TaxTMI 
TaxTMI 
2024 (2) TMI 883
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....essee submitted that Ld.CIT(A) has decided the issue on merit and he prayed that the Cross Objections may be kept open. 4. Considered the submissions of both the parties, since Ld. CIT(A) has dealt with the issue on merit we are not inclined to go into the jurisdictional issue raised by the assessee in the cross objections. Accordingly, we keep the ground raised by the assessee in Cross objections open. 5. In the result, cross objections filed by the assessee are dismissed as indicated above. ITA No. 1994/MUM/2023 (A.Y. 2003-04) ITA No. 1995/MUM/2023 (A.Y. 2004-05) 6. Now, we proceed to dispose off the appeals filed by the revenue. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 1994/MUM/2013 for Assessment Year 2003-04 as a lead appeal. 7. Revenue has raised following grounds in its appeal: - "1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of deduction u/s. 80IA of the Act, 1961 of Rs. 9,72,33,000/-?" 2. "Whether on th....
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....using hot exhaust gases from gas turbo generators Each heat recovery steam generator has a capacity of generating 27 Tons per hour steam. Whenever the gas turbo generator is in operation it is ensured that the corresponding heat recovery steam generator is also put on line to avoid any energy wastage. All the steam generated from the heat recovery steam generator is utilized for refinery operations. Hence, the captive power plant is not only to generate electricity but also based on co- generation of power and steam and steam generation is unavoidable. Thus, steam generation in the captive power plant is a newly established industrial undertaking which is accepted as a separate unit by itself. 7.2 The Assessee has two options available to take income arising from steam generation by either taking the price in the open market of the product if it is saleable or actually sold in the market or consider savings in the cost of alternative uses made of steam. The different alternative uses of steam in the refinery process rule out the possibility of sale of steam in the open market. Hence, income arising from steam generation was calculated considering the savings in LSHS due to....
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.... the AO but the claim for deduction for captive power plant of the Mumbai refinery had been consciously allowed by the AO. Thus, the claim has been allowed on merits not only for Visakh refinery but also for Mumbai refinery that too not only through the assessment order but also by a rectification order under section 154 to the Assessee. 7.6 Hence, the Assessee submitted that the AO has allowed the deduction under section 80-IA of the Act for captive power plant unit after a detailed scrutiny are application of mind to the facts of the case. The reason for rejecting the claim of deduction based on no documentary evidence furnished with the objections by the Assessee has no basis and cannot be sustained. The AO while disposing off the objections has not considered the factual details before him and incorrectly held that the generation plant used only HSD and Naphtha for generation of electricity and there was no ground to show savings in terms of use of LSHS. The Assessee submits that the deduction ought to be granted to it and the same has been correctly allowed during the original assessment proceedings. The reasons for reopening the assessment on this ground are unsustai....
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....ssessee has requested to follow the principle of judicial discipline to state that the first Appellate Authority or the Assessing Officer are bound by the orders of Tribunal. Even where the assessee or the department has pursued the matter in reference proceedings, it does not act as a kind of stay of operation of the order of the Tribunal. The principle of judicial discipline is to be followed keeping in view the rule of consistency to keep the matter alive till the issue attains finality by the High Court or Supreme Court. In case no addition/ disallowance are made in subsequent assessments on a particular issue and that issue is decided in favour of the revenue at higher forums, the department would not get second innings to play in subsequent assessments. Moreover, the existence of different facts and legal provisions in subsequent years on the same issue are other restrictions which have to be considered while following the orders of Tribunal in subsequent assessments. 8.3 The assessee has also relied upon the assessment order dated 15.12.1992 wherein the deduction was allowed in AY 1990-91, and order u/s 154 dated 06.04.1999 for the AY 1996-97 wherein deduct....
