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2014 (7) TMI 554
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....f convenience, these appeals were heard together and are being disposed off by way of this consolidated order. We first proceed to dispose off the assessee's appeal in ITA no.3802/Mum./2006, for the assessment year 2002-03. 3. Ground no.1, reads as under:- "1. That on the facts and in the circumstances of the case, the learned CIT(A) was not justified in holding that the appellant is not eligible for deduction under section 80IA in respect of power unit no.2, 3, 4 and 5." 4. Brief facts, qua the issue involved are that, the assessee is a public limited company engaged in the business of manufacturing of paper and paper boards, optic fiber cables, jelly filled cables, from its units situated at Dandeli, Uttara Kannada, Mysore, Karnataka. It is also engaged in operation of wind mill at Tamil Nadu. The assessee has also set-up various units of power generation viz. 4 D.G. sets of power in unit no.1 in the assessment year 1996-97; 4 D.G. sets of power in unit no.2 in assessment year 1997-98; 2 multi-fuel power based plant of 3.8 MW and 4 MW capacity in power unit no.3 and 4 respectively which started in assessment year 1999-2000. One more multifuel based ....
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....in favour of the assessee wherein the claim for deduction under section 80IA, in respect of the power units no.1 to 5, have been respectively allowed. The compilation of the Tribunal decisions has been placed in the paper book from Page-567 to 607. He pointed out that in the Tribunal order dated 31st January 2007, for the assessment year 2001-02 in ITA no.8275/Mum./2005, this claim for deduction u/s 80IA, has been considered in respect of all the units including unit no.5, which was installed in the assessment year 2001-02. 7. The learned Departmental Representative, on the other hand, admitted that insofar as the claim for deduction under section 80IA for unit no.1 to 5 is concerned, the same are covered by the decision of the earlier year's of the Tribunal, however, he reiterated the finding and the conclusion drawn by the Assessing Officer in the assessment order i.e., these assets were taken on lease and were out sourced to different agency and no separate books of account were maintained in respect of these units. Therefore, the claim has rightly been denied by the Assessing Officer as well as learned Commissioner (Appeals). 8. We have considered the rival contentions, p....
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....business of industrial undertaking. The questions raised by the Assessing Officer have all been answered by the Supreme Court in the case of Orient Paper Mills Ltd., 176 ITR 110. This decision of the Supreme Court does not bring out the facts. It has only affirmed the decision of the Calcutta High Court in CIT v/s Orient Paper Mills Ltd., 94 ITR 73. The facts could only be found in the judgment of the Calcutta High Court. The assessee in that case owned a paper mill. It set up a plat for the manufacture of caustic soda, an essential chemical for use in the process of manufacture of paper. The assessee obtained a separate license for the manufacture of caustic soda and the plant was housed in a separate building. The Income Tax Officers in that case held that the caustic soda plant was anciliary to the main manufacturing unit and no part of caustic sold was sold to any outsider and, therefore, no relief could be claimed by the assessee under section 15C of the 1922 Act. The material produced in the plant was used for captive consumption. Before the Tribunal, it was contended by the revenue that the language used in section 15C was "profit and gain" derived from an industrial underta....
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....onsideration, if any, for such transfer is recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the profit and gain for such transferred business shall be computed as if the transfer has been made at market value as on that date. In other words, the provisions of section 80IA themselves provide an answer and give a solution where there is a captive consumption of the finished goods of the eligible units. In the light of these discussion, the order of the learned CIT(A) granting 80IA relief in respect of DG Units I, II, III and IV cannot be found fault with. The other consideration that the assessee has not operated these units by itself but got them operated through outsiders and, therefore, the assessee is not entitled for 80IA relief in our view, is not a right approach. Such consideration in our opinion, is not a relevant consideration. Keeping in view the purpose and intent of relief under section 80IA, such consideration in our opinion is not germane from the provision of section 80IA of the Act. In the light of the above, disallowing the assessee's claim for deduction under section 80IA....
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....o the assessment year 2002-03, wherein new chemical recovery boiler was installed with a cost of around Rs. 23.80 crores, which was acquired by way of lease finance from ICICI Ltd. It was commissioned on 14th July 2001. The said power unit required installation of turbines and further capacity expansion and steam generation. In the revised return of income filed on 31st March 2004, the assessee revised its claim for deduction u/s 80IA apart from its original claim under section 80JJA, in respect of power Unit-6 by way of note which reads as under:- 1. The assessee claimed that the chemical recovery boiler, which is itself an independent undertaking, is engaged in generation of power (in the form of steam) by processing biodegradable waste (wood residue) and is eligible for deduction 80JJA. This claim of the assessee was finally quantified vide its letter dated 30th December 2004 submitted during the course of assessment proceedings. 2. In case the deduction u/s 80JJA is not allowed, the assessee preferred an alternate claim for deduction of the profits of the new chemical recovery boiler u/s 80IA, and according to the assessee, the afores....
