Indsynergy Ltd., RAIPUR (CG) V. A.C.I.T. 1(2), RAIPUR (CG)

CO 138/BIL/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1548 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV VARSHNAY
• Assessee Lawyers: P C M ALOO
• Keywords: Business income; Principle of natural justice; Capital receipt
• Section: 143(3); 115JB

Judgement Text

1 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 IN TH E INCOME TAX APPELLATE TRIBUNAL: RAI PUR BENCH: RAI PUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO .110 /BLPR/2011 ASSESSMENT YEARS: 2008 - 09 THE ASST. COMMISSIONER OF INCOME TAX - 1(2), CENTRAL RE VENUE BUILDING, RAIPUR , CHHATTISGARH VS IND SYNERGY LTD., GOKULPURAM, KACHNA ROAD, KHAMARDIH, RAIPUR, CHHATTISHGARH, PAN:AAACI7072D (APPELLANT) (RESPONDENT) C. O. NO. 138 /BLPR/2015 (IN I.T.A.NO.110/BLPR/2011 - AY : 2008 - 09) IND SYNERGY LTD., GOKULP URAM, KACHNA ROAD, KHAMARDIH, RAIPUR, CHHATTISHGARH, PAN:AAACI7072D VS THE ASST. COMMISSIONER OF INCOME TAX - 1(2), CENTRAL REVENUE BUILDING, RAIPUR , CHHATTISGARH (CROSS OBJECTOR) (RESPONDENT) REVENUE BY SHRI RAJIV VARSHNAY (CIT) ASSESSEE BY SHRI P. C. M ALOO DATE OF HEARING: 1 3 - 10 - 2015 DATE OF PRONOUNCEMENT: 30 - 11 - 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION BY THE RESPONDENT ASSESSEE, BOTH ARISING FROM THE ORDER OF THE LEARN ED CIT (A) , RAIPUR, 2 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 CHHATTISHGARH DATED 31 - 03 - 2011 . WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE REVENUE. 2. GROUND NO.1 : - 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS JUSTIFIED IN DELETING THE DISA LLOWANCE AND ADDITION OF RS.1,20, 8 6 , 445 / - MADE BY THE AO U/S 80IA WHEN AS PER PROVISIONS OF SECTION 80IA THE DEDUCTION IS ELIGIBLE FOR PO WER AND NOT FOR CARBON CREDIT . THE FACTS IN BRIEF, AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S 143(3) OF THE IT ACT DAT ED 28 - 12 - 2012 WERE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURE OF SPONGE IRON, INGOTS, GENERATION OF POWER ETC. A RETURN OF INCOME WAS ELECTRONICALLY FILED AT RS.10,27,19,530/ - UNDER THE PROVISIONS OF SECTION 115JB OF THE IT ACT. THE BOOK P ROFIT WAS AT RS.33,92,06,808/ - THE ASSESSEE CLAIMED A DEDUCTION IN RESPECT OF INCOME FROM GENERATION OF POWER AND SALE OF CARBON CREDIT AMOUNTING TO RS.1,20,86,455/ - . THE AO HAS EXAMINED THE ISSUE OF INCLUSION OF AMOUNT RECEIVED ON SALE OF CARBO N CREDIT, WHILE COMPUTING THE ELIGIBLE BUSINESS IN THE CLAIM OF DEDUCTION U/S 80IA OF THE IT ACT. ACCORDING TO THE AO, THE AMOUNT IN QUESTION WAS NOT DERIVED FROM GENERATION AND DISTRIBUTION OF POWER, THEREFORE, NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80 IA OF THE IT ACT. AFTER DISCUSSING CERTAIN CASE LAWS