eligible unit. The amount of liquidated damage represents the receipt to the assessee from the supplier who failed to supply or cause....
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....the assessee. Accordingly, the question of disallowance of deduction under section 80IA of the Act will not arise. Thus, merely the assessee has presented the sale of consumable stores in a particular manner, the assessee cannot be debarred from claiming the deduction under the provisions of section 80IA of the Act. It is also pertinent to note that the income from the sale of consumable stores used in the eligible unit has direct link with the generation and distribution of power, therefore on this score as well, the assessee cannot be denied the benefit of the deduction under section 80IA of the Act. In view of the above detailed discussion, the ground of appeal raised by the assessee is hereby partly allowed for statistical purposes. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Coming to ITA NO. 535/AHD/2014, appeal by the assessee for A.Y. 2010-11. 11. The items of other income claimed during the year under consideration which are in dispute before us are as under: 1. Liquidation damage Rs. 1,57,84,406/- 2. Sale of scrap Rs. 65,44,725/- 3. Ash disposal Rs. 2,16,94,022/- 4. Other income Rs. 33,05,199/- 12. At the outset....
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....een allowed as deduction against the income from generation and sale of electricity. Thus, it has a live link with the activity of the assessee. Accordingly, we hold that the assessee is eligible for deduction on such receipts. In view of the above, the ground of appeal raised by the assessee is hereby allowed. In the result, the appeal filed by the assessee is allowed. Coming to ITA NO. 1257/AHD/2015, an appeal by the Revenue and CO. No. 111/AHD/2015 by assessee for A.Y. 2011-12. 15. The AO during the assessment proceedings found that deduction claimed by the assessee under section 80IA of the Act includes several incomes under head other income which were not directly arising from the business of generation and sale of electricity. Thus, the AO disallowed the same. On appeal by the assessee, the learned CIT(A) allowed certain items to be deducted under section 80-IA of the Act and also confirmed the disallowances of certain income. Thus, against the order of the learned CIT(A) both the assessee and revenue are before us vide in their respective appeal and cross objection. The assessee is in cross objection against the disallowance of deduction under section 80IA with respect ....