TaxTMI 
TaxTMI 
2015 (7) TMI 677
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.... under consideration, assessee filed its return of income on 24/09/2010 declaring total income of Rs. 20,19,94,997 after claiming deduction u/s 80IA of an amount of Rs. 4,84,48,186. During the assessment proceeding, AO noticed that from its power generation unit assessee has disclosed a total turnover of Rs. 19,37,19,867 which includes sale of electricity to sugar division amounting to Rs. 59.39 lakh and sale of electricity to cement division amounting to Rs. 831.31 lakhs. Besides, assessee has also sold electricity to AP Transco at Rs. 927.93 lakhs. Assessee also disclosed an amount of Rs. 118.55 lakhs towards sale of steam to sugar division. It was found by AO that assessee generates electricity using Bagasse as fuel which is a residue obtained from sugarcane. While examining assessee's claim of deduction u/s 80IA of the Act, AO observed that power generation unit claimed to have been set up by assessee is not a new unit but has been set up by splitting up of earlier business, therefore, being of the opinion that power generation unit has been a continuation of the earlier business, he disallowed the deduction claimed u/s 80IA of the Act. Being aggrieved of such disallowance, ass....
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....ew and identifiable undertaking separate and distinct from the existing business. The lower authorities agrees that from 2002-03, a new cogeneration plant was put up and also they agrees that installation of sophisticated and high capacity machinery to produce steam and electricity has taken place in the place of existing old technology. Thus, they impliedly agree that the new machinery and plant have been installed under separate licence and premises. Even though the decision of Textile machinery [supra] was concerned with the clause dealing with reconstruction of existing business but the expression 'not formed' was construed to mean that the undertaking should not be a continuation of the old but emergence of a new unit. Therefore, even if the undertaking is established by transfer of building, plant or machinery, it is not formed as a result of such transfer, in our considered view; the assessee could not be denied the benefit. We also find that a new undertaking for manufacture of power with steam as by-product was formed out of fresh funds, in separately identifiable premises, under a separate license with manifold increase in capacity with new machinery and buildings....
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....in the impugned AY, there is no reason to deny such deduction to assessee in the impugned AY. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in allowing assessee's claim of deduction u/s 80IA after following the decision of ITAT on the issue. We, therefore, uphold the order of ld. CIT(A) by dismissing the ground raised. 7. The next issue, which is common in ground nos. 3 & 4 is, with regard to deduction claimed by assessee on cost of steam sold to sugar unit. 8. Briefly, the facts relating to this issue are, in course of assessment proceeding, AO while denying assessee's claim of deduction u/s 80IA also held that steam is not a power as envisaged u/s 80IA. He was also of the view that steam is only a bye-product, it cannot be said to be income from the business of power generation. AO opined that since no value has been ascribed by APERC in tariff fixation, its value has been taken at nil. He also observed that since the cost of fuel has been fully considered in fixing the tariff no separate addition in respect of fuel cost can be allowed. AO observed that since deduction claimed u/s 80IA is denied to assessee on the amount of Rs. 118.55 lakhs representing t....
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....s. 11.43 lakhs is to be treated as ineligible profits for the purpose of deduction under section 80IA of the Act and for the balance sale amount of steam to sugar division, the assessee company is eligible for deduction under section 80IA of the Act. For this proposition, we place reliance on the order of the Tribunal in the case of DCW Ltd.vs. Addl. CIT, ITA No. 126/Mum/2008, AY 2003-04 dated 29th January, 2010 reported in 42 DTR (Mumbai) (Trib.) 369 at page 383 para 18.8 which reads as under: "18.8 the next item of miscellaneous income is the income from sale of steam produced by the assessee. Briefly the facts and nature of steam are that the captive power undertaking also has waste heat recovery boiler, which is part of the power undertaking. The power generated by the running of diesel generating set is used in the manufacture of caustic soda. Running of diesel generating sets produce heat, which is recovered from the waste heat recovery boiler in the form of steam. During the year ended March, 2002, the total quantity of steam generated is 1,02,295 MT. The said steam is used as power for the manufacture of PVC and limenite and 6,240 MT was used towards internal consumption.....
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.... will be furnished by the assessee before him. The assessee is directed to furnish necessary records for the purpose of determining the value of the steam produced and transferred to sugar unit. This ground is allowed for statistical purposes." Since the facts in dispute in the present appeal are materially same and the order passed by ld. CIT(A) is fully in terms with the order of the Tribunal, we have no hesitation in upholding the same by dismissing the ground raised. 10. The last issue raised by the department in ground no. 5 is relating to reduction in power charges. 11. During the assessment proceeding, AO noticed that assessee has adopted a rate of 3.48% in respect of electricity supplies made to AP Transco, sugar and cement divisions. He observed that initially the Govt. of AP vide GO Ms. No. 93 dated 18/11/97 announced uniform incentives to all projects based on renewable sources of energy for purchase of power by APSEB/AP Transco. The rate was fixed at Rs. 2.25 per unit with 5% escalation per annum with 1997-98 as base year. AO observed that APERC was constituted on 03/04/1999 in pursuance to AP Electricity Reform Act, 1998. The purchase agreements signed by AP Transc....