NAMELY CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD., VS CIT, 113 ITR 84 (SC) ETC. THE AO HAS FINALLY HELD THAT THE SALE ON CARBON CREDIT WAS NEITHER HAVING DIRECT NOR HAVING IMMEDIATE NEXUS WITH THE INCO ME FROM POWER GENERATION DIVISION OF THE ASSESSEE, THEREFORE, PROFIT ON SALE OF CARBON CREDIT WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA OF THE IT ACT. AS A RESULT, THE AMOUNT RECEIVED ON SALE OF CARBON CREDIT FOR A SUM OF RS.1,20,86,455/ - WAS DISALL OWED. 3 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 3 . WHEN THE MATTER REACHED BEFORE THE FIRST APPELLATE AUTHORITY, THE LEARNED CIT (A) HAS GRANTED RELIEF AS PER THE FOLLOWING OBSERVATIONS: 3.4 I HAVE GONE THROUGH THE ORDER OF THE A. O. AND THE SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO GONE THR OUGH THE LINE DIAGRAM CHART FOR GENERATION OF POWER. THE PRECISE ISSUE FOR ADJUDICATION IS AS TO WHETHER THE CARBON CREDIT HAS BEEN DERIVED IN COURSE OF BUSINESS OF GENERATION OF POWER OR NOT. FOR BETTER UNDERSTANDING OF THE RELEVANT PROVISIONS OF SECTION 80IA WHICH GOVERNS THE CLAIM OF THE APPELLANT, ..... ......... 3.4.4 CONSIDERING THE FACTS OF THE CASE AND THE LEGAL PROPOSITION, I AM OF THE CONSIDERED OPINION THAT, IN PRESENT CASE, CARBON CREDIT COULD BE EARNED, IF POWER IS GENERATED AND NOT OTHERWISE AND, THEREFORE, GAINS FROM SALE OF CARBON CREDIT IS A GAIN DERIVED FROM BUSINESS OF GENERATION OF POWER AND CONSEQUENTLY ELIGIBLE FOR DEDUCTION U/S 80IA (4). CONVINCED OF THE PROPOSITION, THIS GROUND OF APPEAL IS DECIDED IN FAVOUR OF APPELLANT. 4. ON THE ISSUE OF ALLOWABILITY OF DEDUCTION PERTAINING TO THE PROFIT EARNED ON SALE OF CARBON CREDIT, THE ASSESSEE HAS RAISED THE CROSS OBJECTION, ALTHOUGH, BELATEDLY AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES IN THE CASE, GAIN ON ACCOUNT OF CARBON CREDIT IS A CAPITAL RECEIPT IN VIEW OF JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS MY HOME POWER LTD. (2014) 365 ITR 82 (AP) AND THEREFORE NOT LIABLE TO TAX. THE LD. A. O. HAS ERRED IN HOLDING IT AND THERE BY TAXING IT AS REVENUE RECEIPT. 5 . ON IDENTICAL FACTS AND CIRCUMSTANCES, WE HAVE ALREADY DECIDE D THIS ISSUE IN THE CASE OF ACIT, RAIPUR VS BAJRANG POWER & ISPAT LTD. IN ITA NOS. 44/BLPR/2011 AND 57/BLPR/2012 ALONG WITH C. O. NOS. 12/BLPR/2011 AND 135/BLPR/2015 FOR ASSESSMENT YEAR 2008 - 0 9 AND 2009 - 10 ORDER DATED 24 - 11 - 2015, WHEREIN AS WELL, THE REVENUE HAS CHALLENGED THE RELIEF GRANTED BY THE LEARNED CIT (A) HOLDING THAT THE INCOME ON SALE OF CARBON CREDIT WAS DERIVED FROM THE ACTIVITY OF THE INDUSTRIAL UNDERTAKING. HOWEVER, ON THE OTHER HAND, THE 4 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 RESPONDENT ASSESSEE HAS CHALLENGED THROUGH THEIR CROSS OBJECTIONS THAT THE AMOUNT RECEIVED ON CARBON CREDIT SALE WAS CAPITAL RECEIPT, WE HAVE TAKEN A DECISION AS UNDER: - 6. