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S. 80JJA Deduction available on Income from manufacturing fuel briquettes from bagasse

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HIGH COURT OF BOMBAY

Commissioner of Income-tax

Versus

Smt. Padma S. Bora

It Appeal No. 29 of 2011

December 3, 2012

JUDGMENT

M.S. Sanklecha, J.  

This appeal under Section 260A of the Income Tax Act, 1961 (“the Act”) challenges a common order dated 9/2/2010 passed by the Income Tax Appellate Tribunal (“the Tribunal”) relating to assessment years 2003-04 and 2004-05.

2. Being aggrieved by the order dated 9/2/2010of the Tribunal the respondent has re-framed the following questions of law for the consideration by this court:

(a)  Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing deduction u/s.80JJA of the Income Tax Act on the profits derived from the business of manufacturing fuel briquettes from bagasse?

(b)  Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in not appreciating that bagasse is not a waste but is a by product of sugar industry and is a basic raw material for many industrial products apart from being used as fuel by the sugar industry to run boilers?

3. The brief facts leading to this appeal are as under:

(a)  The respondent-assessee, is an individual inter alia engaged in the business of manufacturing fuel briquettes from bagasse. For the assessment years 2003-04 and 2004-05 the respondent filed her returns of income declaring total income of Rs. 2.65 lacs and Rs. 2.34 lacs respectively. The aforesaid income for the assessment years 2003-04 and 2004-05 was arrived at inter alia after claiming deduction of Rs. 27.62 lacs and Rs. 28.18 lacs respectively under Section 80JJA of the Act.

(b)  By an order dated 28/2/2006 for assessment year 2003-04 the Assessing officer disallowed a claim for deduction of Rs. 27.62lacs under Section 88JJA of the Act. Similarly by an order dated 29/9/2006 for assessment years 2004-05 the deduction of Rs. 28.18lacs under Section 80JJA of the Act was disallowed. This deduction under Section 80JJA of the Act was disallowed by the Assessing Officer on the following grounds:

 (1)  bagasse is not a waste;

 (2)  it is not generated in municipal/urban limits i.e. by local authorities;

 (3)  it is not collected but it is purchased; and

 (4)  the process does not involve any treatment or

recycling of a biodegradable waste.

(c)   In appeal, the Commissioner of Income Tax (appeals) by an order dated 2/5/2007 for assessment year 2003-04 and order dated 7/6/2007 allowed the respondent’s appeal in respect of its claim for deduction under Section 80JJA of the Act. The Commissioner of Income Tax(Appeals) in both the above orders held that bagasse was purchased from sugar factories and processed by it for making briquettes to be used as fuel. It was further held that the respondent assessee was engaged in the business of collecting and processing/treating biodegradable waste. Further it was held that all the conditions laid down in Section 80JJA of the Act were satisfied and the respondent-assessee was entitled to claim a deduction thereunder.

(d)  Being aggrieved by the order of Commissioner of Income Tax (appeals) dated 2/5/2007 and 7/6/2007 for the assessment years 2003-04 and 2004-05 respectively, the appellant preferred two appeals to the Tribunal. By a common order dated 9/2/2010 the Tribunal dismissed both the revenue’s appeals filed by the revenue. The Tribunal held that bagasse generated in the sugar industry is a waste and merely because it is purchased for a price it does not cease to be a waste. The Tribunal held that the respondent assessee satisfied the conditions for availing of the benefit of Section 80JJA of the Act namely collecting and processing bio-degradable waste in respect of profits and gains derived there from.

4. Section 80 JJA of the Act reads as under:

“80JJA. Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power (or producing bio fertilizers, biopresticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure, there shall be allowed, in computing the total income of the assessee, (a deduction of an amount equal to the whole of such profits and gains for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which such business commences).”