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....f the profits of new chemical recovery boiler because it was a separate undertaking for generation and distribution of power. The income shown from this unit was at a realizable value of steam of Rs. 20,34,28,080. The assessee also submitted that section 80JJA and 80IA used the term "power" and not any specific form of "power". The "power" implies source of energy and it cannot be equated with electricity alone. In support of this contention, strong reliance was placed on the decision of the Tribunal in Sial SBEC Bio Energy Ltd. v/s DCIT, [2004] 83 TTJ (Del.) 866. The learned Commissioner (Appeals), however, did not agree with the assessee's contention and held that power cannot imply sources of energy but only to electricity power as contemplated in section 80IA(4). He also distinguished the decision of Sial SBEC Bio Energy Ltd. (supra). His detail observation and the conclusion have been given in Para-10 to 22 of the appellate order. 17. Before us, the learned Counsel, Mr. Vijay Mehta, on behalf of the assessee, submitted that the language used in section 80IA(4), Explanation (iv)(a) is "generation" or "generation of power". The said section does not use the word "electricity"....
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....rtmental Representative, on the other hand, submitted that the assessee is only generating steam which is only a medium and source of energy and not power per-se. He strongly relied upon the reasoning and findings given by the learned Commissioner (Appeals). 20. We have heard the rival contentions, perused the findings of the authorities below as well as the material available on record. The assessee's claim under section 80IA, with regard to unit no.6 is that it has installed a power unit in the form of chemical recovery boiler for the generation of steam. This steam is used firstly, to rotate the turbine which generates electrical power for the assessee which is used in the paper manufacturing process and secondly, for drying of the pulp. For the first use, the steam so generated by the chemical recovery boiler has a high temperature and pressure which is then transferred through the inlet to run the turbines. This transforms to electrical energy which is supplied to paper division for running of the machines. The second use of steam is independently using it for evaporating the moisture from the paper product or for drying pulp by the assessee. On these facts, whether it can ....
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....lance the word 'power' shall mean the energy only. The energy can be of any form, be it mechanical, be it electrical, be it wind or be it thermal. The steam produced by the assessee on the principle of interpretation of statute shall only be termed as power and shall quality for the benefits available under s. 80-IA(iv). The assessee is into the business of generation of power. The generation of power takes place when bagasse is burnt in a boiler and heat generated is used to heat up the water in the boiler and generates steam. The steam so generated is at high temperature and pressure. This steam is then transferred into an inlet of steam turbine through pipes. The energy available in steam is used to rotate the turbine, the turbine then rotates the alternator which generates electrical energy. The steam after being used to rotate turbine is drawn from the turbine outlet and then finally used. In this background, the steam so generated is generated by the industrial undertaking and the receipt would be the receipt from the business of the industrial undertaking within the meaning of s. 80-IA which would qualify for this benefit. The assessee, therefor....
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....auses deal with the three different categories of the undertaking. These three types of undertakings referred to in the said sub-cls. (a), (b) and (c) are different and independent of each other. Thus while dealing (with) one sub-clause, inference need not and cannot be drawn from the other sub-clause. On perusal of these provisions, we agree with the plea of the learned Authorised Representative that case of the assessee falls in sub-cl. (a) itself and the legislative intent inferred by the AO with reference to sub-cl. (b) is superfluous, just like there is transmission or distribution lines for electricity there are transmission and distribution lines for steam too. Therefore, there is no basis whatsoever for drawing distinction between the two or a room for any confusion between the two propositions. The 'power' and 'energy' are synonymous, which can be in several types and forms, be it heat, which is steam or mechanical or electrical, wind or be it thermal. We also agree with this plea of the learned Authorised Representative that if the intent of the legislature remained to restore the application of the benefit of deduction under s. 80-IA to generation of elec....
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.... and the conclusion drawn by the Tribunal in the aforesaid decision after referring to the catena of decisions and various other provisions clearly clinches the point. Now coming to the other observation of the learned Commissioner (Appeals) that the assessee has not undertaken the generation of power in this year also, we find that the same is incorrect on facts because the assessee has already filed a certificate from the Karnataka State Boiler Inspection Department that the assessee has generated steam during the period from 3rd May 2001 to 6th May 2002 which mostly falls in this year only and the rate of quantity generated has also been mentioned. This generation of steam has been evaluated at a realisable market value by the assessee in its books of account and the assessee has also debited expenditure incurred for the generation of power. Thus, on these facts itself, it cannot be held that the assessee has not undertaken the generation of power in this year. The section provides that the assessee must begin to generate power during the period defined under the statue and the impugned assessment year definitely falls within that period. Lastly, insofar as the observation and t....
