TaxTMI 
TaxTMI 
2004 (3) TMI 342
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.... the action of the AO in not accepting that steam is one of the forms of power and, therefore, income from generation of steam is eligible for deduction under the provisions of s. 80-IA(4)(iv), which is applicable to an undertaking engaged in generation of power. 3. In any case and without prejudice to the above, the learned CIT(A) should have held that the income derived from supply of steam is income derived from an undertaking engaged in generation of power and is thus eligible for deduction under s. 80-IA(4)(iv) of the Act. 4. In any case and without prejudice to the other grounds, even if it is assumed (though not admitted) that receipts from steam are not eligible for deduction under s. 80-IA, the learned CIT(A) should have held that the said receipts ought to be reduced from the cost of generation of power for the purposes of computing the income of the undertaking. 5. In any case and without prejudice to the other grounds, the learned CIT(A) has also erred in upholding the action of the AO in not correctly estimating the expenses incurred against receipts eligible for deduction under s. 80-IA, in as much as, since the entire expenses incurred by the appellant have bee....
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....ricity Board. Needless to say that the supply to both the concern and the UPSEB had the same rate. Apart from the receipts generated through the supply of power, the assessee also received some amount on account of supply of steam to SBEC Ltd. The assessee claimed deduction under s. 80-IA for these receipts on the grounds that they pertain to the supply of power as according to the assessee the steam so supplied is a power and falls within the parameters of s. 80-IA of the IT Act. On these receipts also the assessee claimed 100 per cent deduction. Apart from this, the assessee in the return of income filed did not deduct the allowable depreciation as per the IT Act. The Revenue felt that the assessee has purposely not claimed depreciation just to inflate its non-taxable income. In this background the investigations were carried out by the AO. The first issue which the AO took and ultimately was confirmed by the CIT(A) was with regard to the claim of depreciation. The AO felt that as the assessee is obliged to claim depreciation and he having not done so, the AO issued a questionnaire to the assessee as to why the depreciation be not first deducted from the income before arriving at....
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....rd. The learned counsel contended that in view of the ratio of the Supreme Court in Mahendra Mills' case it was optional for the assessee to claim the same or not to claim the same. The learned counsel contended that there is no dispute left now that this Explanation is prospective and for this he relied upon the judgment of the Kerala High Court in CIT vs. Kerala Electric Lamp Works Ltd. (2003) 183 CTR (Ker) 182 : (2003) 129 Taxman 549 (Ker), wherein this particular Explanation has been held to be prospective. After referring to various judgments, our attention was drawn to para 13 of the said report appearing at pp. 557 and 558 of the report which is in the following terms: "13. In this connection the Finance Bill, 2001 clearly spells out that this amendment will take effect from1st April, 2002and will, accordingly, apply in relation to the asst. yr. 2002-03 and subsequent years. Clause 21 of the Finance Bill seeking to amend s. 32 of the IT Act relating to depreciation is reproduced as hereunder: 'Sub-cl. (a) seeks to insert a new Expln. 5 in cl. (ii) of sub-s. (1) of the said section so as to clarify that the provisions of sub-s. (1) of s. 32 shall apply whether or not ....
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....ve around the fact as to whether the steam is a form of power and thus falls within the ambit of s. 80-IA or not. These three grounds are interrelated and once the answer to the said question whether steam is an energy and one form of power or not, is given either in the affirmative or in the negative, then the aforesaid grounds shall find an answer automatically. 9. To adjudicate the said grounds, it is necessary to revert to a few facts available on the record. Undoubtedly, the assessee is into the business of generation of power. For the generation of power, the assessee uses bagasse and water. For generating power the bagasse is burnt in the boiler and the heat generated is used to heat up the water in the boiler to raise steam. The steam so generated has high temperature and pressure. The steam is then transferred to the inlet of steam turbine through the pipes. The energy available in the steam is used to rotate the turbine. The rotation of the turbine then rotates the alternator which generates electrical energy. To this extent there is no dispute as the Revenue has not contradicted these facts or process. The dispute is that the steam after being used to rotate the turbine....
