TaxTMI 
TaxTMI 
2014 (7) TMI 554
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.... 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 power plant of 4.04 MW capacity in power unit n....
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....uction 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, perused the relevant findings of the authorities below a....
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.... 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 undertaking. Unless the profits arose by the sale of the product o....
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....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 on the ground made out by the Revenue cannot stand. The Asse....
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.... 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 aforesaid Chemical recovery boiler is itself eligible for deduction as a new unit generatin....
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....eration 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". This precise issue has also come up for consideration before the Tribunal in the following ....
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....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 be held that the said undertaking on a standalone basis has been set-up for generation of power or not wi....
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....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, therefore, succeeds on this account also. The 'observations of the authorities below that it is only the electrical f....
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....he 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 electricity only, it would have been specifically so worded by using the connotation 'electrical power' only rath....
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....ous 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 the conclusion of the Assessing Officer, which are based on similar reasons as given for Unit-1 to 5, the same is also n....
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....sed 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 incurred for such activity which is borne by the paper division. He also noted that the learned Commissioner (Appeals), in the appellate order, for the assessment year 1999-2000 has held that the common expenses incur....
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....essee 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 received the power from various other parties. From the said order, he pointed out that the Tamil Nadu Government was supplying electricity in the open market @ Rs. 2.55 per unit. In Maharashtra, the private producers were selli....
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....er 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 by power unit of the assessee to the paper division of the assessee has to be seen from the angle, if the paper unit has to purchase the electricity directly from the Karnataka Electricity Board (as both the power units as w....
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....00 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 that for computing deduction u/s 80IA, the prorated indirect expenses of the company should be reduced from the profit of the Power Unit." 35. After hearing both the parties, we find that the present issue has been decided by the Tri....
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....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 incurred in connection with the roads, drainages, boundary walls and building, concert platform, plant and machinery, coal yard, bamboo yard etc. The revenue has treated all these expenses as capital in nature whereas, the assessee claims it as revenue ....
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..... 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 expenditure in respect of new Bangalore office taken on lease. The amount so spent for A.Y. 2000-01 is Rs. 36,68,591 and for A.Y. 2001-02 is Rs. 4,29,052. We have heard both the sides and have gone through the record. The assessee had taken office on lease and to make it....
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.... 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 be allowed on payment basis irrespective of the year in which the liability is incurred. As a result, we restore matter to the file of the Assessing Officer with a direction to give reasonable opportunity to the assessee to submit the relevant evidences." 49. In view of the....
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....ribunal 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 investment which has yielded exempt income out of borrowed funds but rather has been made out of accumulated / surplus funds, has not been rebutted by the Revenue. The assessee had also placed on record that the sum of Rs. 41.38 crores on account of retention of sales tax in terms of deferment of....
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....idering 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 Industries has held that sale proceeds of scrap cannot be included as part of the total turnover for the purpose of section 80HHC. The Hon'ble Supreme Court has discussed this exclusion of the scrap sales from the turnover in a very detail manner. Thus, respectfully following the aforesaid judgment of the Hon&....
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.... 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 Court in ACG Associated Capsule Pvt. Ltd. (supra), we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that only 90% of the net amount of receipts in the nature as given in clause-1 of Explanation (baa) to section 80HHC should be reduced from the profits. In the present case, the receipts, wh....
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....iness 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 23, read as under:- "22. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in disallowing the claim of deduction u/s 80JJA in respect of Chemical Recovery Boiler. 23. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not....
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....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 holding that Captive Power Consumption from generating set would be eligible for deduction u/s. 80IA." 81. The learned Counsel for the assessee, at the outset, submitted before us that insofar as the issue of disallowance under section 80IA with regard to unit no.1 is concerned, the same is purely academic as there was a loss in this unit and the assessee has n....
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....'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 appellate order for the assessment year 2000-01 and 2001-02, held that the Explanation to section 73 is not applicable in the present case. 90. At the outset, the learned counsel submitted that this issue stands covered by the decision of the Tribunal in assessee's own case for the assessment year 2000-01 and 2001-02. 91. After considering the material available on record, it is seen t....
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....round 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 passed by the learned Commissioner (Appeals) on this issue and allow ground no.3, raised by the assessee. 99. Ground no.4, relates to alternative claim for deduction under section 80IA in respect of integrated power unit no.6. 100. After hearing both the parties, we find that this ground is similar to ground no.6 and 7 of assessee's appeal in ITA no. 3806/Mum./ 2006. Since the claim for deduction under ....
