Karnataka High Court
The Principal Commissioner Of ... vs Shri.S.S. Bakkesh on 13 October, 2025
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ITA No. 72 of 2020 C/W
ITA No.37/2020
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13th DAY OF OCTOBER, 2025
PRESENT
THE HON'BLE MR. JUSTICE D K SINGH
AND
THE HON'BLE MR. JUSTICE VENKATESH NAIK T
INCOME TAX APPEAL NO.72 OF 2020
C/W
INCOME TAX APPEAL NO.37 OF 2020
IN ITA NO.72 OF 2020
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF
INCOME-TAX, CIT(A)
CENTRAL CIRCLE
C.R. BUILDING
QUEEN'S ROAD
BENGALURU-560 001.
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-1
PRESENT ADDRESS:
DCIT, CENTRAL CIRCLE-1(3)
C.R. BUILDING, QUEENS ROAD
BENGALURU-560 001.
Digitally signed by
MOUNESHWARAPPA
NAGARATHNA
...APPELLANTS
Location: High Court
of Karnataka
(BY SRI SUSHAL TIWARI, ADVOCATE)
AND:
SHRI S.S. BAKKESH
PROP: BAKKESH RICE INDUSTRIES
LOKIKERE ROAD
DAVANAGERE.
...RESPONDENT
(BY SRI S. PARTHASARATHI ALONG WITH
MS. JINITA CHATTERJEE, ADVOCATES)
***
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ITA No. 72 of 2020 C/W
ITA No.37/2020
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A OF
THE INCOME TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND
SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU IN M.P.NO.266/BANG/2018 (IN ITA
NO.229/BANG/2013) DATED 21/06/2019 FOR ASSESSMENT YEAR
2008-2009 ANNEXURE-E CONFIRMING THE ORDER OF THE
APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY
THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-
1(3), BENGALURU AND ETC.
IN ITA NO.37 OF 2020
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF
INCOME-TAX, CIT(A)
CENTRAL CIRCLE
C.R. BUILDING
QUEEN'S ROAD
BENGALURU-560 001.
2. THE DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-1
PRESENT ADDRESS:
DCIT, CENTRAL CIRCLE-1(3)
C.R. BUILDING, QUEENS ROAD
BENGALURU-560 001.
...APPELLANTS
(BY SRI SUSHAL TIWARI, ADVOCATE)
AND:
SHRI S.S. BAKKESH
PROP: BAKKESH RICE INDUSTRIES
LOKIKERE ROAD
DAVANAGERE.
...RESPONDENT
(BY SRI S. PARTHASARATHI ALONG WITH
MS. JINITA CHATTERJEE, ADVOCATES)
***
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ITA No. 72 of 2020 C/W
ITA No.37/2020
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260A OF
THE INCOME TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND
SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU IN M.P.NO.265/BANG/2018 (IN ITA
NO.226/BANG/2013) DATED 21-6-2019 FOR ASSESSMENT YEAR
2007-2008 ANNEXURE-E CONFIRMING THE ORDER OF THE
APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY
THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-
1(3), BENGALURU AND ETC.
THESE INCOME TAX APPEALS, HAVING BEEN HEARD AND
RESERVED ON 08.09.2025 COMING ON FOR PRONOUNCEMENT OF
JUDGMENT, THIS DAY, VENKATESH NAIK T. J., PRONOUNCED THE
FOLLOWING:
CORAM: HON'BLE MR. JUSTICE D K SINGH
and
HON'BLE MR. JUSTICE VENKATESH NAIK T
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE VENKATESH NAIK T)
These Tax Appeals are filed under Section 260A of the
Income Tax Act, 1961 (for short, 'The Act') by the Revenue
challenging the order passed by the Income Tax Appellate
Tribunal, Bengaluru, in MP Nos.265 and 266/Bang/2018 (in ITA
Nos.226 and 229/Bang/2013) dated 21.06.2019 for the
Assessment Years 2007-08 and 2008-09 vide Annexure-E,
whereby the appeals filed by the Revenue came to be
ITA No. 72 of 2020 C/W
dismissed. The subject matter of the appeals pertains to the
Assessment Years 2007-08 and 2008-09.
2. ITA No.72/2020 and ITA No.37/2020 were ordered to
be admitted on 20.11.2020 and 07.10.2020 respectively, on
the following common substantial questions of law:
1. Whether on the facts and in the circumstances of
the case and in law, the Tribunal is right in
dismissing the Miscellaneous Petition filed by
the Revenue without adjudicating upon the
issue of the correctness of the deduction
determined by the assessing officer under
Section 80JJA vis-à-vis the deduction claimed
under Section 80 JJA by the assessee?