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....e consumption. Besides this, the assessee company is paying fuel escalation charges and tax @ 0.25 and 0.20 per unit respectively. Based on these, he worked out the average rate of sale of power per unit as per the provisions of section 80IA(8) @ Rs. 4.09 in the following manner:- (A) (i) Total units of electricity generated by the DG Sets Rs. 7,91,34,216 (ii) Total units of electricity generated by the Steam Turbine (Net of Inter unit transfer) Rs. 4,66,74,175 (iii) Total Units of power purchased from KEB Rs. 58,98,480 Rs. 13,17,06,871 (B) (i) Demand charges @ Rs. 150 for 6750 KVA 12 Rs. 1,25,00,400 (ii) Energy Charges (iii) For 1st 1 lakh units @ Rs. 3.25 * 12 Rs. 39,00,000 (iv) Balance units @ Rs. 3.75 Rs. 48,98,80,463 (v) Fuel Esc. Charges Rs. 3,29,58,698 (vi) Taxes & Penalty @ Rs. 0.20 per unit Nil Total Amount payable Rs. 53,92,39,561 28. He further noted that the assessee has not apportioned indirect expenses towards generation of power and held that certain expenditures have to be ....
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.... the transfer price. Taxes and duties which are levied are part and parcel of the cost per unit supplied by the Karnataka Electricity Board and it cannot be removed for the purpose of determining the market value. The assessee has supplied the power from its power unit to paper division on the basis of actual grid charges paid to the Karnataka Electricity Board. This should be the guiding factor for determining the transfer price. It has to be seen, ultimately, if the paper division had to buy the electricity from the Karnataka Electricity Board then what price they would have paid to them. This definitely would be inclusive of taxes and duty. Therefore, the same cannot be removed for determining market value of the price. 31. The learned Departmental Representative, on the other hand, submitted that this issue of transfer price has been discussed in detail by the Assessing Officer in his assessment order for the assessment year 2005-06. He also filed relevant extract of the said assessment order and pointed out that the Assessing Officer has taken the rate of electricity supplied by Tamil Nadu Government in open market; market rate at which Karnataka Electricity Board has recei....
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.... as on the date of transfer, then the Assessing Officer can make adjustments in the profits after determining the market value of such transfer. The said section in other words, empowers the Assessing Officer where the transfer of goods and services as recorded in the accounts of the eligible business does not correspond to the market value, then the profits declared for the eligible business can be adjusted by the Assessing Officer on such basis so as to ensure that the goods and services are transferred to its own unit at the market value of such goods and services. In the Explanation to section 80IA(8), the "market value" has been defined as a price that such goods or services would ordinarily fetch in the open market. Fetching of the price in the open market has to be seen from the factors which are determined through negotiation between the parties and mutual agreement as arrived at a price which is acceptable between the buyer and the seller in the open market conditions i.e., in an unrelated and uncontrolled transactions. Open market conditions refers to the conditions and price available for the public at large. In the present case, the market value of supply of electricity....
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....awn by the Tribunal. First, in the assessment year 1997-98 and 1998-99 which are in favour of the assessee and has attained finality as no further appeal has been filed by the Department and other in the assessment year 1999-2000 and 2000-01. In the subsequent orders, the Tribunal has not taken note of the decision of the earlier orders. Further, the provisions of section 80IA(8) has also not been considered for arriving at a different conclusion. Under these facts and circumstances, we are rendering our decision purely on the basis of our interpretation of statutory provisions, sans going by any earlier year precedence. Thus, in our opinion, we have to follow the provisions as contained in section 80IA(8) for determining the market price, which cannot be arrived by reducing the price by any other factors like taxes, duties, etc., as the same are embedded in the price. Thus, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.8, is treated as allowed. 34. Ground no.9, reads as under:- "9. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in holding tha....
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....nt order. The learned Commissioner (Appeals), based on the reasoning given in the assessment year 2001-02, has affirmed the findings of the Assessing Officer. 38. Before us, it has been submitted that similar issue on account of disallowance under the head "repair and maintenance" had come up for consideration before the Tribunal in the assessment year 2001-02 and 2001-02. Most of these expenses of repairs and maintenance were incurred in connection with the roads, drainages, boundary wall and buildings, platform, plant & machinery, coal yard, etc. The Tribunal, on similar set of expenditures on account of repair and maintenance, has treated it to be revenue expenditure after observing and holding as under:- "6. The next dispute in A.Y. 2000-01 relates to the expenditure on repairs and maintenance of plant and machinery, building and other assets to the extent of Rs. 95,34,778. Such sum for A.Y. 2001-02 is Rs. 1,42,15,761. The assessee has explained the nature of these expenses in the compilation filed at pages-622 to 672 of the paper book. We have heard the both the sides and have gone through the relevant orders. We find that these expenditure were incurr....