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....power generation is Rs.. 6023.93 lakhs and also assessee has saved in LSHS. This is nothing but diversion of steam energy in the refinery to the extent of Rs.. 3,505.43 lakhs and expenditure incurred by the assessee for generation of HSD / Naptha and other direct expenditures of Rs.. 662.20 lakhs and indirect expenditure of Rs.. 680.86 lakhs and declared a net profit for financial year 2002-03 of Rs.. 972.33 lakhs. 14. Further, he brought to our notice Page No. 234 of the Paper Book which is the order in assessee's own case in which Hon'ble Bombay High Court has decided exactly similar issue under consideration and allowed the claim of the assessee in A.Y. 2002-03. By referring to the above order he submitted that electricity generated by the assessee are nothing but utilization for captive power consumption and the by-product coming out of the electricity division which is LSHS (Steam) are also utilized within the company for captive purpose, by relying on the above decision he prayed that the issue under consideration is covered in favour of assessee. 15. Considered the rival submissions and material placed on record, we observe that assessee has a captive power plant which....
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....t consumed Duties Applicable To Products 7213.97 b) Direct Charges 662.20 c) Indirect Charges 680.86 Sub Total 8,556.03 (Less) Saving in LSHS 3,505.43 5,051.60 Profit /Loss For 2002-03 972.33 17. The facts brought to us which is similar to the facts in the A.Y.2002-03 in which the Hon'ble Bombay High Court has considered the same issue and decided the issue in favour of assessee, the relevant findings of the Hon'ble Bombay High Court are reproduced below: - "12. The material which has been placed on the record would support the contention of the assessee that there was a full and true disclosure of all material facts relating to the claim of the assessee for a deduction under s. 80-IA in respect of the profits made by the CPP at Vizag. In computing those profits, the assessee disclosed the two components which form a constituent element of the income of the unit. The assessee furnished a break-up of the value wh....
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....r all these reasons we are of the view that the first issue on which the assessment is sought to be reopened, the Revenue has failed to establish a case for the reopening of the assessment beyond four years." 18. Respectfully following the above decision, we are inclined to allow the claim of the assessee for the current assessment year also. Accordingly, Ground No. 1 raised by the revenue is dismissed. 19. Coming to the Ground No. 2, the relevant facts are, during the course of assessment proceedings, Assessing Officer observed that assessee has claimed deduction under section 80IB of Rs.. 57846.06 lakh pertaining to Visakh Refinery Expansion Project II [in short "VREP-II"] at Visakh refinery, Andhra Pradesh and assessee had included the marketing margin of Rs.. 10158.56 lakhs in its claim of deduction under section 80IB of the Act. 20. Assessing Officer observed that as per the provisions of the Income Tax Act, deduction under section 80IB is applicable to the profit of the industrial undertaking only and no other income can be brought and added to it. The Marketing margin is not attributable to the activities of the industrial undertaking (VREP-II). He observed that Mar....
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....bmitted by the assessee during the course of the regular assessment. The CIT(A) order has been accepted by the department and no appear has been filed. The issue of inclusion of marketing profit for computing the eligible profits for deduction under section 80I therefore reached finality. Based on the Supreme Court decision of Berger Paints (266 1TR 99) where the department has not challenged the correctness of the law and has accepted it, there can be no cause to justify departure from the laid down principle. 10.3 The Assessee also submits that the Mumbai tribunal order in its own case for AY 1984-85 held that marketing division is an integral part of the total manufacturing activity undertaken by the company. The Tribunal also held that the business of the company is one single integrated and indivisible business of manufacturing and marketing of petroleum products. Thus, during the course of original assessment proceedings detailed submissions were made regarding inclusion of marketing profits for the purpose of computing the eligible profits for deduction under section 80-IB of the Act. 10.4 The Assessee submits that the Bombay High Court in its own case for ....
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....poration P. Ltd Vs CIT (SC) 227 ITR 552, the Hon'ble Supreme Court has held : The phrase "derived from" is different from "attributable to" - It is no doubt true that the words 'attributable to have a wider meaning than the words 'derived from'- But at the same time it cannot be ignored that normally the word 'attributable' implies that for a result to be attributable to anything' it must be wholly, or in material part, caused by that thing- In order that income can be said to be attributable to manufacture or processing of goods, the earning of the income must be directly connected with manufacture or processing of goods. It is also necessary that material part of the said income should have been earned by that activity. 11.3 Further, in the case of Liberty India Vs CIT (SC) 317 ITR 2318 the Hon'ble Apex Court has held as under: "By using the expression 'derived from Parliament intended to covers sources not beyond that first degree- DEPB / Duty drawback are incentive which flow from the schemes framed by Central Govt, or Customs Act and hence they belong to the category of ancillary profits of such undertakings- Not d....