2. Whether on the facts and in the circumstances of
the case, the order passed by the Tribunal is
perverse in nature as the Tribunal has not
considered grounds urged in miscellaneous
petition, even when there is mistake apparent
on record, which attracts Section 254 of the
Act?
3. The facts in issue in both the appeals are that:
The assessee is an individual deriving income under the
head 'business' and engaged in the business of manufacturing
ITA No. 72 of 2020 C/W
of rice as well as receiving milling charges of paddy and he is
also a trader in seeds, fertilizers, pesticides and sugar etc. He is
also engaged in the business of manufacturing of bio-
fertilizers and bio-fuel pellets in respect of which, the
assessee has claimed a deduction under Section 80 JJA of the
Act. The return of income, for the Assessment years 2008-2009
and 2007-08 was processed under Section 143(1) of the Act.
The scrutiny assessment was completed by the Assessing
Officer under Section 143(3) of the Act, at a total assessed
income of Rs.15,40,92,700/- for the Assessment Year 2007-08
in ITA No.37/2020 and Rs.17,98,98,400/- for the Assessment
Year 2008-09 in ITA No.72/2020. While doing so, the Assessing
Officer disallowed the claim for deduction under Section 80 JJA
in respect of bio-fuel pellets. However, he allowed deduction in
respect of bio-fertilizers, composite unit to the extent of
Rs.2,85,15,180/- and made several other disallowances like
sundry creditors of Rs.18,00,000/-, interest under Section 14A
of the Act at Rs.50,55,701/-, disallowance under Section 68 of
the Act for Rs.15,70,650/- and treated sale proceeds of bio-
compost of Rs.9,73,02,533/- as unaccounted.
ITA No. 72 of 2020 C/W
4. Being aggrieved by the above disallowance, the
assessee preferred two appeals before the Commissioner of
Income Tax (Appeals), Hubli. The Commissioner of Income
Tax(Appeals) Hubli, confirmed the addition in respect of loan to
creditors on the ground that the assessee had failed to produce
any creditors for examination and accordingly, dismissed the
appeals. Being aggrieved by the order of the Commissioner of
Income Tax (Appeals), the assessee preferred ITA
No.225/Bang/2013 and the Revenue preferred appeals in ITA
Nos.226 & 229/Bang/2013 before the Income Tax Appellate
Tribunal, Bengaluru.
5. The Income Tax Appellate Tribunal, Bengaluru
dismissed the appeals filed by the Revenue for the Assessment
Years 2007-08 and 2008-09, and allowed the appeals filed by
the assessee in-part and observed that, the CIT(A) passed
very cryptic order without giving any elaborate reasoning.
Further, the claim under Section 80JJA of the Act cannot be
denied to the assessee, as the same claim was allowed by the
Assessing Officer in the previous years, on the same set of
facts and thus, the Tribunal upheld the order of CIT(A) on this
count.
ITA No. 72 of 2020 C/W
6. Being aggrieved by the impugned order, the Revenue
preferred the appeal before the learned Division Bench of this
Court in ITA No.988 of 2017 and same was withdrawn by the
Revenue with a liberty to the Appellants/Revenue to file
appropriate Miscellaneous petition before the learned Tribunal.
Hence, the Revenue filed Miscellaneous Petition Nos.265 and
266/Bang/2013 before the Income Tax Appellate Tribunal,
Bengaluru, in turn, the Tribunal dismissed the Misc. Petitions
filed by the Revenue.
7. Being aggrieved by the order passed by the Tribunal,
the Revenue preferred these appeals.
8. The learned counsel Sri Sushal Tiwari, for the
appellants/Revenue vehemently contended that, the Tribunal
committed an error in dismissing Misc. Petitions filed by the
Revenue without adjudicating the issue of correctness of the
deduction determined by the Assessing Officer under Section
80JJA of the Act, vis-à-vis, the deduction claimed under Section
80JJA of the Act by the Assessee even when the issue raised by
the Revenue in Miscellaneous petitions were not dealt by the
Tribunal in the proper perspective. The order passed by the
Tribunal is perverse in nature, as the Tribunal has not
ITA No. 72 of 2020 C/W
considered the grounds urged in the Misc. Petitions, even when
there is mistake apparent on face of the record, which attracts
the provisions of Section 254 of the Act. Hence, learned counsel
prayed to allow the appeals.
