[Krishak Bharati Co-op. Ltd. v. Jt. CIT, (2009) 310
ITR 400 (SC)]
The appellant, a multi-state co-operative society engaged
in the business of manufacturing urea and ammonia at its plant at Hazira, used
to supply ammonia gas through pipe connections from its plant at Hazira
directly to the heavy water plant (HWP) of the Heavy Water Board (HWB),
which is a Department of Atomic Energy. The HWP was located next to the
appellant’s plant. In fact, it was in the precincts of the appellant’s plant.
On September 14, 1994, an agreement came to be executed
between the appellant and HWB. Under that agreement, the appellant was
entitled to be reimbursed the cost of ammonia manufactured by it and supplied
to the Board and in addition thereto it was also entitled to receive service
charges and incentives from HWB.
In respect of the assessment year 1993-94, the Commissioner
of Income-tax (Appeals) held that since the receipt of service charges was not
directly connected or linked with the manufacturing activity carried out in
the industrial undertaking of the assessee, the service charges received by
the assessee from the said activity of producing heavy water cannot be
considered as profit derived from its industrial undertaking so as to qualify
for deduction u/s.80-I of the Act.
This view of the Commissioner of Income-tax (Appeals) was
affirmed by the judgment of the Tribunal as well as by that of the Delhi High
Court.
The Supreme Court at the outset, noted the brief process of
manufacturing heavy water. Heavy water is employed as a coolant in pressurised
heavy water nuclear reactors. Synthesis gas is produced at the ammonia plant
of the appellant. It contains deuterium. Synthesis gas containing deuterium is
taken to heavy water plant, where deuterium is extracted in extraction towers
and the balance synthesis gas is returned to the ammonia plant of the
appellant. The Supreme Court observed that the appellant’s plant which is
known as ammonia plant from which synthesis gas flows to HWP at Hazira owned
by the Department of Atomic Energy and which is known as Hazira Ammonia
Extension Plant (‘HAEP’). HAEP is an extension of the ammonia plant. According
to the Supreme Court this aspect was important for deciding the appeal before
it as it indicated the inseverability between the two plants.
The Supreme Court further observed that unfortunately, in
this case, the appellant herein had failed to place before the Tribunal, which
is the highest fact finding authority under the Act, the relevant contracts
and other data. In fact, the appellant had failed to produce the relevant
contracts and the connected data before the Tribunal. The Supreme Court
therefore, held that there was no fault with the impugned judgment of the High
Court. Normally, it would have dismissed this civil appeal for lack of due
diligence. However, looking to the importance of the matter and in view of
special features of the contract, Supreme Court decided to entertain the civil
appeal by grant of special leave. The Supreme Court noted that in this case,
the appellant had placed reliance only on an agreement dated September 14,
1994, for operation and maintenance of heavy water plant at Hazira. They had
failed to produce the contracts dated August 5, 1986, and July 11, 1990.
According to the Supreme Court the exact meaning of the manufacturing carried
out in the industrial undertaking of the appellant required in-depth
examination.
The Supreme Court held that as the appellant had failed to
produce relevant data before the authorities below it was permitted to do so,
subject to the payment cost of Rs.25,000 as a condition precedent to the
hearing of the appeal by the Tribunal.
