Judgment:
THE HIGH COURT OF DELHI AT NEW DELHI % + Judgment delivered on:
24. 07.2013 ITA No. 1248/2010 KRISHAK BHARTI COOPERATIVE LIMITED Appellant Respondent versus DEPUTY COMMISSIONER OF INCOME TAX Advocates who appeared in this case: For the Appellant : Mr S. Ganesh, Sr Advocate with Ms Surekha Raman, Mr Varun Singh and Mr Purushottam Kumar Jha For the Respondent : Mr Rohit Madan Kumar, Ms Pushpa Sharma WITH + ITA No. 614/2011 KRISHAK BHARTI COOPERATIVE LIMITED Appellant versus ADDITIONAL COMMISSIONER OF INCOME TAX Respondent Advocates who appeared in this case: For the Appellant : Mr S. Ganesh, Sr Advocate with Ms Surekha Raman, Mr Varun Singh and Mr Purushottam Kumar Jha For the Respondent : Mr Rohit Madan Kumar, Ms Pushpa Sharma CORAM:HONBLE MR JUSTICE BADAR DURREZ AHMED, ACTING CHIEF JUSTICE HONBLE MR JUSTICE R.V. EASWAR JUDGMENT BADAR DURREZ AHMED, ACJ 1.These appeals pertain to the assessment years 1993-94 and 1994-95. ITA No.1248/2010, which relates to the assessment year 1993-94, has been taken to be the lead matter and the facts of that case would be considered. The other appeal, ITA No.614/2011 is on virtually identical lines.
2. By virtue of an order dated 06.09.2011, a Division Bench of this court, while admitting the said appeals, framed the following substantial question of law:Whether in the facts and circumstances of the case, the Tribunal was justified in holding that service charges received from the Heavy Water Board of Department of Atomic Energy could not be considered as profit derived from the industrial undertaking to qualify for deduction under Section 80-I of the Act 3. The service charges, which have been received by the appellant (Kribhco) was in respect of Kribhco operating and maintaining the heavy water plant, also known as the Hazira Ammonia Extension Plant (HAEP), owned by the Heavy Water Board, Department of Atomic Energy, Government of India. The issue is whether these service charges can be regarded as profits and gains of Kribhco derived from an industrial undertaking and, consequently, whether Kribhco would be entitled to any deduction under Section 80-I of the Income-tax Act, 1961.
4. In respect of the assessment year 1993-94, the extent of the above service charges was Rs 6,36,45,631/-. Initially, the appellant (Kribhco) claimed deduction under Section 80-I of the said Act in respect of the said service charges. Subsequently, during the assessment proceedings, the assessee revised the claim by excluding these charges for the purposes of deduction under Section 80-I and treated them as its income from other sources. The Assessing Officer, while computing the profits eligible for deduction under Section 80-I of the said Act, reduced the profits of industrial undertaking by an amount of Rs 6,36,45,631/- on account of the fact that these service charges were treated as income from other sources. However, before the Commissioner of Income-tax (Appeals), the appellant by way of an additional ground, reiterated its initial claim that the receipt of Rs 6,36,45,631 on account of service charges constituted part of its profits and gains from an industrial undertaking and was eligible for deduction under Section 80-I of the said Act. This claim of the appellant was rejected by the Commissioner of Income-tax (Appeals), who held that the said service charges were not profits and gains derived by the assessee from its industrial manufacturing activities. It was held that the said service charges received from the Heavy Water Board were not dependent upon the appellants manufacturing activities and, consequently, it was held that the service charges were not derived from the industrial undertaking of the appellant / assessee.
5. Being aggrieved, the appellant filed an appeal before the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal) which, by an order dated 27.01.2006 upheld the view taken by the Commissioner of Income-tax (Appeals). Thereafter, the appellant preferred appeals before this court under Section 260-A of the said Act in respect of three years, including the assessment year 1993-94 and 1994-95. Those appeals were numbered as ITA Nos 12521254/2006. By an order dated 15.11.2006, a Division Bench of this court dismissed those appeals holding that no substantial question of law arose for the consideration of this court.
6. Being aggrieved by the order dated 15.11.2006 passed by a Division Bench of this court, the appellant filed a Special Leave Petition [SLP (C) No. 3802/2007] which got converted into a Civil Appeal (Civil Appeal No.6244/2008). That appeal was disposed of by an order dated 21.10.2008. The Supreme Court took the view that the Tribunal and the High Court had not examined all the relevant contracts between the appellant and the Heavy Water Board because the appellant, in the first instance, had only produced the agreement dated 18.09.1994, but had failed to produce the contracts dated 05.08.1986 and 11.07.1990. The Supreme Court felt that the said contracts needed to be examined in depth in order to determine the basic issue as to whether the receipt of service charges was or was not directly linked with the manufacturing activities carried out and the industrial undertaking of the appellant. For this reason, while keeping all contentions from both sides expressly open, the Supreme Court set aside the impugned judgment of the Delhi High Court and remanded the matter to the Tribunal for reconsideration of the matter in accordance with law.
7. It is, thereafter, that the matter was reconsidered by the Tribunal which disposed of the appeal in respect of the assessment years 1993-94 being ITA No.6130/Del/1997 by an order dated 26.02.2010. It is that order which is impugned before us insofar as the assessment year 1993-94 is concerned. A similar order was passed in respect of the assessment year 1994-95 in ITA No.3902/Del/2010 dated 20.10.2010.
8. The appellant has an Ammonia / Urea Plant at Hazira. Just next to it and within its premises, the Hazira Ammonia Extension Plan, which manufactures heavy water, has been set up and established by the Heavy Water Board, which is part of the Department of Atomic Energy, Government of India under the said agreements dated 05.08.1986, 11.07.1990 and 14.09.1994. After examining the agreements between the appellant and the Heavy Water Board, the Tribunal, which is the final fact finding authority in income-tax matters, has come to, inter alia, the following conclusions:1. The ownership of the industrial undertaking for manufacture of heavy water vests with the Government of India, Department of Atomic Energy since inception and not with the appellant / assessee; 2. The Heavy Water Plant belonging to the Heavy Water Board and the Ammonia / Urea Plant of the assessee are both integrated with each other; 3. The process of manufacture of heavy water plant is dependent on the supply of synthesis gas which is enriched with deuterium which is a by-product of Kribhcos Ammonia / Urea plant. There are 10 pipe lines connecting Kribhcos Ammonia / Urea Plant with the Heavy Water Plant. The Schematic Diagram showing 10 pipe lines is as under:KRIBHCO-HEAVY WATER PLANT (HAEP) INTERCONNECTION LINE Heavy Water (HAEP) PLANT 1