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....tive 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 assessment year 1996-97 and 1997-98, hence, this ground becomes purely academic. Consequently, ground no.13, is treated as dismissed as infructuous. 113. In the result, assessee's appeal for the assessment year 2003-04 is partly allowed. We now take up Revenue's appeal in ITA no.5707/Mum./2008, for the assessment year 2003-04. 114. Ground no.1, 1.1 and 1.2, relate to disallowance of deduction under section 80IA on captive power generati....
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....hat 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 of sales tax deferred loan, the same has not been disputed. The assessee's investment which has generated dividend income is far less than the availability of interest free funds. Thus, there can be no presumption that borrowed funds were utilized for making the investment, so as to warrant any kind of disallowance of interest. Therefore, in view of the decision of the Jurisdictional High Court in Reliance Utilities and Power Ltd. (supra), we uphold the ....
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....nd 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 the assessment year 2002-03. Consistent with the view taken therein, the ground no.8, raised by the Revenue is treated as dismissed. 135. Ground no.9, relates to deletion of interest under section 234D. 136. After hearing both the parties, we find that this issue is similar to the issue arising out of ground no.24, raised by the assessee in its appeal in ITA no.3802/Mum./2006, for the assessment year 2002-03. In view of the retrospective amendment, this issue is decided ag....
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....overy 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 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./2006. Consistent with the view taken therein, we dismiss this ground no.4, as infructuous because the claim of deduction under section 80IA with regard to the unit-6 has already been allowed. 150. Grounds no.5 and 6 relate to disallowance of expenditure on repair and maintenance as capital expenditure. 151. These grounds are similar to the grounds no.10, 11 and 12 raised by the as....
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....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 holding that captive power consumption from generating set would be eligible for deduction u/s 80IA. 1.1 On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the provisions of section 80-lA(3)(ii) are satisfied in respect of the DG sets. 1.2 On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the provisions of section 80-lA(3)(i) are satisfied in respect of Unit No.1." 163. After hearing both the parties....
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....aring 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 free from sales tax deferral loan to meet the investment in securities is erroneous and without any material on record. 4.2 On the facts and in the circumstances of the case and in law, the findings of the CIT(A) is contrary to the established law inasmuch as the assessee failed to establish the nexus between availability of interest free funds for investments in the securities from which the dividend was earned." 169. Before us, the learned counsel submitted that the disallowance of interest made by the Assessing Officer is Rs. 30,20,....
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.... 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-rata basis without even looking to the nature of expenses. For e.g., vehicle maintenance, charity and donation, misc. expenses, etc., cannot be said to have been incurred for the purpose of investment in shares, etc. At the most, directors' fees and expenses and auditor's remuneration can be said to be attributable for the purpose of disallowing the administrative expenses for the purpose of earning exempt income on the investments made. From the details mentioned above, it is seen that the directors' fees and expenses is Rs. 13 lakhs whereas, auditor's remuneration is Rs. 5.53 lakhs. If the ratio on which the Asse....
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....n 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 AO to allow incremental wages paid during the previous year not relevant to the Asst. year 2004-05." 183. Facts relating to this issue are that the assessee has entered into an agreement on 20th April 2004, for wage revision with the union of the staff on 20th April 2004 for the period of four years i.e., from 1st January 2003 to 31st December 2006. Since the liability to pay differential wage accrued just after the end of the financial year and before the Balance Sheet date, the incremental liability for the period from 1st January 2003 to 31st March 2004, amounting to Rs. 6,86,90,112, was debited to the Profit & Loss account for the finan....
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....ding 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:- "11. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in excluding the value of internal consumption of power from the total turnover of the business of the assessee for the purpose of computing deduction u/s 80HHC." 191. After hearing both the parties, we find that this ground is similar to ground no.18 raised by the assessee in its appeal in ITA no.3802/Mum./2006, for the assessment year 2002-03, wherein following the order of the Tribunal in assessee's own case for earlier assessment year, this issue has been decided in favour of the assessee. Thus, ground no.11, raised by the Revenue stands dismisse....
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....." 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 furniture to the tune of Rs. 82,266/- are capital expenditure. 6. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) failed to appreciate the fact that such expenditure of Rs. 82,2661- has been incurred in the regular course of running of existing business and not for bringing into existence any new assets of enduring benefits in future and hence, no part of the said expenditure can be treated as capital expenditure." 202. These grounds are similar to ground no.10 to 12 raised by the assessee in its appeal in ITA no.3802/Mum./2006, and ground no.5 and 6, raised by the assessee in its appeal in ITA no.5269/Mum./2008. Consistent with the view taken....