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....ht to our notice Page No. 49 to 54 of the First Appellate Order wherein Ld. CIT(A) has allowed the claim of the assessee merely relying on the decision of the ITAT, Mumbai bench in assessee's own case. He submitted that Ld. CIT(A) has not appreciated the facts on record and merely following the decision in assessee's own case passed earlier, allowed the claim of the assessee. Therefore, this issue may also be remitted back to file of the Ld. CIT(A). 25. On the other hand, Ld. AR brought to our notice Page No. 294 of the Paper Book to highlight that Visakh Refinery Expansion Project - II is an expanded unit and as per the definition of section 80IB this particular unit is covered by the provisions of section 80IB of the Act and further, he brought to our notice Page No. 305 of the Paper Book which is the decision of the Hon'ble Bombay High Court in assessee's own case wherein Hon'ble High Court upheld the findings of the Tribunal. Further, he brought to our notice Page No. 96 to 105 of the Paper Book which is the assessment order for the A.Y. 1990-1991 wherein the Assessing Officer itself has allowed claim of the assessee by considering the marketing profit included by the assess....
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....cts brought before me. As I filed, the AO has mentioned the market price in his order and has not disputed the same. Since the market price is lower than the value adopted by the appellant there is no reduction of cost resulting in inflation of the profit of the eligible unit and thereby a claim of deduction under section 80I. In fact by adopting the value which is substantially higher than the market price, the appellant has increased its cost, reduced the profits of eligible unit and thereby has claimed a lesser reduction under section 80 IA then what could have been calculated if market price of the product was adopted. In such a scenario there was no region for the AO to disturb the calculation made by the appellant. He has increased the value only marginally from 14.365 p.m. to 14.479 p.m. own estimate basis which cannot be accepted under the circumstances. 10.7. Taking into consideration the entirety of the facts and circumstances of the appellant's case and the relevant provision of the Income Tax Act, I find no reason to support the action of AO. Accordingly he is directed to accept the appellant's claim of profit from the VERP II for the purpose of deduction under....
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....ee, Assessing Officer rejected the submissions of the assessee by observing as under:- "14. I have considered the submission made by the assessee. I have also gone through the relevant provisions and judicial pronouncements on the subject. The decisions being relied upon by the assessee have the facts, different from assessee's facts and hence not applicable here. Revenue expenditures are short-term business expenses usually used immediately or within one year. They include all the expenses that are required to meet the current operational costs of the business, making them essentially the same as operating expenses. Tracking revenue expenditure allows a business to link earned revenue with the business operations expenses incurred during the same accounting year. Capital expenditures are funds that a company uses to acquire, improve, or maintain physical assets (land, property, equipment software) or intangible assets (patents or licenses). Capital expenditure is generally used to improve the company's capacity or efficiency. 14.1 As regard legal position on the subject, in the case of Arvind Mills Ltd Vs CIT 197 ITR 422 (SC) it has beds held that Capital....
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....nce and repair activities that are charged to P & L account and hence are purely revenue in nature and allowable under section 37(1) of the Act. Therefore, Ground No. 3 taken by the appellant is allowed." 32. Aggrieved, revenue is in appeal before us and at the time of hearing, Ld. DR brought to our notice findings of the Assessing Officer from Page No. 13 of the assessment order and he also brought to our notice findings of the Ld. CIT(A) from Page No. 56 to 67 of the order and he brought to our notice Page No. 64 to 66 of the order in which assessee has submitted a detailed break-up of the expenses which assessee has spent location wise during the year. He submitted that Ld.CIT(A) has merely accepted the above break-up and allowed the claim of the assessee without proper verification. He submitted that the issue may be remitted back to the file of the Assessing Officer for proper verification. 33. On the other hand, Ld.AR of the assessee brought to our notice Page No. 59 to 64 of the Appellate order and he submitted that all these expenditures are incurred by the assessee in the various retail outlets situated across the country. This is not a fresh construction expenditure....