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....t power is an energy and it can be any form of energy, be it electrical, thermal, wind or any other form energy which shall qualify and be eligible for deduction under s. 80-IA(iv) of the IT Act. The assessee also contended that any form of energy produced or generated and/or generated and distributed shall fall within the ambit of expression "power" used in s. 80-IA(iv) and the Revenue so generated shall qualify for the benefit of s. 80-IA. 13. In this background the assessee contended that the steam so taken out from the turbine which is low pressure steam and is used in various mechanism for producing sugar is a form of energy and if it is a form of energy then any receipts so received would qualify for deduction under s. 80-IA. The assessee contended that the word power is not defined in the IT Act. Since it is not defined in the IT Act, then first and the foremost that can be done is to take recourse to the dictionary meaning. According to the assessee, the dictionary meaning given to the power is the energy and once the power means the energy, then it can be any form of energy. The assessee contended that steam is definitely an energy, then any receipts so generated would qu....
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....ssessee placed reliance on another judgment of the Kerala High Court reported in 47 STC 68 (Ker) for the proposition that in this case the Court has treated steam as power. The other judgment to which reliance was placed by the learned counsel was the one reported in AIR 1962 SC 29 wherein also, the steam has been held to be a form of power. 15. After having referred to certain judicial precedents, the learned counsel contended that in the IT Act there earlier used to be a s. 80E which dealt with deductions in respect of profit and gains from specified industries in the case of certain companies. According to the learned counsel, the said section stands deleted by the Finance Act, 1967. According to the learned counsel, the reference to this section is made for the limited purpose that in s. 80E the legislature intended the word generation or distribution of electricity or any other form of power. According to the learned counsel, when the legislature intended the word power to be used in conjunction with electricity, they have in their wisdom used it so, but in s. 80-IA, the word electricity having not been used, the power is to be read as a whole in its wider perspective and the....
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.... Departmental Representative also contended that transfer of low pressure steam from the boiler to evaporate water from the cane juice through the medium of steam is transfer of heat energy only and in this process of evaporation of water from cane juice no work is done by the steam and, therefore, no power is generated or distributed. 17. We have heard the parties on this issue and taken ourselves through the record and find that the argument of the learned Departmental Representative which have been referred to above and placed before us through the note of9th March, 2004, supports the case of the assessee. 18. When we put to test the arguments raised by the learned Departmental Representative and compare the work done by the steam with that of electrical energy, we find that both of them are capable of producing same end results. Examining further this concept of producing sugar, we say that for producing sugar there could be deployment of electrical energy also but the assessee instead of deploying electrical energy has put to use the thermal energy. If the assessee has given preference to one form of energy over the other and both are capable of producing the same results, t....
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....hat the steam is a form of power". Once the AO has himself admitted that there are pronouncements, which uphold the factum of steam to be a form of power, we fail to understand as to how could the authorities below form a different opinion contrary to the pronouncements of the Courts. 22. We must say here itself that before the authorities below there were judicial pronouncements holding steam to be a form of power. The dictionary meaning of the word power were also before the authorities below and if the authorities below were not satisfied with the explanation of the assessee they should have sought for some expert advice. The authorities being not experts in the field and not having taken any expert advice, then in that case they could not ignore the judicial pronouncements explaining the meaning of steam and also the pronouncements equating the steam with power. 23. The authorities below having not done so, the order passed by them holding steam not to be power cannot be sustained. The view we take finds a support from the judgment of the apex Court in the case of Saraswati Industrial Syndicate vs. CIT (1999) 152 CTR (SC) 470 : (1999) 237 ITR 1 (SC). 24. Examining the reason....
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....ning of the word power so given in the Webster's andOxforddictionary in earlier part of this order. It is also a settled position that the meaning of such words as emerging from cognate statute are also indicative of the meaning of those words and it was in this background we have referred to some judgments. 27. We may, here itself, refer to the judgment of the apex Court in the case of State of Orissa vs. Titagur Paper Mills Co. Ltd. (1985) TLR 2948 where the apex Court has observed that "dictionary meaning of a word cannot be looked at where the word has been statutorily defined or judicially interpreted, but where there is no such definition or interpretation, the Court may take the aid of dictionaries to ascertain the meaning of the word in common parlance bearing in mind that a word is used in different senses according to its context and a dictionary meaning gives all the meanings of a word, and the Court has, therefore, to select the particular meaning which is relevant to the context in which it has to interpret the word". 28. To the similar effect is the judgment of the Kerala High Court reported in the case of CIT vs. Casino (P) Ltd. (1973) 91 ITR 289 (Ker), wherein the....