9. The learned counsel for the respondent
Sri S. Parthasarathi along with Ms. Jinita Chatterjee,
vehemently contended that the Tribunal has correctly analysed
the fact and the provisions of the Income Tax Act and has
correctly arrived at the finding, which do not call for any
interference by this Court. Thus, he prayed to dismiss the
appeals filed by the Revenue.
10. Hence, it is just and necessary to analyse Section
80JJA of the Income Tax Act, 1961:
80JJA. Deduction in respect of profit and gains from
business of collecting and processing of bio-
degradable waste. - Where the gross total income of an
assessee includes any profits and gains derived from the
business of collecting and processing or treating of bio-
degradable waste for generating power or producing bio-
fertilizers, bio-pesticides or other biological agents or for
producing bio-gas or Section 51, for " producing bio-gas,"
making pellets or briquettes for fuel or organic manure,
there shall be allowed, in computing the total income of
ITA No. 72 of 2020 C/W
the assessee, Inserted by Act 21 of 1998, Section 35 a
deduction of an amount equal to the whole of such profits
and gains for a period of five consecutive assessment
years beginning with the assessment year relevant to the
previous year in which such business commences, Section
51, for " a deduction from such profits and gains of an
amount equal to the whole of such income, or five lakh
rupees, or five lakh rupees, whichever is less".
11. Thus, Section 80 JJA of the Income Tax Act provides
a deduction for business involved in collecting and processing
bio-degradable waste. The deduction is intended to promote
eco-friendly practises and sustainable waste management in
India.
12. The deduction is available to Tax payers, whose gross
total income includes profits and gains from a business of
collecting, treating or processing bio-degradable waste. The
eligible activities include, generating power, producing bio-gas,
bio-fertilizers and bio-pesticides, making fuel pellets and
briquettes and producing organic manure. A deduction equal to
100% of the profits derived from the eligible business can be
claimed. The deduction can be claimed for five consecutive
assessment years, starting from the Assessment year in which
the business commences.
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ITA No. 72 of 2020 C/W
13. Conditions for claiming the deduction
a. Income source. -The profits and gains from the bio-
degradable waste business must be included in the assessee's
gross total income.
b. Waste utilisation -The deduction applies to profits
from the collection and processing of bio-degradable waste.
c. Purpose -The waste must be used for a qualifying
purpose, such as, generating energy and creating organic
fertilizers.
14. In the instant cases, the Assessing Officer disallowed
the claim for deduction under Section 80JJA of the Act in
respect of bio-fuel pellets. Hence, it is just and necessary to
analyse the meaning of bio-fuel pellets.
15. Bio-fuel pellets are dense, uniformally sized,
cylindrical fuel pellets made from compressed organic materials
like wood waste, agricultural residue and other bio-mass. These
small, hard pellets serve as a sustainable and renewable
alternative to fossil fuels, used for generating heat in residential
and industrial applications like stoves, furnaces and boilers.
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ITA No. 72 of 2020 C/W
16. Section 80JJA of the Income Tax Act, 1961 is a
provision that allows deduction of profits and gains derived
from the business of collecting and processing of bio-
degradable waste for the generation of power, producing bio-
fertilizers and bio-pesticides, generating bio-gas, making
pellets or briquettes for fuel and producing organic manure.
This deduction is allowed for a period of five consecutive
assessment years beginning with the assessment year relevant
to the previous year in which such business commences.
17. In order to claim the benefit of deduction under
Section 80JJA of the Act, the assessee has to satisfy the
following conditions:
1. Gains from biodegradable business: Section
80JJA of the Income Tax Act provides benefits to
businesses that have a component of gains from
biodegradable waste utilisation in their books of
account. This section allows for a tax deduction of
profits that are derived through the collection and
processing of biodegradable waste or through
biodegradable waste treatment. Efficient use of
organic manure or biodegradable fuels for the
generation of energy and generation of bio fertilisers
and biopesticides can also be considered eligible for
the 80JJA deduction benefit.
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ITA No. 72 of 2020 C/W
2. Gross total income: This income generated through
the collection, treatment or processing of
biodegradable waste should be a part of the
assessee's (business) gross total income. Without
this, the business may not be able to avail of the
Section 80JJA Income Tax Act benefit on their
business gains.
3. Assessment years to be considered: Section
80JJA entitles the business to earn through
biodegradable waste collection, processing, and
treatment for five consecutive assessment years. This
period of five consecutive assessment years would
start from the assessment year in which the
assessee's business had commenced.
4. Limitation on income for deduction: The 80JJA
deduction is only applicable to the assessee's total
income. Other aspects of their business income, such
as a specific business component or section in
isolation, are not eligible under the Section 80JJA
benefit.
