The Madras High Court recently clarified a decade-long dispute regarding the applicability of deduction available under 80IA of the income tax act for contractor companies involved in electricity distribution and maintenance sector.
The appellant, M/s. Covanta Samalpatti Operating Private limited was engaged in the activity of distribution of electricity produced by one Samalpatti power corporation private limited. Ironically, M/s. Covanta USA owns 70% shares in the aforementioned company and 100% shares in the Assessee through its Mauritius subsidiary.
The appellant pleaded that they were a contractor company, who were merely involved in the distribution of electric power and occasional maintenance for which they were paid a fee and hence, they were entitled to the deduction under section 80IA of the Income Tax Act.
Justice T.S. Sivagnanam and Justice N. Seshasayee while dismissing of the appeal in favour of the revenue department, were quoted, “the term ‘generating company’ can only refer to the SPCL and not the appellant, since the Assessing Officer, the First Appellate Authority and the Tribunal, after considering the scope of the agreement entered into between the appellant and the SPCL, clearly held that the appellant is not the owner of the power plant and that it does only maintenance work, for which, it is given a fee. Even assuming that the appellant contributed technical know-how for the purpose of generating electricity, it does so on behalf of the owner of the plant namely the SPCL. We find that the interpretation of agreement between the appellant and the SPCL, as given by the Assessing Officer, the First Appellate Authority, and the Tribunal, is perfectly legal and valid and that there is no perversity in the finding rendered by all the three Authorities. In such circumstances, we cannot re-appreciate the factual position to arrive at a different conclusion. Thus, for all the above reasons, we find that there are no merits in this appeal.”
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