KSPS Natarajan & Co. vs The Asst. Commissioner of Income Tax

R. Sudhakar, J.—Aggrieved by the order of the Appellate Tribunal in dismissing the appeal filed by it, the assessee is before this Court challenging the said order by filing the present appeal and this Court, vide order dated 26.6.07, framed the following substantial questions of law for consideration :-

"1) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the appellant is not entitled to deduction u/s 80IA of the Act of the profits from the generation of electricity through wind electricity generators for the assessment year 1999-00?

2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the generation of electricity would not amount to production of goods and article and hence not entitled to deduction u/s 80IA of the Act?"

The appellant/assessee is engaged in the business of electricity and the case on hand relates to the assessment year 1998-99 during which year, the appellant filed return of income to the extent of Rs.10,15,880/-. The assessment was reopened under Section 147 and the same was completed on 16.2.04 and a claim under Section 80IA to the extent of Rs.8,28,447 was disallowed, being the income earned from generation of power through windmill. Aggrieved against the said assessment order, the appellant preferred an appeal to the Commissioner of Income Tax (Appeals). However, the CIT (Appeals) rejected the contentions advanced by the appellant and held that the provisions of Section 80IA(2)(v) are applicable as held by the Apex Court in Commissioner of Sales Tax, Madhya Pradesh, Indore Vs. Madhya Pradesh Electricity Board, Jabalpur, and upheld the order of the Assessing Officer.

Aggrieved over the said order of CIT (Appeals), the appellant preferred an appeal to the Income Tax Appellate Tribunal reiterating the submissions as taken before both the lower authorities. The Tribunal, following its order in Tamil Nadu Chlorates case (ITA No. 307/2000 dated 6.9.05), held that generation of electricity would not amount to production of goods and articles and, therefore, the appellant is not entitled to the relief under Section 80IA and dismissed the appeal filed by the assessee. Aggrieved by the said order of the Tribunal, the appellant is before this Court by filing the present appeal.

Heard the learned counsel appearing for the appellant/assessee and the learned counsel appearing for the respondent.

It is pointed out by the learned counsel that without considering the merits of the appellant''s claim under Section 80IA, the Tribunal had proceeded to dismiss the appeal primarily on the ground that the decision in Tamil Nadu Chlorates case (ITA No. 307/2000) is squarely applicable to the facts of the case. It was pointed out by the learned counsel at the time of hearing that this Court in TCA No. 1360/06, etc. vide order dated 23.7.12, while deciding the appeals of the assessee in M/s. Tamilnadu Chlorates Vs The Commissioner of Income Tax held as follows :-

"2. The assessee herein is located in a backward area and is manufacturing potassium chlorates. It also installed windmills for generation of electricity. The assessee filed the returns claiming deduction under Section 80HH and 80I of the Income Tax Act. A reading of the order of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal show the confusion in their mind as regards the granting of relief under Chapter VIA. When there is a specific provision to consider the claim on generation and distribution of energy under Section 80IA and on the admitted fact that the assessee''s windmills are located in a backward area, the Tribunal and the other authorities should have adverted their attention to the specific provision for deduction, i.e., Section 80IA. In the assessment made for the assessment year 1996-97, the Officer had rightly pointed out that the claim could be considered only under Section 80IA. As far as the claim under Section 80I is concerned, there is hardly any material for them to consider whether the claim was with reference to electricity generation, in which event, here again, the question could be considered only under Section 80IA and not under Section 80I.

Considering the misdirection in the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, we feel, the proper course herein would be to set aside the order of the Tribunal and remit the matter back to the Assessing Officer for considering the claim of deduction in the light of the provisions under Section 80IA. Accordingly, these Tax Case Appeals stand allowed. Connected M.P. No. 1 of 2006 in T.C. (A) No. 2536 of 2006 stands closed. No costs."

In the present case also, the substratum on which the earlier order of the Tribunal was set aside by this Court, is similar and, therefore, we are inclined to allow the appeal by way of remand to the Tribunal.

Therefore, without this Court answering the above questions of law, the Tribunal is called upon to address the same, since the original authority has already declined to grant deduction under Section 80IA. The Tribunal shall therefore, re-examine the issues above in the light of the claim under Section 80IA.

This appeal, is accordingly, allowed by way of remand to the Tribunal. However, there shall be no order as to costs.