5. Limitation on kind of business: The tax deduction
under Section 80JJA is applicable for income through
the collection, processing and treatment of
biodegradable waste. This tax deduction is not
applicable to other business types.
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ITA No. 72 of 2020 C/W
6. Proof of eligible businesses: Since only businesses
earning through the collection, processing, and
treatment of biodegradable waste are considered,
there would be specific proof required for the same.
Subject to certain provisions, it requires proof of
eligible business activity and proof of income earned
through such activity.
7. Extension for assessment years: The assessee can
claim the 80JJA deduction only for a period of five
consecutive years. This tax deduction cannot be
extended or carried forward for further assessment
years.
8. Necessary documents and evidence to be
furnished: As mentioned in point number six above,
the tax deduction benefit is only eligible for specific
business activities. Therefore, the business is
mandated to furnish necessary documents and
provide evidence about the eligible business activities.
The business also needs to show proof of expenses
incurred on eligible business activities for which the
profit was earned.
18. Section 80JJA is a hallmark provision that aims to
support the effective utilisation of biodegradable waste in India.
It does this by incentivising businesses with tax deductions
equal to the eligible business income or value up to
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ITA No. 72 of 2020 C/W
Rs.5.00 lakhs. Thus, Section 80JJA serves the goal of building
an ecologically sustainable future.
ANALYSIS:
19. We have perused the appeal memos and the
impugned order. The only contention raised by the Revenue in
these appeals as well as in the miscellaneous petitions before
the Tribunal, is that the Tribunal has not adjudicated the issue
regarding the quantum of deduction permissible to the
Assessee under Section 80JJA of Income Tax Act, thus a
mistake has crept in the order of the Tribunal and the same has
to be rectified.
20. The principles of consistency in Income Tax
proceedings have been applied in plethora of decisions. The
claim under Section 80 JJA of the Act cannot be denied to the
Assessee as the same claim was allowed by the Assessing
Officer for the previous years on the same set of facts.
21. In another matter i.e., in ITA No.225/2013, the
Assessee has raised seven grounds and amongst it, ground
Nos.1, 2, and 7 were declared as general in nature and hence
do not require any adjudication. Insofar as ground No.3, the
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ITA No. 72 of 2020 C/W
Assessee challenged the order of the Commissioner of Income-
Tax(Appeals) confirming the addition of sundry creditors made
under Section 68 of the Act. Hence, the assessee contended
that the CIT(A) without considering the evidence, has filed
confirmation letters. Infact, payments were subsequently made
through banking to the sundry creditors, thus, CIT(A) ought not
to have upheld the addition. It shows that the CIT(A) failed to
take cognizance of the confirmations and evidence filed
substantiating existence of sundry creditors. Thus, Income Tax
Tribunal remitted ground No.3 to the Assessing Officer for de
novo assessment.
22. Insofar as ground No.4 is concerned, the addition of
Rs.50,55,706/- made under provisions of Section 14A of the
Act, it is the contention of the Assessee that, the advances to
sister concerns were made out of funds without using borrowed
funds. Accordingly, the Tribunal remitted the matter in respect
of ground Nos.4, 5 and 6.
23. Insofar as the contentions raised by the Revenue that
the Assessee is not entitled for any deductions in respect of the
Assessment years 2007-2008 and 2008-2009, however, the
Revenue cannot take such contentions as the quantum of
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ITA No. 72 of 2020 C/W
deduction allowable to the assessee under Section 80JJA of the
I.T. Act, the same is not tenable under law. All the grounds
raised by the Revenue for these two years in respect of
allowability of deduction permissible to Assessee under Section
80JJA of I.T. Act are without merit.
24. Therefore, in order to ascertain whether the assessee
is eligible to avail deductions for the Assessment years
2007-2008 and 2008-2009, the Appellate Tribunal remanded
the matter to the Assessing Officer for fresh consideration,
which, in our opinion, is just and proper. Therefore, there was
no error in the order of the Tribunal, to invoke Section 254 of
the Income Tax Act, 1961, which empowers the Tribunal to
pass and amend the orders on appeals brought before it. The
remand order passed by the Tribunal clearly demonstrates that
a fair opportunity would be given to both Revenue and the
Assessee. Thus, no grounds are made out to rectify any
mistake in the impugned order passed by the Tribunal.
In the result, both the appeals filed by the Revenue are
dismissed.
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ITA No. 72 of 2020 C/W
No order as to costs.
In view of disposal of the main appeals, pending
interlocutory applications, if any, stands disposed off.
Sd/-
(D K SINGH)
JUDGE
Sd/-
(VENKATESH NAIK T)
JUDGE
*mn/-