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.... "13. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in holding that expenditure in respect of Bangalore office taken on lease to the tune of Rs. 50,136/- are capital expenditure." 41. The assessee, during the assessment year 1999-2000, had acquired property at Bangalore on lease. For repair and maintenance of the new Bangalore office, it had incurred a sum of Rs. 2,14,075 during the assessment year 2002-03. The Assessing Officer, after holding it to be capital expenditure, disallowed the said expenditure. 42. The learned Commissioner (Appeals), while deciding the issue, had followed the first appellate order for the assessment year 2001-02 in assessee's own case and partly affirmed the said findings. 43. Before us, it has been submitted that this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for the assessment year 2000-01 and 2001-02 in ITA no.8243/Mum./2004, etc., order dated 31st January 2007. The relevant observations and findings of the Tribunal in this regard are as under:- "7. The next dispute relates to the disallowance of expenditur....
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....the 2000-01 and 2001-02 in ITA no.8243/Mum./2004, etc., order dated 31st January 2007, wherein the Tribunal decided the issue in the following manner:- "9. We have heard both the sides and have gone through the record. The facts of the case in brief are that the assessee has balance in CENVAT amount and PLA. In the computation of total income, the assessee had claimed deduction in respect of the said sums u/s 43B on payment basis. Relying on the decision of the Tribunal in the case of Amforge Industries (79 ITD 49), the Assessing Officer disallowed the claim on the ground that there is no liability to pay the sum in the assessment year under consideration. The learned Counsel relied on the very same decision and pointed out that the balance lying in the CENVAT account should be allowed as deduction since it is nothing but actual payment and at best the decision in the case of Amforge Industries (supra), may apply to the balance lying in the PL register. The balance in the CENVAT account is nothing but the excise duty paid on procurement of inputs and the same cannot be treated as advance. In the light of the provisions of section 43B, deduction u/s 43B should ....
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....sioner (Appeals) held that similar issue had come up before the Tribunal in assessee's own case for the assessment year 2000-01 and 2001-02, wherein the disallowance made by the Assessing Officer was confirmed. 53. Before us, the learned counsel submitted that in the earlier years, the Tribunal has set aside this issue to the file of the Assessing Officer to verify the source of funds for investment and in the set aside proceedings, the Assessing Officer accepted the assessee's contention that investments have not been made out of borrowed funds. He further submitted that in this year also, no investments have been made out of borrowed funds, therefore, there is no question of disallowance of interest. Moreover, this issue now stands covered by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Reliance Utilities and Power Ltd., [2009] 313 ITR 340 (Bom.). 54. The learned Departmental Representative, on the other hand, relied upon the order of the Assessing Officer. 55. After considering the relevant findings of the Assessing Officer and the learned Commissioner (Appeals), we find that insofar as the assessee's plea is concerned that it has not made any in....
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....rnal consumption of power from the total turnover, the same has been decided in favour of the assessee. With regard to the exclusion of sale of scrap, the same has been decided against the assessee as the Tribunal has held that it should be taken as a part of the total turnover. 60. After carefully considering the rival submissions, we find that the Tribunal, with regard to the exclusion of internal consumption of power for the total turnover, had decided the same in favour of the assessee by holding that such an inclusion in the total turnover will result into double addition, because it is already included in the computation of the profit thus, respectfully following the earlier year's order, we also hold that the internal consumption of power will not form part of the total turnover for the purpose of computing the relief under section 80HHC. Insofar as the exclusion of the scrap sale is concerned, though this issue has been decided against the assessee by the Tribunal in earlier years, however, the Hon'ble Supreme Court in its latest judgment in Civil Appeal no. 5592 of 2008, vide judgment and order dated 10th May 2014, rendered in CIT v/s Punjab Stainless Steel Industri....
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.... in this year also, following the same, we set aside the impugned order passed by the learned Commissioner (Appeals) and decide this issue in favour of the assessee holding that the same should not be excluded from the profits while computing the deduction under section 80HHC. Accordingly, ground no.19, is treated as partly allowed. 64. Ground no.20, reads as under:- "20. That on the facts and in the circumstances of the case and without prejudice to ground no.19, the Ld. CIT(A) erred in reducing 90% of the gross income, instead of 90% of the net income, received on account rent, interest and processing and other income in order to compute profits of the business for the purpose of computation u/s 80HHC." 65. It has been admitted by both the parties that insofar as the issue whether 90% of the gross income, as mentioned in ground no.19, i.e., interest income and rental income, should be reduced, or the 90% of the net income, the same is now covered in favour of the assessee by the decision of the Hon'ble Supreme Court in ACG Associated Capsules Pvt .Ltd. v/s CIT, [2012] 343 ITR 89 (SC). 66. In view of the law upheld by the Hon'ble Supreme Cour....
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....tion under other provisions so that the aggregate deduction under section 80IA and other provisions under heading "C" of Chapter-VIA do not exceed 100% of the profit of the business. The High Court further held that the contention of the Revenue that deduction allowed under section 80HHC has to be computed on the profits of the business as reduced by the profits allowed as deduction under section 80IA cannot be sustained. Thus, the High Court categorically held that both the deductions can be allowed independently so that aggregate deduction under section 80IA and section 80HHC do not exceed the 100% profit of the business. Since the decision of the Bombay High Court is binding upon us, therefore, we are not discussing the ratio laid down by the other High Courts on this issue. Thus, respectfully following the aforesaid Bombay High Court decision in Associate Capsules Pvt .Ltd. (supra), we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that the deduction under section 80IA cannot be reduced from the profit of the business for the purpose of computing deduction under section 80HHC. Thus, ground no.21 is treated as allowed. 71. Ground no.22, and....
