By TIOL News Service

CHENNAI, APRIL 22, 2016: THE issue is - Whether assessee need not always be owner of power plant for availing Sec 80IA benefits. YES is the answer.

Facts of the case

The assessee is a Company. It filed return for relevant AY. During the assessment process, AO found that the assessee claimed deduction u/s 80IA of the Act in respect of generation of power from a unit which was set up by some other company with whom assessee had entered into an agreement for operating the power plant. The AO held that assessee was not eligible for deduction u/s 80IA of the Act as it was not the owner of the power plant. Assessee filed appeal before the CIT(A), who by placing reliance on the order of this Tribunal in assessee's own case for the previous AY, in I.T.A.No. 2058/Mds/2013 dated 29.5.2015, found that the assessee was entitled for deduction u/s 80IA of the Act. Aggrieved Revenue filed appeal before Tribunal.

After hearing parties, Trbunal held that,

++ admittedly, there was an agreement for licence between the assessee and one M/s Kanishk Steel Industries Ltd. This agreement of licence empowers the assessee-company to operate the power generating unit owned by M/s Kanishk Steel Industries Ltd. On identical set of facts, in assessee's own case for assessment year 2009-10, this Tribunal in I.T.A.No. 2058/Mds/2013 dated 29.5.2015, found that the assessee need not be the owner of the power plant for claiming deduction u/s 80IA of the Act;

++ as rightly clarified by the ld. Representative for the assessee, 'works contract' means execution of a work by using the raw material supplied by a third party on payment of a commission. The manufactured goods shall be supplied to the person who is giving the works contract. In the case before us, the entire power plant was established by M/s Kanishk Steel Industries Ltd. The assessee was given the licence to operate and generate electricity by an agreement dated 26.4.2008. The consideration of the agreement is supply of 9 million units of power generated in every financial year. If the production of electricity is less than 9 million units in any financial year then the assessee shall compensate to M/s Kanishk Steel Industries Ltd. by an amount equal to the value of such shortfall of electricity on the basis of the rate on which Tamilnadu Electricity Board supplies electricity. Even though there is no express agreement in respect of the electricity generated over and above 9 million units in every financial year, there is no obligation on the part of the assessee to supply the same to M/s Kanishk Steel Industries Ltd. In other words, the assessee may use the electricity generated over and above 9 million units in any financial year in accordance with its discretion. The agreement for licence does not provide for payment of any commission to the assessee by M/s Kanishk Steel Industries Ltd. In those facts and circumstances, this Tribunal is of the considered opinion that it is not a case of works contract as contended by the DR. It is a simple case of a licence to operate the power plant set up by M/s Kanishk Steel Industries Ltd. Since the income of the assessee includes profits and gains derived from generation of power, this Tribunal is of the considered opinion that in view of the judgment of Madras High Court in the case of M/s K.A Infrastructure Pvt. Ltd., the assessee is eligible for deduction u/s 80IA of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.

(See 2016-TIOL-587-ITAT-MAD)