Bombay High Court
Commissioner Of Income Tax vs Ahmedabad Electricity Co. Ltd. on 14 January, 1993
Equivalent citations: [1993]203ITR521(BOM)
Author: Sujata V. Manohar
Bench: Sujata V. Manohar
JUDGMENT U.T. Shah, J.
1. Under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal has referred the following question at the instance of the Revenue :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the following receipts of the assessee-company were profits and gains attributable to its priority industry and qualified for relief under section 80-I of the Income-tax Act, 1961, for the assessment years 1971-72 and 1972-73 ?
Rs. Rs.
(a) Hire charges of meters,
transformers, switchgears, etc. 18,02,602 19,61,992
(b) Interest on call and fixed
deposits 5,97,133 1,33,797
(c) Profit under section 41(2) 26,619 1,12,649
(d) Other miscellaneous receipts
including meter fixing charges,
etc. 34,364 37,451
(e) Electricity duty collection
commission 6,000 6,000
(f) Miscellaneous receipts 38,998 63,000
(g) Profits in exchange on loan in
foreign currency 9,415 11,330."
2. The respondent (hereinafter referred to as "the assessee") is a company engaged in the business of generation and distribution of electricity. The assessment years are 1971-72 and 1972-73 and the relevant previous years are the corresponding financial years ending on March 31, 1971, and March 31, 1972, respectively.
3. In the assessments originally framed under section 143(3) of the Act, the Income-tax Officer had granted deduction under section 80-I of the Act in respect of the aforesaid receipts. However, subsequently, he took action under section 147(b) /148 of the Act in view of the objection raised by the Revenue audit in respect of the aforesaid receipts. Following the procedure laid down in the Act, he framed the assessments under section 143(3) /148 of the Act, wherein he withdrew the deduction granted to the assessee under section 80-I of the Act in respect of the aforesaid receipts, on the ground that the same were "not attributable to" the business of generation and distribution of electricity.
4. In appeal before the Appellate Assistant Commissioner of Income-tax, the assessee contended that, since the aforesaid receipts had arisen in the course of carrying on of the business, the Income-tax Officer ought not to have withdrawn the deduction under section 80-I of the Act allowed to it earlier. Reliance was placed on the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. The Appellate Assistant Commissioner, in his order, has given a clear finding that each of the aforesaid receipts was part and parcel of the income earned by the assessee in carrying on its business of generation and distribution of electricity. He further held that the income so earned by the assessee was incidental to the carrying on of its business. Applying the ratio laid down in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT , he accepted the assessee's contention that it was entitled to deduction under section 80-I of the Act in respect of the aforesaid receipts.
5. Being aggrieved by the order of the Appellate Assistant Commissioner, the Revenue camp up in appeal before the Income-tax Appellate Tribunal (for short, "the Tribunal") and contended that since the aforesaid receipts were not incidental to the carrying on of the business of the assessee, the assessee was not entitled to deduction under section 80-I of the Act in respect of the same. The Tribunal, however, in its order under reference, gave a categorical finding that each of the aforesaid receipts was incidental to the business carried on by the assessee and, therefore, would qualify for deduction under section 80-I of the Act. In this view, of the matter, the Tribunal upheld the order of the Appellate Assistant Commissioner.
6. Having been dissatisfied with the order of the Tribunal, the Revenue sought reference under section 256(1) of the Act and the Tribunal has referred the aforesaid question to us. Learned counsel for the Revenue once again submitted that, since the aforesaid receipts were note incidental to the business carried on by the assessee, the Tribunal ought to have upheld the action of the Income-tax Officer. He, however, was fair enough to state that the profit under section 41(2) of the Act would qualify for deduction under section 80-I of the Act in view of the aforesaid decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. [1978] 113 ITR 84.
7. Learned counsel for the assessee, on the other hand, took us through the relevant portion of the said decision of the Supreme Court, more particularly the observations appearing at pages 93 and 94 of the report and submitted that the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of", has a much wider meaning than the expression "derived from". In this view of the matter, he submitted that the Tribunal was fully justified in holding that the aforesaid receipts would qualify for deduction under section 80-I of the Act. As regards item (b), he invited our attention to the decision of this court in the case of CIT v. United Carbon India Ltd. [1991] 190 ITR 622, and pointed out that, in the said case, the High Court was pleased to hold that the interest earned would qualify for deduction under section 80-I of the Act. Thereafter, he invited our attention to the relevant portion of the order of the Tribunal under reference as well as the statement of the case with a view to impress upon us that the Tribunal has given a clear finding that the aforesaid receipts were incidental to the business of generation and distribution of electricity carried on by the assessee. Since this findings of the Tribunal is not challenged in the reference, learned counsel for the assessee urged that we should uphold the order of the Tribunal under reference.
8. Section 80-I of the Act, as far as it is relevant, reads as under :
"80-I. Deduction in respect of profits and gains from priority industries in the case of certain companies. - (1) In the case of a company to which this section applied, where the gross total income includes any profits and gains attributable to any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to five per cent. thereof in computing the total income of the company."
9. The expression "priority industry" is defined by sub-section (7) of section 80B of the Act. The relevant portion is reproduced below :
"(7) 'priority industry' means the business of generation or distribution of electricity or any other form of power...."
10. In the case of Cambay Electric Supply Industrial Co. Ltd. [1978] 113 ITR 84, the Supreme Court was required to consider whether the balancing charge worked out under section 41(2) of the Act would qualify for deduction under section 80E of the Act (corresponding to section 80-I of the Act). The court has discussed the provisions as under (at page 93) :
"As regards the aspect emerging from the expression 'attributable to' occurring in the phrase 'profits and gains attributable to the business of' the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the Legislature has deliberately used the expression 'attributable to' and not the expression 'derived from'. It cannot be disputed that the expression 'attributable to' is certainly wider in import than the expression 'derived from'. Had the expression 'derived from' been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression 'derived from', as, for instance, in section 80-I. In our view, since the expression of wider import, namely, 'attributable to', has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.
For the aforesaid reasons and particularly on the true construction of the provision itself, we are of the view that both the Tribunal and the High Court were right in taking the view that the items of Rs. 7,55,807 was required to be taken into account while computing the deduction of eight per cent. contemplated by section 80E(1) of the Act."
11. In the case of United Carbon India Ltd. [1991] 190 ITR 622, this court applied the ratio laid down in the aforesaid case of Cambay Electric Supply Industrial Co. Ltd. , and held that the interest income earned on short-terms deposits of money not immediately required for the business was attributable to the business of the assessee which was a priority industry.
12. On a due consideration of the submissions made by the parties and after adverting to the facts found by the Tribunal as well as the aforesaid decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. and of this court in the case of United Carbon India Ltd. [1991] 190 ITR 622, we do not find any merit in the submissions made on behalf of the Revenue. In our view, the Tribunal has correctly come to the conclusion that the aforesaid receipts would qualify for deduction under section 80-I of the Act. We would, therefore, answer the question referred to us in the affirmative and in favour of the assessee.
13. No order as to costs.