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....een settled by the Hon'ble Supreme Court in CIT v/s Bhari Information Technology Systems Pvt. Ltd., [2012] 340 ITR 593 (SC). 77. Learned Departmental Representative, on the other hand, also admitted that this issue now stands covered by the Hon'ble Supreme Court cited above. 78. After hearing both the parties, we, respectfully following the ratio laid down by the Hon'ble Supreme Court in Bhari Information Technology Systems Pvt. Ltd. (supra), hold that the deduction claimed by the assessee under section 80HHC has to be worked out on the basis of adjusted book profit under section 115JA and not on the basis of profits of the business computed under the normal provisions of the Act, which are applicable for the computation of profit and gain of the business. Thus, the additional ground raised by the assessee is allowed. 79. In the result, assessee's appeal for the assessment year 2002-03 is partly allowed. 80. We now take up Revenue's appeal in ITA no.3752/Mum./2006, for the assessment year 2002-03, vide which, following grounds have been raised:- "(1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in h....
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....h the parties admitted before us that this issue is not only covered by the decision of the Tribunal in earlier years but it is also covered by the decision of the Hon'ble Supreme Court in CIT v/s Catapharma India Pvt. Ltd., [2007] 292 ITR 641 (SC) and host of other decisions of the Hon'ble Supreme Court as well as High Courts. Thus, in view of the law settled by the Hon'ble Supreme Court that sales tax and excise duty do not form part of the total turnover for the purpose of calculation of deduction under section 80HHC, we uphold the impugned order passed by the learned Commissioner (Appeals) as he has rightly directed the Assessing Officer to exclude the component of excise duty and sales tax component from the total turnover for the purpose of calculation of deduction under section 80HHC. Ground no.4, is thus dismissed. 88. Ground no.5, relates to loss on sale of investments considered as speculative loss in view of the provisions of Explanation to section 73. 89. The findings of the Assessing Officer on this issue are based on the findings given in the earlier assessment years. The learned Commissioner (Appeals), after relying upon the order of the first appel....
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....ein, we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow ground no.1, raised by the assessee. 95. Ground no.2, relates to allocation of indirect expenses in pro-rata basis for computing the deduction under section 80IA by reducing it from the profit of the power units. 96. After hearing both the parties, we find that this ground is similar to ground no.9 of assessee's appeal in ITA no. 3802/Mum./2006 for the assessment year 2002-03, wherein this issue has been decided against the assessee following the earlier years' order of the Tribunal. Thus, ground no.2, raised by the assessee is dismissed. 97. Ground no.3, relates to the claim of deduction under section 80IA in respect of the profit of new chemical recovery boiler as standalone power generating unit. 98. After hearing both the parties, we find that this issue is similar to ground no.5 of assessee's appeal in ITA no. 3802/Mum./2006, wherein this ground has been decided in favour of the assessee by allowing the assessee's claim for deduction under section 80IA in respect of this unit. Therefore, in view of the findings given therein, we set aside the impugned order pas....
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.... assessee's appeal in ITA no. 3802/Mum./2006 for the assessment year 2002-03, therefore, in view of the findings given therein, which is based on the decision of the Hon'ble Supreme Court in ACG Associated Capsules Pvt .Ltd. (supra), we set aside the impugned order passed by the learned Commissioner (Appeals) on this issue and allow ground no.9, raised by the assessee. 109. Grounds no.10, 11 and 12, relate to alternative claim of deduction under section 80JJA in respect of chemical recovery boiler. 110. After hearing both the parties, we find that this ground is similar to ground no.22 and 23 raised by the assessee in ITA no.2802/Mum./ 2006, wherein it has been held that the said ground is purely academic because already the claim for deduction under section 80IA, has been allowed with respect to this power unit. Thus, the grounds no.10, 11 and 12 are treated as allowed. 111. In ground no.13, the assessee has challenged the direction of the learned Commissioner (Appeals) to exclude the principal element included in these rentals. 112. After hearing both the parties, we find that, admittedly, depreciation has already been allowed on the leased assets in the assessmen....