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASS ED U/S 143(3) OF THE IT ACT DATED 05 - 05 - 2010 WERE THAT THE ASSESSEE WERE ENGAGED IN THE BUSINESS OF MANUFACTURING SPONGE IRON AND GENERATION OF POWER. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80 IA (4) (IV) OF THE IT ACT. IT HAS ALSO BEEN NOTED BY THE AO TH AT BETTER GROSS PROFIT FROM 19.67% OF THE PAST YEAR TO 26.86% IN THE YEAR UNDER CONSIDERATION AS WELL AS NET PROFIT FROM 11.93% TO 18.19% WAS DISCLOSED AS PER THE ACCOUNTS OF THE ASSESSEE. THERE ARE TWO DIVISIONS NAMELY (I) STEEL DIVISION AND (II) POWER DI VISION RESPECTIVELY ENGAGED IN MANUFACTURE OF SPONGE IRON AND FERRO A LLOYS ETC. AND THE POWER DIVISION IS IN THE BUSINESS OF GENERATION OF ELECTRICITY. THE YEAR UNDER CONSIDERATION WAS THE FIRST YEAR OF CLAIM OF DEDUCTION IN RESPECT OF GENERATION AND DISTR IBUTION OF POWER. ON THE ISSUE OF CLAIM OF DEDUCTION U/S 80 IA (4) (IV) OF THE ACT A QUERY WAS RAISED THAT WHETHER GENERATION AND DISTRIBUTION OF POWER IS AN ELIGIBLE BUSINESS ACTIVITY FOR CLAIM OF SAID DEDUCTION. THE ASSESSEE WAS ASKED TO PROVIDE THE BIFU RCATION OF SALE OF POWER DIVISION. AS PER THE DETAILS SUBMITTED, IT WAS FOUND THAT THERE WAS A SALE OF CARBON CREDIT OF RS.7,82,87,701/ - . THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80 IA OF THE IT ACT ON THE ENTIRE PROFIT OF THE POWER DIVISION. HENCE, THE ISSUE OF INCLUSION OF PROFIT ON SALE OF CARBON CREDIT WAS EXAMINED BY THE AO TO ASCERTAIN WHETHER SALE OF CARBON CREDIT IS AN ELIGIBLE BUSINESS FOR SUCH DEDUCTION. PRIMA - FACIE, THE OBSERVATION OF THE AO WAS THAT THE PROFIT EARNED ON SALE OF CARBON CRED IT WAS NOT DERIVED FROM GENERATION AND DISTRIBUTION OF POWER, THEREFORE, NOT ELIGIBLE FOR DEDUCTION. THE SALE OF CARBON CREDIT HAD NO DIRECT NEXUS WITH GENERATION OF POWER. ACCORDING TO THE AO, AT BEST, IT CAN BE INCIDENTAL TO GENERATION/DISTRIBUTION OF PO WER. ON THE QUESTION OF ELIGIBILITY OF PROFIT FROM SALE OF CARBON CREDIT, REPLY OF THE ASSESSEE WAS AS UNDER: - POWER GENERATION PROCESS: 2.1 THE ASSESSEE COMPANY HAS A POWER DIVISION WHEREIN POWER IS GENERATED FROM FLUE GAS PRODUCED DURING THE MANUFACTUR ING OF SPONGE IRON. THE GENERATION OF ELECTRICAL POWER TAKE PLACE THROUGH THE INSTALLATION OF WASTE HEAT RECOVERY BOILER (WHRB) AND TURBINE GENERATORS. IN SPONGE IRON DIVISION, COAL AND IRON ARE PROCESSED THROUGH 5 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 A ROTARY KILN AT TEMPERATURE ABOVE 1000 DEG REE C TO REDUCE THE IRON - ORE TO PRODUCE SPONGE IRON. THE REDUCTION PROCESS YIELDS CARBON DIOXIDE AND CARBON MONOXIDE. THESE GASES