ITAT affirms deduction under section 80IA for power division, directs recalculation of steam value.

The ITAT affirmed the CIT(A)'s decision, allowing the assessee's power division the deduction under section 80IA of the IT Act. The ITAT directed the Assessing Officer to recalculate the value of steam sold to the Sugar Division based on provided records, partially allowing the Revenue's appeal for statistical purposes. The judgment was delivered on 05/02/2014.

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Issues Involved:
1. Entitlement of the assessee to the benefit of deduction under section 80IA of the IT Act for its power division.
2. Deletion of addition related to the assessee's claim of sale of steam by the Power Division to the Sugar Division.

Issue-wise Analysis:

1. Entitlement to Deduction under Section 80IA:

The primary issue revolves around whether the assessee's power division qualifies as an independent unit eligible for deduction under section 80IA of the IT Act. The Revenue contended that the captive steam generation plant is an integral part of the sugar division and not a new unit for power generation as per section 80IA. The Assessing Officer denied the deduction, arguing that the new undertaking merely continued the earlier business of producing steam and electricity without forming a new unit.

The CIT(A), however, allowed the deduction, referencing ITAT Hyderabad's decisions in the assessee's own case for AY 2007-08 and 2008-09, which concluded that the power plant was a distinct and independent unit. The ITAT upheld the CIT(A)'s decision, noting that the premises and technology of the power division were distinct from the sugar unit, and the new undertaking was established with new machinery and separate licenses. The ITAT emphasized that the new unit was not formed by splitting up the old unit and was recognized by government authorities, including the Electricity Regulatory Authority.

2. Deletion of Addition Related to Sale of Steam:

The second issue concerns the deletion of an addition related to the sale of steam by the Power Division to the Sugar Division. The Assessing Officer argued that steam is not considered power under section 80IA and is merely a by-product, assigning it a value of nil. Consequently, the income of the sugar division was increased by the value of the steam.

The CIT(A) directed the Assessing Officer to calculate the value of the steam produced as per the ITAT's directions for AY 2008-09. The ITAT upheld this direction, referencing its previous decisions where it was determined that only the actual profit from steam, which was Rs. 11.43 lakhs, should be treated as ineligible for the deduction under section 80IA. The ITAT instructed the Assessing Officer to determine the value of the steam produced and transferred to the sugar unit based on the cost and production records provided by the assessee.

Conclusion:

The ITAT concluded that the assessee's power division is eligible for the deduction under section 80IA, affirming the CIT(A)'s decision. Additionally, the ITAT remitted the issue of the value of steam back to the Assessing Officer for recalculation based on the records furnished by the assessee, allowing the Revenue's appeal partly for statistical purposes. The judgment was pronounced in the open court on 05/02/2014.

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