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....ant 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 disallowance in view of the amendment made by the Finance Act, 2008 with retrospective effect from 1st April 2001. However, for the purpose of levying interest under section 234B, no interest should be charged as at the time of filing of return of income no such provisions was there for disallowance in the statute. He thus, submitted that no interest under section 234B and 234D, should be charged. In support of his contention, he relied upon the decision of the Calcutta High Court in Imami Ltd. v/s CIT, [2011] 337 ITR 470 (Cal.). He also relied upon the decision of the co-ordinate bench in Essar Steels India Ltd. v/s ACIT, ITA no.7013/Mum./2011, order dated 27th September 2013. 209. The learned Departmental Representativ....
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..... (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 wherein it declared its total income and the book profit both as nil. However, consequent to the amendment of the provisions contained in s. 115JB of the Act by virtue of Finance Act, 2002 which was published in the official gazette on 11th May, 2002 giving retrospective effect to the amendment from 1st April, 2001, the appellant first voluntarily paid a sum of Rs. 1,55,62,511 on account of the tax payable on book profit as provided in amended provision of s. 115JB and then filed its revised return of 31st March, 2003 declaring its business income as nil but the book profit under s. 115JB as Rs. 20,63,65,711. The AO accepted such return of income but imposed interest under ss. 234B and 234C of the Act amounting to Rs. 44,00,937 and R....
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....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 of the advance tax on the last day of the financial year i.e. 31st March, 2001 when its book profit was nil according to the then law of the land. The various decisions of the other High Courts and the Tribunals relied upon by the Tribunal did not effectively consider the question whether even in a case like the present one where on the last date of the financial year preceding the relevant assessment year, the assessee had no liability to pay advance tax, he would be nevertheless asked to pay interest in terms of s. 234B and s. 234C of the Act for default in making payment of tax in advance which was physically impossible. We, therefore, partly allow the appeal by answering the first question in the affirmative and against the as....
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....d 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 Government Act for selling power thereby allowing excess claim of deduction u/s 80IA of the Act. The Ld. CIT(A) has, therefore, erred in accepting the purchase price of power as Fair Market Value (i.e. the rate at which Karnataka Electricity Board is selling) as against controlled sale price of power by the assessee which is otherwise required to be taken under the Act when the said sale price is controlled by the Government regulation." 215. After hearing both the parties, we find that the issue arising out of the aforesaid grounds is similar to the issue raised in ground no.8, by the assessee in its appeal in ITA no.2802/Mum./2006. In view of the findings given therein, grounds no.2 and 2.1, raised by the Revenue are treated as dismissed. 216. Ground no.3, r....
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....ns, 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 Jurisdictional High Court in Reliance Utilities and Power Pvt. Ltd. (supra) will be squarely applicable. Thus, the ground no.4, 4.1 and 4.2 are treated as allowed. 222. Ground no.5, reads as under:- "5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs. 16,12,208/- made by the AO under the head Short Term capital Gain arising out of sale of D.G. sets from the block of plant & machinery of Power Unit No.1." 223. Brief facts are that during the relevant financial year, the assessee has sold various fixed assets on which the assessee has earned profit of Rs. 1,52,68,923, which was arrived at after set-off of loss of Rs. 1,23,21,301, on the sale of D.G. set no.1, 2, 3 and 4 of power unit no.1. Since ....
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....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 following modifications:- (1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer or transfers; (ii) the written down value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block of assets acquired during the previous year, such excess shall be deemed to be the capital gains a....
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....rch 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 Mahalaxmi Glass Works Pvt. Ltd., [2009] 318 ITR 116 (Bom.). The finding of fact as recorded by the learned Commissioner (Appeals) that after making the adjustments made by the assessee in the opening stock and purchase and sale, the net effect is nil appears to be based on fact. Thus, we do not find any reason to deviate from such findings of fact which has not been rebutted and, hence, the ground no.6(i) and 6(ii) raised by the Revenue stand dismissed. 233. Ground no.7, reads as under:- "7. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of profits on sale of investments of fixed assets in computing book profit u/s. 115JB." 234. After hearing both the parties, we find that this issue was decided in favour of the assessee by the Tri....