LEAVE THE KILN AT HIGH TEMPERATURE ABOUT 950 DEGREE C AND BEING UTILIZED TO GENERATE POWER. AFTER LEAVING KILN, THE HOT GASES ARE PASSED THROUGH AND AFTER BURNING CHAMBER WHERE FURTHER OXIDATION OF GASES OCCURS I.E. CARBON MONOXIDE TO CARBON DIOXIDE. THE GASES ARE THEN FED TO WASTE HEAT RECOVERY BOILER (WHRB) AND THE RESULTANT STEAM BEING UTILIZED TO GENERATE ELECTRICAL POWER. TH IS TECHNOLOGY CONTRIBUTES TO SUSTAINABLE DEVELOPMENT BECAUSE OF MAINLY SUBSTITUTION OF FOSSIL FUEL BASED POWER WHICH CURRENTLY DOMINATES. THEREFORE THE INFRASTRUCTURE ON SUCH WASTE HEAT RECOVERY GENERAL SCHEME IS POSITIVE STEP TOWARDS REDUCING DEPENDENCE O N FOSSIL FUELS. 2.1.1 THE TECHNOLOGY FOR GENERATION OF POWER FROM WHRB IS SO DESIGNED THAT IN THE PROCESS OF GENERATION OF POWER, THE GREENHOUSE GASES EMISSION IS CONTROLLED FOR WHICH SOME VALUE IS ASSIGNED AND PAID TO THE UNDERTAKING THE VALUE IS CALLED CARBON CREDIT WHICH IS SUBJECT MATTER OF PRESENT ISSUE UNDER CONSIDERATION. ..... THUS THE FINANCIAL VALUE ASSIGNED TO REDUCTION OF GREENHOUSE GASES EMISSION IS THE RESULT OF TECHNOLOGY EMPLOYED FOR GENERATION OF POWER AND THEREFORE IT HAS DIRECT NEXUS WIT H THE GENERATION OF POWER. THE FINANCIAL VALUE ASSIGNED TO SUCH REDUCTION IN GREENHOUSE GASES IS ALSO MEASURED IN TERMS OF UNIT OF POWER GENERATED. FOR BETTER UNDERSTANDING THE MEANING OF CARBON CREDIT AND ITS BACKGROUND IS NARRATED IN BRIEF AS UNDER: ME ANING OF CARBON CREDIT: 2.2 A CARBON CREDIT IS A GENERIC TERM MEANING THAT A VALUE HAS BEEN ASSIGNED TO A REDUCTION OR OFFSET OF GREENHOUSE GAS EMISSIONS. CARBON CREDITS AND MARKETS ARE KEY COMPONENTS OF NATIONAL AND INTERNATIONAL ATTEMPTS TO MITIGATE THE GROWTH IN CONCENTRATIONS OF GENERATING GASES (GHGS). ONE CARBON CREDIT IS EQUAL TO ONE TON OF CARBON DIOXIDE OR IN SOME MARKETS, CARBON DIOXIDE EQUIVALENT GASES .... THE CONCEPT OF CARBON CREDITS CAME INTO EXISTENCE AS A RESULT OF INCREASING AWARENESS OF T HE NEED FOR CONTROLLING EMISSIONS. .... THE MECHANISM OF CARBON CREDIT WAS FORMALIZED IN THE KYOTO PROTOCOL, AN INTERNATIONAL AGREEMENT BETWEEN MORE THAN 170 COUNTRIES, AND THE MARKET MECHANISMS WERE AGREED. .... OPERATORS THAT HAVE NOT USED UP THEIR QUOTA S CAN SELL THEIR UNUSED ALLOWANCES AS CARBON CREDITS, WHILE BUSINESSES THAT ARE ABOUT TO EXCEED THEIR QUOTAS CAN BUY THE EXTRA ALLOWANCE AS CREDITS, PRIVATELY OR ON THE OPEN MARKET. 