Taken As Part Of Sale Price Of Electricity Incomputing Relief Under Section 80Ia?" v. Assistant Commissioner, Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26.11.2018 CORAMTHE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE DR.JUSTICE ANITA SUMANTH Tax Case (Appeal) Nos.779 and 780 of 2009 Neyveli Lignite Corporation Ltd.,Corporate Office Block-I, Neyveli 607 801. Appellant in both AppealsVs. The Assistant Commissioner ofIncome Tax, Company Circle-IV(4)Chennai 600 034. Respondent in both Appeals Tax Case Appeals filed under Sec. 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, Madras 'C' Bench, Chennai, dated 18.12.2008 in ITANos.920/Mds/2008 and 921/Mds/2008 respectively. TCA.No. 779 of 2009: Against the Order of the commissioner ofIncome Tax (Appeals) V, Chennai dated 14-01-2008 and made inITA.No. 127/06-07 for the Assessment Year 2003-2004. Against the Order of the Assistant Commissioner of IncomeTax, company circle IV (4), Chennai 34, dated 27.03.2006 andmade in Pa.No. /G.I.No.AAACN1121C/NE-65 for the Assessment Year2003-04. TCA.No. 780 of 2009 against the Order of the Commissioner ofIncome Tax (Appeals) IV, Chennai 34, dated 10.01.2008 and madein ITA.No.444/06-07 for the Assessment Year 2004-2005. Against the Order of the Additional Commissioner of IncomeTax, Company Range IV, Chennai dated 11.12.2006 and made inP.A.No. /G.I.No. AAA CN 1121C/NE-65 for the Assessment Year2004-2005. https://hcservices.ecourts.gov.in/hcservices/ JUDGMENT (Judgment of the court was delivered by DR.ANITA SUMANTH,J.) These Tax Case Appeals relate to assessment years 2003-2004and 2004-2005. The following substantial question of law hasbeen framed:- "Whether, on the facts and in the circumstancesof the case, the Tribunal was right in holdingthat components of price for sale of electricityfixed on basis of tax liability should not be taken as part of sale price of electricity incomputing relief under Section 80IA?" 2. Mr.R.Vijayaraghavan, learned counsel appearing for theappellant/assessee and Mrs.Hemalatha, learned Senior StandingCounsel appearing for the Revenue concur on the position thatthe question of law has been answered by this court vide itsorder in the assessee's own case for assessment year 2001-2002reported in (2014) 267 CTR 352 (Neyveli Lignite Corporation Ltd. v. Assistant Commissioner, Income Tax.). 3. The question raised in that case is identical to thequestion before us now, relating to the eligibility of theassessee to deduction under section 80IA of the Income Tax Actin relation to the income earned from the sale of electricityand whether the price component determined inter se partieswould also be taken to be a part of sale price. 4. This court has, in its order aforesaid, noticed asfollows:- "6. A reading of the agreement dated 18.2.1999entered into between the assessee and the variousState Electricity Boards thus show the modalitiesof arriving at the tariff which includes the taxliability of Neyveli Lignite Corporation. Thus,it is evident that the tariff that was arrived atbetween the parties consisted of variouscomponents including tax liability on the incomestreams from the core activity of NLC and thequantification was to be done on the basis of themethods given in Clause 6.2 of the agreement. Areading of the same thus makes it clear that instrict sense, there was no reimbursement of thetax liability by the recipient, but was treatedas part of the tariff and whatever was done onthe receipt of the statement of the tax payableby the assessee was that the tariff price payableon the electricity sold was finally reckoned withreference to the above said tax payment. In thecircumstances,itisclearthatby"reimbursement", it does not mean that the taxpaid by the assessee was very much part of thetariff and hence, part of the sale price." and has concluded in para 18 as under:-"18. In the circumstances, we have no hesitationin accepting the plea of the assessee that theCommissioner committed serious error indissecting the tariff to come to the conclusionthat the tax component specified as part of thetariff is reimbursement of the liability of theassessee and hence it would not form part of theincome. As already pointed out, when the Revenuehad not questioned the genuineness of theagreement between the parties and liberty is thusavailable for the parties to arrive at the costof the energy to be supplied by the assessee asguided by the notifications of the Ministry ofPower in this regard, we find no ground tosustain the plea of the Revenue that the reliefto be granted under Section 80IA calls forexclusion of the tax component in the sale priceof electricity. Consequently, the first questionraised in the tax case is answered in favour ofthe assessee and the order of the Tribunal is setaside." 5. It is not in question that the order of the High Courtdated 16.7.2012 has attained finality and has also beenfollowed while deciding the identical issue for the interveningassessment year, i.e., assessment year 2002-2003. Moreover, inrespect of the present two assessment years, the orders of thefirst and second appellate authorities have been passed in 2008prior to this court's decision dated 16.7.2012. 6. In the light of the above, we answer the question of lawin favour of the assessee and against the Revenue. The Tax Case(Appeals) are allowed. No costs. Sd/-Assistant Registrar(CO) //True Copy// ssk. Sub Assistant Registrar TO 1.The Income Tax Appellate Tribunal, Madras C Bench, Chennai. Madras C Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Company Circle-IV (4), Chennai. 3.The Commissioner of Income Tax, (Appeals) – IV, Chennai. 4. The Additional Commissioner of Income Tax, Company Range IV, Chennai. Company Range IV, Chennai. +1cc to Mr.T.Ravi Kumar, Senior Standing Counsel, Advocate, S.R.No. 80604 Advocate, S.R.No. 80604 +1cc to Mr.Subbaraya Aiyar, Padmanaban, Advocate, S.R.No. 80766 T.C.A.Nos.779 & 780 of 2009SV(CO)GN(20/12/2018)