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....visions of section 14A and the Tribunal in assessee's own case has held that if sufficient interest free funds are available, then no interest should be disallowed. 122. Before us, the learned counsel submitted that the assessee's own fund as on 31st March 2003, was Rs. 138,29,27,841, whereas the investment was made only Rs. 21,53,14,167. The learned counsel also pointed out that the learned Commissioner (Appeals) has given categorical findings that the assessee has sufficient interest free funds in the form of sales tax deferred loan. Thus, it cannot be held that the borrowed funds have been utilised for the purpose of making the investment. Thus, in view of the decision of the Jurisdictional High Court in Reliance Utilities and Power Ltd. (supra), the claim for deduction cannot be disallowed on the basis of notional disallowance of interest. 123. The learned Departmental Representative, on the other hand, relied upon the order of the Assessing Officer. 124. After hearing both the parties, we find that insofar as the fact that the assessee had huge surplus funds as stated above, which were interest free and also there were availability of interest free funds in the form o....
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....ts of the business and, accordingly, ground no.5, raised by the Revenue stands dismissed. 129. Ground no.6, relates to netting of interest income while computing deduction under section 80HHC. 130. After hearing both the parties, we find that this ground is similar to the ground no.20, raised by the assessee in its appeal in ITA no.3802/Mum./2006, and in view of the findings given therein, the ground no.6, raised by the Revenue stands dismissed. 131. In ground no.7, the Revenue has challenged that the deduction under section 80IA should not be reduced from the profit of the business for the purpose of computing deduction under section 80HHC. 132. After hearing both the parties, we find that this ground is similar to ground no.21, raised by the assessee in its appeal in ITA no.3802/ Mum./2006, wherein we have followed jurisdictional High Court decision. Consistent with the view taken therein, ground no.7 raised by the Revenue stands dismissed. 133. Ground no.8, relates to inapplicability of the provisions of Explanation to section 73. 134. After hearing both the parties, we find that this ground is similar to ground no.5, raised by the ITA no.3752/Mum./2006, for th....
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....t for the purpose of computation of deduction under section 80IA. 145. After hearing both the parties, we find that this issue is similar to ground no.9 raised by the assessee in its appeal in ITA no.3802/Mum./2006, and ground no.2, raised by the assessee in ITA no.5269/Mum./2008. Thus, consistent with the view taken therein, ground no.2 raised by the assessee stands dismissed. 146. Ground no.3, relates to disallowance of deduction under section 80IA in respect of profit of the chemical recovery boiler as a stand alone power generating unit. 147. After hearing both the parties, we find that this issue is similar to the issue raised in ground no.5, raised by the assessee in its appeal in ITA no.3802/Mum./2006 and ground no.3, raised assessee in ITA no.5269/Mum./2008. In view of the findings given therein, ground no.3, raised by the assessee is treated as allowed. 148. Ground no.4, is an alternate claim made under section 80IA in respect of integrated power unit no.6, on the ground that the Assessing Officer has not quantified the deduction under section 80IA. 149. After hearing both the parties, we find that this ground is similar to grounds no.6 and 7 raised by the a....
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....n therein, ground no.9, is treated as allowed. 158. Ground no.10, 11 and 12, relate to denial of deduction under section 80JJA, in respect of profits of the chemical recovery boiler. 159. After hearing both the parties, we find that these grounds are similar to the grounds no.22 and 23 raised by the assessee in its appeal in ITA no.3802/Mum./2006, and grounds no.10, 11 and 12 raised by the assessee in its appeal in ITA no.5269/Mum./2008. Consistent with the view taken therein, the grounds no.10, 11 and 12 raised by the assessee are treated as allowed. 160. Ground no.13, relates to exclusion of principal element included in lease rentals. 161. This ground is similar to ground no.13, raised by the assessee in its appeal in ITA no.5269/Mum./2008, and in view of the findings given therein, we dismiss this ground as infructuous. 162. In the result, assessee's appeal for the assessment year 2004-05 is partly allowed. We now take up Revenue's appeal in ITA no.5708/Mum./2008, for the assessment year 2004-05. Grounds raised by the Revenue, read as under:- "1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in hold....
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....2006. In view of the findings given therein, grounds no.2 and 2.1, raised by the Revenue are treated as dismissed. 166. Ground no.3, reads as under:- "3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the capital expenditure of Rs. 45,32,321/- as revenue expenditure ignoring the nature and magnitude of expenditure incurred under each head of expenditure on parts of machinery, expenditure on rewinding & reconditioning of machinery and renovation of guest houses." 167. After hearing both the parties, we find that this ground is similar to grounds no.10, 11 and 12, raised by the assessee in its appeal in ITA no.2802/Mum./2006, therefore, consistent with the view taken therein, ground no.3, raised by the Revenue is treated as dismissed. 168. Ground no.4, reads as under:- "4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the disallowance of expenditure made u/s. 14A. 4.1 On the facts and in the circumstances of the case and in law, the findings of the CIT(A) that the assessee had sufficient fund available as interest....
