TaxTMI 
TaxTMI 
2014 (1) TMI 1289
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....assessee has raised numbers of elaborate grounds in each relevant assessment year, vide letter dated 20-06-2013, the assessee has furnished concise grounds of appeal for each assessment year, the same are reproduced herein under for reference: Assessment Year 2007-08 "1. The learned C.I.T.(A) erred in holding without giving opportunity to the assessee that the assessee will be entitled to deduction u/s. 80IA (4) on the profit that remains after reducing the interest expenditure of Rs.29,70,234/-. 2. The learned C.I.T.(A) erred in holding that the assessee had computed the excess value of LP steam byRs.56,71,681/- and thereby claimed the excess deduction u/s 80IA (4) of the Act. The computation made by the C. I. T. (Appeals) resulting into excess of Rs.56,71,681/- is incorrect. 3. The C. I. T. (Appeals) erred in holding that 80IA (4) relief will be reduced by deemed brought forward loss. 4. The C. I. T. (Appeals) erred in enhancing income chargeable to tax by Rs.41,61,167/- by holding that the assessee has diverted expenditure to first half of F. Y. 2006-07. 5. The C. I. T. (Appeals) erred in enhancing income chargeable to tax by Rs.1,16,03,400/- by holding that th....
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....of LP steam by Rs.6,48,81,794/- and thereby claimed the excess deduction u/s 80IA (4) of the Act. The computation made by C. I. T. (Appeals) resulting into excess of Rs.6,48,81,794/- is incorrect. 2. The C. I. T. (Appeals) erred in holding that 80IA (4) relief will be reduced by deemed brought forward loss. 3. The C. I. T. (Appeals) erred in enhancing income chargeable to tax by Rs.2,43,27,693/- by holding that the assessee has claimed excess coal consumption in Unit III to reduce income chargeable to tax. 4. The C. I. T. (Appeals) ought to have granted telescoping effect of giving the deduction of added expenditure from added income. 5. The C. I. T. (Appeals) ought to have granted depreciation on furniture at the residence of the Managing Director." 3. The above concise grounds of the assessee are further consiced and summarized issue-wise herein below for adjudication:- ISSUE NO.1:- Disallowance of proportionate Interest expenses for the loan extended by the assessee to its 80IA Unit while computing the profit yearned by the 80IA unit. (Grounds No. 1 for A. Y. 2007-08 and 2008-09). ISSUE NO.2:- Disallowance of deduction u/s 80IA (4) of the Act towards the cla....
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....t. When the matter cropped up before the learned CIT(A), the learned CIT(A) subscribed to the ratio adopted by the learned AO, however, re-worked the disallowance of interest at Rs.29,70,234/- and Rs.11,09,755/- for the assessment year 2007-08 and 2008-09 respectively. 4.1 The learned AR argued before us stating that the assessee had substantial capital which is much more than the loan extended to the 80 IA units and, therefore, the learned AO was not justified in disallowing the proportionate interest while computing profits of the 80 IA units. The learned AR had, further, relied in the decision of the case in CIT Vs Reliance Utilities and Power Ltd., reported in 313 ITR 340, wherein it was held that where the assessee has own funds or interest free funds then the presumption would be that such loans extended by the assessee would be from its own funds/interest free funds. Further, on perusing the balance sheet of the assessee for the assessment year 2007-08 and 2008-09, it is apparent that the share capital and reserves and surplus of the assessee aggregated to Rs.37,52,71,973/- and Rs.43,15,86,742/- respectively. Therefore, following the ratio laid down by the Hon'ble High Co....
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....ation of the cost of LP steam supplied to the ancillary units of the assessee. The learned DR pointed out to the grounds raised by the revenue in its appeal that "steam" is not "power" for claiming deduction u/s 80 IA of the Act as the intention of the legislature was to provide deduction to the industrial undertaking producing electricity. The learned DR further argued that all the decisions of the higher judiciaries cited by the assessee and relied on by the learned CIT(A) were with respect to sale of steam produced by Captive Power Plants as by-products, but, in the assessee's case, the LP steam produced was not by-product of the Captive Power Plant but the co-gent plant of the assessee was specially designed to produce LP steam for the consumption of its ancillary units. Since this issue in the Revenue's appeal that "Steam" is not "Power", is held in favour of the Revenue on page 22 Para 19.1 herein below, this ground raised by the assessee has become infructuous and, therefore, it is dismissed as such. 6. ISSUE NO.3:- Set off of loss worked out by the AO in co- gen power plant against the profit of paper unit. (Ground No.3 for assessment years 2007-08 & 2008-09, Ground N0.2....