6 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: - (I) ACIT VS MA X C ARE LABORATORIES LTD. , 92 ITD 11 (CUTTACK) (II) JOY CO INDIA ( P ) LTD. VS ITO, 122 TTJ 940 (DEL.) (III) CIT VS BHANSALI ENGINEERING POLYMERS LTD., 306 ITR 194 (BOM.) THE AO WAS NOT CONVINCED AND HELD THAT THE EXPRESSION DERIVED FROM HAS A NARROW MEANING AND DIFFE RENT FROM THE TERM ATTRIBUTABLE TO AS LAID DOWN IN THE CASE OF CAMBAY ELECTRIC SUP PLY CO. 113 ITR 84 (SC) AND STE RLING FOODS, 237 ITR 579 (SC). FEW OTHER DECISIONS HAVE ALSO BEEN CITED, HOWEVER, KEEPING BREVITY IN MIND; NEED NOT TO BE DISCUSSED AT LENGTH . FINALLY, THE AO HAS HELD THAT THE SALE OF CARBON CREDIT HAD NO DIRECT NEXUS WITH POWER GENERATION. GENERATION OF CARBON CREDIT WAS STATED TO BE KYOTO PROTOCOL. THERE WAS A CONFERENCE UNDER UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC). T HEREIN KYOTO PROTOCOL WAS ADOPTED. THE PROTOCOL REQUIRES THE DEVELOPED COUNTRIES TO LIMIT THEIR GREENHOUSE GAS EMISSION WHICH COULD RESULT INTO AN AVERAGE REDUCTION OF 5.2% IN GREENHOUSE GAS EMISSION. IT WAS ADVISED TO ADOPT A MECHANISM TERMS AS CLEAN DEVE LOPMENT MECHANISM WHICH HAS ALSO PROVIDED A COOPERATION BETWEEN THE DEVELOPED COUNTRIES AND DEVELOPING COUNTRIES. THE ADMINISTERING BODY I.E. CLEAN DEVELOPMENT MECHANISM, EXECUTIVE BOARD, CERTIFY THE REDUCTION IN EMISSION OF GREENHOUSE GASES. THE C ERTIFIED EMISSION REDUCTION (CER) COULD BE TREATED IN A SPECIALIZED MARKET WHERE THE BUYERS ARE FROM DEVELOPED COUNTRIES. THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF SALE OF POWER GENERATION, AS WELL AS SALE OF CARBON CREDIT. THE AO HAS HELD THAT SALE OF CER WAS NOT THE PROFIT AND GAIN DERIVED FROM: GENERATION OF POWER. THE ASSESSEE HAD SOLD CER OF RS.7,82,87,701/ - WHICH WAS SHOWN IN THE PROFIT OF POWER DIVISION. HOWEVER, THAT WAS REDUCED BY THE AO FROM THE PROFIT AND THE BALANCE WAS CONSIDERED FOR THE P URPOSE OF COMPUTATION OF DEDUCTION. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 7. AFTER DETAILED DISCUSSION AND CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF SEVERAL CASE LAWS, THE LEARNED CIT (A) HAS HELD THAT THE P ROFIT WAS EARNED ON SALE OF CARBON CREDIT ONLY WHEN POWER WAS GENERATED AND NO T OTHERWISE. HE HAS HELD THAT PROFIT EARNED ON SALE OF CARBON CREDIT WAS THE GAIN DERIVED FROM THE B USINESS OF GENERATION OF POWER, CONSEQUENTLY, ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA (4) OF THE IT ACT. BEING AGGRIEVED, NOW, THE REVENUE IS IN APPEAL BEFORE US. 7 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 8. FROM THE SIDE OF THE REVENUE , THE LEARNED DR, RAJIV VARSHNAY AT THE THRESHOLD PLACED ON RECORD CERTAIN ARTICLES PERTAINING TO THE CONCEPT OF INCOME GENERATION ON SALE OF CARBON CREDIT AND ITS TAX IMPLICATION. THE GIST OF THE ARTICLES IS REPRODUCED BELOW: CARBON CREDIT AND ITS TAXABILITY THE KYOTO PROTOCOL - THE KYOTO PROTOCOL IS AN INTERNATIONAL AND LEGALLY BINDING AGREEMENT TO REDUCE GREENHOUSE GAS EMISSIONS WORLDWI DE AND IS AN ADDITION TO THE UNFCCC TREATY. THE KYOTO PROTOCOL WAS ACCEPTED IN KYOTO, JAPAN, ON 11 DECEMBER 1997 AND ENTERED INTO FORCE ON 16 FEBRUARY 2005. 