5. Mr. Vimal Gupta, Senior Counsel for the revenue in support of the appeal submits as under:

(a)  Bagasse which is purchased by the respondent is not a waste but a by product of sugar industry. Therefore, Section 80JJA of the Act could have no application in this case;

(b)  Reliance is placed upon a circular No.772 dated 27/12/1998 issued by the Central Board of Director Taxes explaining the intention to insert Section 80 JJA of the Act to support his contention. According to him section 80JJA of the Act was introduced so as to encourage local bodies to manage waste arising in Urban areas. Thus the benefit of Section 80JJA of the Act is not available to persons other than local bodies;

(c)  Bagasse is not collected by the respondent-assessee but is purchased from the sugar factories. Therefore, the pre-requisite for claiming deduction under Section 80JJA of the Act is not satisfied.

In view of the above, it is urged by him that substantial questions of law do arise and the appeal be admitted.

6. As against the above, Mr. S.N. Inamdar, Senior Counsel appearing for the respondent submits as under:

(a)  Bagasse is a waste which arises in the manufacture of sugar. It is not a by product of a sugar industry. In support of his contention that bagasse is a waste reliance was placed upon a letter dated 4/2/2006 of the Sugar Commissioner, Maharashtra State certifying that bagasse is a residual waste generated in sugar industry. Similarly reliance was also placed upon Chapter 23 Heading No.23.01 of the Central Excise Tariff Act, 1985 and Chapter 23 of ITC (HS) classification wherein bagasse has been classified as waste of sugar manufacture;

(b)  The Circular No.772 dated 23/12/1998 being relied upon by the appellant does not in fact restrict operation of Section 80JJA of the Act only to local bodies and excludes individuals from its benefit; and

(c)  Section 80 JJA of the Act merely requires that bio degradable waste should be collected and processed for making briquettes fuel. The mere fact that the bagasse is collected from the sugar factory by making a payment would not by itself result in bagasse not being a waste or the same not being collected.

In view of the above, he submits that the appeal of the revenue be dismissed.

7. We have considered the submissions. We find that on examination of the evidence both Commissioner of Income Tax (appeals) as well as Tribunal have reached a finding of fact that bagasse is a biodegradable waste used for making briquettes for fuel by the respondent assessee. This finding of fact was based on evidence led before the authorities by the respondent-assessee. We find that bagasse is a waste of the sugar factory. This waste is a bio-degradeable waste and the same is collected on consideration by the respondent assessee from the factory. There could be no universal definition of the word “waste”. The term waste has to be understood contextually i.e. place where it arises and the manner in which it arises during the processing of some article. The fact that sugar industry also regards Bagasse as waste is evident from Circular dated 4/2/2006 issued by the Sugar Commissioner, Maharashtra State, Pune. Besides the ITC classification of the Exim policy also classifies bagasse as a waste of sugar industry under Chapter 23 Heading 23.20 thereof. Further, the Central Excise Tariff Act 1985 also regards bagasse as waste of sugar manufacture and is classified under Chapter 23 heading 23.01 of the Central Excise Tariff Act, 1985. We do not agree with the submissions of the appellant’s Counsel that collection would mean collecting free of charge and not by purchasing the same. The word “collecting” means to gather; to fetch. It is a neutral word and does not mean collection for consideration or collection without consideration. It is an admitted/undisputed position that the respondent assessee has collected bagasse from sugar factories after having made payment for the same. Therefore, the aforesaid requirement of collecting as provided under Section 80JJA of the Act is satisfied. It is a undisputed finding of fact that the collected bagasse has been used by the respondent-assessee to make briquettes for fuel as that indeed is the business of the respondent-assessee. The reliance upon the circular No. 772 dated 23/12/1998 by the appellant is misplaced. The aforesaid Circular does not restrict its benefits only to local bodies. In any event the circular cannot override the clear words of Section 80JJA of the Act which provides deduction in respect of profits and gains derived from the business of collecting and processing/treating of bio- degradable waste i.e. bagasse into briquettes for fuel. In these circumstances, we find no fault with the order of the Tribunal both on facts as well as in law.

8. In view of the above, no substantial question of law arises for consideration by this court. Therefore the appeal is dismissed, with no order as to costs.


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