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....ch have been invested for the purpose of earning dividend income and also the administrative expenses, the disallowance made by the Assessing Officer should be upheld. 172. After carefully considering the rival submissions, we find that insofar as the disallowance of interest is concerned, the same cannot be made under section 14A, on the facts of the present case. The assessee has, admittedly, huge interest free surplus funds, which is evident from the fact that it has its own funds of Rs. 149.29 crores. Besides this, it also had sum of Rs. 63.20 crores on account of retention of sales tax difference in this year. In view of such huge surplus funds, the investment to the tune of Rs. 49 crores that too major portion is coming from the earlier years, it can be said to be made out of the surplus funds only. Thus, according to the principles laid down by the Bombay High Court in Reliance Utilities and Power Pvt. Ltd. (supra), no disallowance on account of interest can be made. 173. Insofar as the disallowance on account of administrative expenses are concerned, we find that the Assessing Officer has taken all the administrative expenses for apportioning the disallowance on pro-r....
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.... Ground no.7, reads as under:- "7. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the AO to include the profits from generation of power claiming deduction u/s 80-IA for the purpose of ded. u/s 80HHC." 179. After hearing both the parties, we find that this ground is similar to ground no.21, raised by the assessee in its appeal in ITA no.3802/Mum./2006, and other similar ground in the assessment year 2003-04. Consistent with the view taken therein, ground no.7 raised by the Revenue stands dismissed. 180. Ground no.8, reads as under:- "8. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that explanation to sec. 73 would not be applicable." 181. After hearing both the parties, we find that this ground is similar to ground no.5, raised by the Revenue in its appeal in ITA no.3752/Mum./2006. Consistent with the view taken therein, ground no.8 raised by the Revenue stands dismissed. 182. Ground no.9, reads as under:- "9. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in directing the ....
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....e, the agreement with the labours was entered on 20th April 2004 i.e., after the closing date of Balance Sheet of 31st March 2003. Thus, the assessee was entitled to make the entry in this year and to claim such an incremental wages even for the period of three months ie., 1st January 2003 to 31st March 2003 in this year only. Thus, we do not find any reason to deviate from the findings / conclusion given by the learned Commissioner (Appeals). Thus, ground no.9 raised by the Revenue stands dismissed. 188. Ground no.10, reads as under:- "10. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in excluding excise duty, sales tax, turnover tax from the total turnover of the business of the assessee while determining total turnover for the purpose of computing deduction u/s 80HHC ignoring the amended provisions of Section 14A of the I.T. Act, 1961." 189. This ground is similar to ground no.4, raised by the Revenue in its appeal in appeal in ITA no.3752/Mum./2006, for the assessment year 2002-03. Consistent with the view taken therein, ground no.10, raised by the Revenue stands dismissed. 190. Ground no.11, reads as under:- ....
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.... standalone power generating unit." 198. This ground is similar to ground no.5 raised by the assessee in its appeal in ITA no.3802/Mum./2006, and ground no.3, raised by the assessee in its appeal in ITA no.5269/Mum./2008. Consistent with the view taken therein, ground no.1, raised by the assessee is allowed. 199. Ground no.4, reads as under:- "4. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified in denying the alternate claim of the appellant for deduction u/s 80IA in respect of integrated Power Unit No.6 and thereby erred in not directing the A.O. to quantify deduction u/s 80IA available in respect of the said unit." 200. This ground is similar to ground no.6 and 7 raised by the assessee in its appeal in ITA no.3802/Mum./2006, and ground no.4, raised by the assessee in its appeal in ITA no.5269/Mum./2008. Consistent with the view taken therein, ground no.1, raised by the assessee is treated as allowed. 201. Ground no.5 and 6, reads as under:- "5. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in holding that expenditure on repairs of....
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.... arising from the above ground has been dealt by us while dealing ground no.9 raised by the Revenue in its appeal no.5708/Mum./2008 wherein we have allowed the incremental wages in the assessment year 2004-05. Since we have allowed the part of incremental wages in the assessment year 2004-05, in this year, the said issue becomes infructuous. Hence, ground no.10, stands dismissed. 207. The assessee has also raised additional ground, which reads as under:- "On the facts and in the circumstances of the case and in law the learned CIT(A) ought to have held that the interest levied by the Assessing Officer u/s 234B and 234D is bad in law and in violation of principles of natural justice. The appellant prays that no interest under section 234B and 234D should be levied when the addition is made due to retrospective amendment in the Act and the same may please be deleted." 208. The learned counsel for the assessee submitted that the disallowance on account of dividend distribution tax and deferred tax has been confirmed by the learned Commissioner (Appeals) while computing the book profit under section 115JB. The assessee has not preferred any appeal on this di....
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....ce Act, 2008, with retrospective effect from 1st April 2001. The financial year ending in this case was 31st March 2007 and by this time no amendment was brought in the statute fastening any liability or expanding the scope of book profit as stipulated in the Explanation. At the time of making the advance tax, the assessee cannot be expected to do impossibility i.e., "Lex Non Cogit Ad Imposibilia". Once the assessee cannot foresee the expansion of the scope of book profit by a subsequent amendment, he cannot be held to be defaulter for the payment of advance tax, when at that time no such provision existed in the statute. This precise issue has been dealt and discussed in detail by the Hon'ble Calcutta High Court in Emami Ltd. (supra), wherein, it is held as under:- "In the case before us, the last date of the relevant financial year was 31st March, 2001 and on that day, admittedly, the appellant had no liability to pay any amount of advance tax in accordance with the then law prevailing in the country. Consequently, the appellant paid no advance tax and submitted its regular return on 31st Oct., 2001 within the time fixed by law wherei....