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....uisite materials will be produced before the Revenue promptly for the speedy disposal of the case. 7.3 After hearing both the sides and perusing the materials on record, we find that the assessee had not co-operated with the learned CIT(A) during the appellate proceedings satisfactorily by producing all the relevant materials. However, the learned CIT(A), after detailed examination of the issue based on the available documents, arrived at the conclusion that the balance cost attributed to HP Steam used in electricity generation in Unit-III would be Rs.41,61,167/-, for which, addition has to be made. In this regard, we are of the view that the casual attitude of the assessee requires to be discouraged for not co-operating before the Revenue. However, in the interests of justice, we remit the matter back to the file of the learned CIT(A) to look into the issue afresh, after obtaining remand report from the learned AO. Further, we direct the assessee to co- operate with the revenue in its proceedings by producing all the relevant documents and details of information generated by the ERP solutions/SAP for speedy disposal of the case. It is ordered accordingly. 8. ISSUE NO.5:- Enh....
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.... from added income (Ground No.6 for AY 2007-08 and AY 2008-09, ground No.4 for AY 2009-10 and 2010-11):- This issue is directly related to the issue No.5 stated herein above which we have remitted back to the file of the learned CIT(A). The learned AR argued before us stating that telescopic benefits to the corresponding Unit should be given while shifting the expenditure for coal consumption from one Unit to the other. Since the issue with respect to allocation of coal consumption to all the units discussed in issue No.5 supra is remitted back to the file of learned CIT(A), this issue of telescoping becomes infructuous and dismissed as such. However, we must say that this issue has to be looked into keeping in view of the overall accounting procedures and method followed by the assessee coupled with the actual facts of the case Viz., total purchases of coal made by the assessee, actual consumption of coal by each unit and closing stock of coal by maintenance of coal consumption log book for all the relevant Units by taking help of the ERP solutions installed by the appellant company. It is held accordingly. 10. ISSUE NO.7:- Granting depreciation on furniture provided at the res....
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....emand report from the learned AO and with further directions as specified herein above in Para 7.3. 12. In the result, all the appeals of the assessee are partly allowed for statistical purposes as indicated above. (Revenue's appeal) ITA No.390, 391, 392 and 393/Ahd/2012 (A.Y.: 2007-08, 2008-09, 2009-10 and 2010-11) 13. The surviving common grounds for all the relevant assessment years mentioned herein-above (except the figures) raised by the revenue are taken from the assessment year 2007-08 and they are reproduced herein under for reference:- "1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,00,000/- made on account of inflation of purchases without considering the fact that the purchase parties were not maintaining the stock register and their books of accounts were rejected at the time of assessment u/s 153C of the I. T. Act. 2. The Ld. CIT(A) has erred in law and fact in deleting the interest disallowance of Rs.1,75,27,159/-:- a) On the basis of additional evidences submitted before him and without giving opportunity to the AO in contravention of the provisions of Rule 46A of the I. T. Rules. b) Without considering the....
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....iolating the provisions of rule 46A of the I. T. Rules. b) by directing him to charge the sale rate of electricity generated at the rate charged by the GEB from other customers at the rate of Rs.5.32 per unit instead of Rs.2.62 per unit adopted by the AO. c) by relying upon various judgments of the tribunals which stated that sale rate should be the rate at which electricity is sold by GEB to other consumers, in spite of the fact that these judgments did not apply in this case, since the AO has adopted the sale rate of electricity to its own unit at the average rate at which co-gen plants in Gujarat sell the power to the GEB. d) by not considering the fact that the rate of electricity generation @ Rs.5.32 by the GEB includes the generation cost, the distribution cost, the transmission cost and other subsidy costs and these costs are not borne by the assessee while generating power from its co-gen plant and therefore, the Ld. CIT(A) ought to have taken the rate of generation @ Rs.2.62 per unit as adopted by the AO." 14. In addition to the above common grounds, the revenue in its appeal in IT(SS) A No.393/Ahd/2012 for the assessment year 2010- 11 has raised the following ....
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....dingly, this ground raised by the revenue is dismissed for all the relevant assessment years. 18. Ground No.2 Deleting the interest disallowed by the learned AO since interest bearing loan was extended to 80IA Units of the assessee: - Since, we have allowed the ground raised by the assessee in the assessee's appeal, even for the partial disallowance sustained by the learned CIT(A) on the same issue, which is discussed at Issue No.1 (supra page 6 Para 4), this ground raised by the revenue has become redundant, and, therefore, we dismiss the same for all the relevant assessment years. 19. Ground No.3 (a) to 3 (e):- In the ground No.3, sub-clause (a) to (e) relates to maintenance of books of account:- Learned DR argued in support of the learned AO and re iterated the stand of the AO. On the other hand, the learned AR submitted before us that all the relevant records were maintained in SAP/(ERP) by the assessee and agreed for the case to be remitted back in order to provide one more opportunity to the assessee to present all the relevant documents, books of account maintained in SAP etc. Considering the submission of the learned AR, and facts and circumstance of the case, we also....