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....taking. According to the learned Departmental Representative, there has to be a direct nexus between the source and the industrial undertaking which is not in the present case. 32. To the said arguments of the learned Departmental Representative, the learned counsel for the assessee contended that the judgment in the case of Pandian Chemicals was under s. 80HH and not under s. 80-IA. After having said so, the learned counsel contended that the scope of income under s. 80HH is very narrow than that of s. 80-IA. The learned counsel would further contend that under s. 80HH the income of an assessee has to be derived from an industrial undertaking while under s. 80-IA the income of the assessee includes any profits and gains derived by an industrial undertaking or enterprise from any business referred to in sub-s. (4). The word "any business appearing in s. 80-IA according to the assessee is very important and in this background, the learned counsel contended that the scope of income under s. 80-IA is much more wider than the one under s. 80HH. After having said so, the learned counsel contended that the receipts so received by the assessee from the generation of steam would qualify ....
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.... on this account also. 35. In view of the discussion above, we feel that the steam is a form of energy and is thus power that would qualify for the deduction under s. 80-IA of the IT Act. 36. Before we part with, we feel that the observations of the authorities below that it is only the electrical form of energy which qualifies for deduction under s. 80-IA, with reference to the provisions of Electricity Act, was not correct especially when the legislature has not used the word electricity, the Courts have invariably been defined the steam to be a form of power and equated the same with power or at par with power. In view of the above, we have no hesitation in allowing ground Nos. 2-4 of the appeal. 37. This brings us to ground No. 5 of the appeal through which the assessee has made a grievance that the learned CIT(A) has erred in upholding the action of the AO in not correctly estimating the expenses incurred against receipts eligible for deduction under s. 80-IA, as, according to the assessee the entire expenses incurred by the appellant have been incurred for the production of steam, the same should be considered as expenses against eligible receipts. On this ground both the ....
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....rim arrangement. It is also on the record that this fact was duly disclosed in the audited accounts attached to the balance sheet. In view of certain objections raised by the PICUP, the interim arrangement was subsequently revised and under the revised arrangement it was agreed that instead of the rates already agreed to, the payment would be made @ 75 per cent metric ton for thermal energy instead of Rs. 236 per metric ton. In view of the new interim arrangement it was decided that the excess amount amounting to Rs. 3,82,59,074 though included in the gross receipt for the year would not form part of the income and was, therefore, reduced from the gross receipt for the next year, i.e. 2001-02. The assessee also undisputedly has brought this fact in its balance sheet as well. 40. During the course of assessment proceedings, this fact was brought to the notice of the AO through the letter of the assessee and it was submitted to the AO through the said letter that income for the year ending31st March, 2000be reduced to this extent. The reverse entry is made in the subsequent year. The assessee tried to impress upon the AO that the tax has to be levied on the real income and it was th....
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....ginal agreement. That apart, the Revenue has not doubted the genuineness of these agreements. No material worth its name has been placed by the Revenue before, which would contradict or dissuade us to hold that this agreement of revision was not genuine and was prospective and not retrospective. The Revenue has also not disputed stakes of the PICUP and also that the agreements inter se were to be approved by PICUP. The Revenue has also not brought any material on the record to contradict the stand of the assessee that it was after the intervention of the PICUP which had stakes in the other company that the original interim arrangement was revised and that too with retrospective effect. The assessee has in the subsequent years reversed the entries also. In this background, we feel that the said receipt never accrued to the assessee and, therefore, the said amount could not be added to the income of the assessee for the year under consideration. 46. The law on this issue that it is only that income which had accrued to an individual that can be subjected to taxation and the income which has not accrued cannot be taxed. We may here itself refer to the judgment of the apex Court in th....
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....rred by admitting additional evidence contrary to the provisions of r. 46A and directing the AO to include a sum of Rs. 2,07,48,226 in the gross receipt eligible for deduction under s. 80-IA. During the course of hearing, learned Departmental Representative while addressing us on this ground contended that the CIT(A) has entertained additional evidence in contravention of r. 46A. The learned Departmental Representative would contend that the admission of this evidence has caused prejudice to the case of the Revenue. 52. To the arguments raised by the learned Departmental Representative, learned Authorised Representative contended that the CIT(A) had not admitted any additional evidence. That apart, it was contended by the learned Authorised Representative that no prejudice has been caused to the Revenue because of the fact that the CIT(A) had obtained a remand report from the AO. The learned Authorised Representative contended that the said remand report finds a place at pp. 44-54 of the paper book wherein the AO has himself admitted that though no new facts or new issues have been raised by the assessee in its written submissions dt.8th July, 2003before the CIT(A) and hence the a....