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....ra), we find that in that case the question was whether interest under s. 234B of the Act could be charged on the tax calculated on the book profit under s. 115JA and in other words, whether advance tax was at all payable on book profits under s. 115JA of the Act. The Supreme Court answered the said question in the affirmative and further held that the provisions of interest on default as provided in ss. 234B and 234C would also apply. We have already pointed out that Mr. Bajoria, at the very outset, conceded that the said decision should be applied for answering the first question formulated in this appeal against his client. In our opinion, the said decision is not relevant for considering the second and the third questions as to whether an assessee can be said to be a defaulter in payment of advance tax if he had no liability to make payment of such tax on the last date of a financial year preceding the relevant assessment year as such question did not arise in the said case before the Supreme Court. It appears that the learned Tribunal has not at all considered the aforesaid aspect as to the liability of the assessee to make payment....
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....ind that the issue arising out of the aforesaid grounds is similar to the issue raised in grounds no.1, 2 and 3 by the Revenue in its appeal in ITA no.3752/Mum./2006, for the assessment year 2002-03. In view of the findings given therein, grounds no.1, 1.1 and 1.2, raised by the Revenue are dismissed. 214. Ground no.2, reads as under:- "2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in dismissing the method adopted by the AO in determining the transfer price of power while quantifying the amount eligible for education u/s 80IA of the Act ignoring the provisions of Section 80IA(8) and 80IA(10) of the I.T. Act, 1961. 2.1 On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the notional sale price of electricity generated from DG set, at inflated rate (i.e. the rate at which the company has bought from Karnataka Electricity Board) in contravention of provisions of section 80IA(8) and 80IA(10) read with Explanation 1 which provides for adopting the market value as a price which assessee's power generated could fetch in the market restricted by the Governm....
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....us, the learned counsel submitted that in this year, the Assessing Officer has only disallowed interest and no administrative expenses has been disallowed unlike the appeal for the assessment year 2004-05 in ITA no.5708/ Mum./2008. He submitted that like in the earlier years also, the assessee had huge surplus funds in the form of share capital, reserve surplus aggregating to Rs. 164,66,62,800, as on 31st March 2005, whereas investment stood at Rs. 44,74,99,000. Thus, the decision of the Hon'ble Jurisdictional High Court in Reliance Utilities and Power Pvt. Ltd. (supra) will apply to the facts of the present case. 220. The learned Departmental Representative, on the other hand, relied upon the order of the Assessing Officer. 221. After considering the rival submissions, we find that this issue has already been adjudicated by us in the appeal for the assessment year 2002-03 and 2004-05. It is undisputed fact that the assessee has huge interest free and surplus funds in this year also as compared to the investment which stood as on 31st March 2005. In such a situation, there cannot be a notional disallowance of interest under section 14A. The principle laid down by the Juri....
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....ly for each unit. 225. The learned Commissioner (Appeals) held that the Assessing Officer has erred in quantifying the short term capital gain on sale of plant and machinery of power unit no.1 even though the block of machinery of the assessee as a whole was still in existence. 226. The learned Departmental Representative relied upon the order of the Assessing Officer, whereas, the learned counsel, on the other hand, supported the order of the learned Commissioner (Appeals). 227. We have heard the rival submissions and perused the relevant findings of the authorities below. Provisions of section 50 provides for special provision for computation of capital gain in the case of depreciable assets. The relevant provisions of section 50, read as under:- "50. Special provision for computation of capital gains in case of depreciable assets Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income- tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the followi....
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....he company himself mentioned in the Audit report." 230. Before us, the learned counsel submitted that the Assessing Officer has held that the unutilised MODVAT credit has to be added in the closing stock in view of the provisions of section 145A. the Assessing Officer has increased the value of closing stock, however, he did not make any corresponding adjustment in the opening stock. Before the learned Commissioner (Appeals), it was submitted that in the computation, the assessee has dully made the adjustment in the opening and closing stock and also the other adjustment in purchases and sale. Based on this factum, the learned Commissioner (Appeals) deleted the said addition as the net effect was "nil". He also submitted a copy of the Tribunal order in MIRC Ltd., in ITA no.849/Mum./2010, order dated 13th March 2013, in support of his contention. 231. The learned Departmental Representative relied upon the order of the Assessing Officer. 232. We have heard the rival contentions and perused the relevant findings of the authorities below. We agree in principle that corresponding adjustment has to be made in the opening stock as held by the Jurisdictional High Court in CIT v/s....