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....rporation Limited (ITA No.1026/MDS/2005) which held that deduction is only when separate business undertaking is put for generation and distribution of power and the same is not available when business enterprise is simply putting up captive power plant to meet in-house requirement." (We find that this decision cited by the learned AO cannot be sustainable in the light of the decision rendered by the Hon'ble Madras High Court in the case Tamilnad Petroproducts Ltd. Vs ACIT reported in 338 ITR 643 wherein it was held that "profits or gains" derived by in-house consumption would also be eligible for deduction u/s 80IA of the Act and accordingly, we reject this argument of the learned AO.) 19.2 The learned CIT(A) allowed the claim of the assessee stating that steam is power and, therefore, eligible for deduction u/s 80 IA of the Act relying on the following decisions:- (i) DCIT Vs Maharaja Shree Umaid Mills Ltd., 120 TTJ 711 (ii) DCW Limited, 132 TTJ 442 (iii) Sial SBEC Bioenergy Ltd, 83 TTJ 886 19.3 The learned DR agreed before us that in the above mentioned judgments, it has been held that for the generation of steam in co- generation plant, benefit of section 80IA....
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....80 IA of the Act with respect to sale of steam because Low Pressure Steam generated by the assessee's Unit is neither residue by-product nor power as construed by the decisions of the higher judiciary and the Act, but it is a product specially manufactured for the consumption of paper unit of the assessee. 19.4 The learned AR stoutly opposed to the contention of the learned DR and cited the decision of the case CIT Vs TANFAC Industries Ltd., Tamilnadu Petroproducts Ltd. Vs ACIT - 13 Taxmann.com 139 (Mad. HC) and the other cases mentioned supra, wherein it was held that the value of steam used for captive consumption by the assessee is eligible for deduction u/s 80IA of the Act. It was, therefore, prayed that deduction may be granted u/s 80 IA of the Act for the value of the steam produced by the assessee. 20. After hearing both the sides and perusing the materials on record, we find that this issue needs consideration. The representative of the assessee company had himself admitted before the learned CIT(A) that the co-generation plant of the assessee is not a simple captive power plant, but it is co- generation plant where Low Pressure Steam is not generated by default, but ....
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....ed as by-product of plant or generation of electricity." The steam produced by the plant in this case was by-product. Moreover, the speech of the Hon'ble Finance Minister was not before the ITAT, Jaipur Bench or before the other benches of the Tribunal for consideration where-in the Hon'ble Finance Minister had expressed the intention for introducing the relevant amendments to section 80 IA of the Act, the relevant part of the speech is reproduced (at the cost of repetition) herein-below for reference:- "57. Electricity is a critical input for the future growth of our economy. I therefore propose to introduce a five-year tax holiday in respect of profits and gains of new industrial undertakings set up anywhere in India for either generation or generation and distribution of power. The five-year tax holiday will begin from the year of generation of power. 58. The five-year tax holiday, in both these cases, will be part of section 80-IA of the Income-tax Act. At the end of the five-year period, these units will be entitled to the existing deduction under section 80-IA for the remaining period." (ii) DCW Ltd. Vs Addl. CIT - 37 SOT 322. The relevant portion of the judgment ....
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....f industrial undertaking after a certain date, in regard to the captive consumption of gas in a chemical manufacturing undertaking. Therefore, it was pointed by the learned DR that the facts of the case are different from the facts of the relevant case before the bench for consideration and, hence, do not have any precedent value. (v) Tamilnadu Petroproducts Ltd. Vs ACIT - 13 Taxmann.com 139 (Mad. HC):- In this case, cited by the learned AR, learned DR stoutly argued stating that the issue was not as to whether steam could be considered as power, but the issue was whether the notional profits on account of power generated from the assessee's own captive power plant and utilized for its own business are entitled for deduction u/s 80 IA of the Act, wherein the Hon'ble Madras High Court held that "the captive power plants are entitled for such deduction." The learned AR could not controvert to the submission of the learned DR and further the decision of the case was not produced before us. 22. From the above, it is evident that in all the above mentioned cases the Tribunal allowed the benefit of section 80 IA of the Act with respect to the residue by-product of steam generate....
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....ng to both the parties. 23. Ground No. 4(a):- Since, we have remitted back the issue whether steam could be considered as power for the benefit of section 80 IA of the Act; this issue of allocation of cost is pre-mature at this stage for adjudication. However, from the facts of the case if such allocation is warranted, then, as agreed by the learned AR, the same can be done so, by drawing information from the specifications of the co-generation plant and the relevant meter recordings embedded in the plant and with the various other records and data maintained by the assessee manually and as well as by SAP, needless to mention that the adaptability of the data contained in the SAP/ERP will further depend on the reliability of the systems/software audit conducted. 24. Ground No.4 (b) to (d):- The revenue is aggrieved by the order of the learned CIT(A) for adopting the rate of electricity produced by the assessee at Rs.5.32 per unit as against Rs.2.62 per unit adopted by the learned AO. Though various contentions were raised by the learned DR on this issue as pointed out by the learned AR, this issue is squarely covered by the decision of the jurisdictional Hon'ble Gujarat High ....