Delhi High Court Rejects Income Tax Dept's Appeal Raising ₹42 Crore Demand On NTPC Subsidiary
Kapil Dhyani
20 April 2025 6:45 PM IST
The Delhi High Court dismissed an appeal preferred by the Income Tax Department raising a demand of ₹42,16,04,786/- from a wholly owned subsidiary of National Thermal Power Corporation Limited (NTPC).
The demand was raised in view of alleged income from sale of fly ash, transferred to it by NTPC.
As per factual matrix of the case, the fly ash was transferred to the assessee in view of Environment Ministry's notification requiring all thermal plants to utilize the fly ash generated from the power plants in specified manner, in this case for building material and construction activities.
Assessee claimed that the proceeds collected from sale of fly ash were credited to a separate earmarked account [fly ash utilisation account] and the entire amount was used exclusively for the purpose of utilization of the fly ash for development of infrastructure and/ or for specified purposes.
The Department on the other hand contended that Assessee had recovered part of its general expenses from the sale proceeds of fly ash and therefore, could not claim that it had not earned any income.
The Assessee then produced all relevant material to establish that it had not included the expenses that were debited to the fly ash utilization fund as a part of its general expenses and thus same were not claimed as a deduction from the Assessee's taxable income.
As the ITAT had ruled in favour of the assessee, Revenue moved the present appeal.
At the outset, the High Court perused a copy of schedules to Assessee's final account, which established that the expenses booked by the Assessee in its nominal accounts were reduced to the extent of the expenses that were transferred to the fly ash utilization fund.
It further noted that part of the funds realized from sale of fly ash was in fact used for specified activities and the infrastructure or facilities that were developed did not belong to the Assessee.
Moreover, the balance amount available in the fly ash utilization fund was made over to NTPC.
In this backdrop a division bench of Justices Vibhu Bakhru and Tejas Karia held, “there is no question of the Assessee having earned any income. The fly ash did not belong to the Assessee, but to its holding company – NTPC. The Assessee had only sold the fly ash and utilized part of the funds as mandated and made over the balance funds to NTPC. In the given facts, we do not find any infirmity with the decision of the learned ITAT that the Assessee had not earned any income on account of sale of fly ash, which was provided by NTPC.”
It relied on Commissioner of Income-Tax v. New Horizon Sugar Mills Pvt. Ltd. (2000) where the Madras High Court in similar circumstances noted that the Assessee was not free to utilize the sale proceeds of fly ash as the same was required to be used for specified purposes, which did not result in the Assessee acquiring any asset.
As such, Revenue's appeal was dismissed.
Appearance: For the Appellant : Mr Shlok Chandra, senior standing counsel with Ms Naincy Jain and Ms Madhavi Shukla, Advocate For the Respondent : Mr Ved Jain and Mr Nischay Kantoor, Advocates.
Case title: Pr. Commissioner Of Income Tax-4, New Delhi v. NTPC Vidyut Vyapar Nigam Ltd
Case no.: ITA 260/2024