185 PARTIES OF THE UNFCCC HAVE RATIFIED THE PROTOCOL. THE MAJOR FEATURE OF THE KYOTO PROTOCOL IS TH AT IT ASSIGNS MANDATORY TARGETS FOR 37 INDUSTRIALIZED NATIONS AND THE EUROPEAN COMMUNITY TO REDUCE THEIR EMISSION OF THE SPECIFIED 6 GREENHOUSE GASES (GHGS). THESE AMOUNT TO AN AVERAGE OF FIVE PER CENT AGAINST 1990 LEVELS OVER THE FIVE - YEAR PERIOD 2008 - 201 2. ..... THE CENTRAL FEATURE OF THE KYOTO PROTOCOL IS ITS REQUIREMENT THAT COUNTRIES LIMIT OR REDUCE THEIR GREENHOUSE GAS EMISSIONS. A COUNTRY HAS TWO WAYS TO REDUCE EMISSIONS. ONE, IT CAN REDUCE THE GHG (GREENHOUSE GASES) BY ADOPTING NEW TECHNOLOGY OR IMPROVING UPON THE EXISTING TECHNOLOGY TO ATTAIN THE NEW NORMS FOR EMISSION OF GASES. OR IT CAN TIE UP WITH DEVELOPING NATIONS AND HELP THEM SET UP NEW TECHNOLOGY THAT IS ECO - FRIENDLY, THEREBY HELP ING DEVELOPING COUNTRY OR ITS COMPANIES EARN CREDITS. A DETAILED NOTE HAS ALSO BEEN SUBMITTED BY THE LEARNED DR TO EMPHASIZE THAT THE EARNING ON SALE OF CARBON CREDIT WAS NOT CONNECTED OR AT ALL DERIVED FROM GENERATION OF POWER. THE SCHEME, AS SUCH, IS AN INDEPENDENT SCHEME HAVING NO NEXUS WITH THE MANUFACTURIN G OF ANY ARTICLES. WHETHER AN ARTICLE MANUFACTURER IS ELIGIBLE FOR CLAIMING DEDUCTION HAS NO CONNECTION WITH EARNING FROM SALE OF CARBON CREDIT. IN SUPPORT OF HIS SUBMISSIONS, THE LEARNED DR HAS PLACED RELIANCE IN THE DECISION OF APOLLO TYRES VS CIT, 47 TA XMAN.COM 416 (COACH TRIB.) WHEREIN A VIEW HAS BEEN EXPRESSED THAT EVEN THOUGH INCOME ON SALE OF CERTIFIED EMISSION REDUCTION / CARBON CREDIT WOULD FORM PART OF PROFITS OR GAINS OR BUSINESS, YET, IT CANNOT BE TREATED AS PROFIT DERIVED FROM INDUSTRIAL UN DERTAKING, THEREFORE, NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IA OF THE ACT. THE LEARNED DR HAS SPECIFIED THAT THE RESPECTED BENCH HAS DULY CONSIDERED SEVERAL DECISIONS AS WELL AS THE DECISION OF MY 8 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 H OME POWER LTD. VS DCIT, 27 TAXMAN.COM 27. THE LEARNED DR HAS SUGGESTED THAT IN A SITUATION WHEN THERE ARE TWO VIEWS EXPRESSED BY THE TRIBUNAL, HENCE, THE MATTER CAN BE REFERRE D TO A LARGER BENCH. IN OTHER WORDS, HIS MAIN POINT OF ARGUMENTS WAS THAT THE PROFIT EARNED ON SALE OF CARBON CREDIT WAS NOT DERIVED F ROM ELIGIBLE INDUSTRIAL ACTIVITY, HENCE, RIGHTLY DISALLOWED BY THE AO. CASE LAWS CITED ARE STERLING FOODS, 237 ITR 579 ETC. 9 . ON THE OTHER HAND, FROM THE SIDE OF THE RESPONDEN T ASSESSEE, THE LEARNED AR, MR. P. C. MALOO APPEARED AND AT THE OUTSET, VEHEMEN TLY OBJECTED THE SUGGESTION OF THE LEARNED DR TO REFER THE ISSUE TO A LARGER BENCH OF THE TRIBUNAL ON THE GROUND THAT IN A SITUATION WHEN THE HONBLE HIGH COURT HAS GIVEN VERDICTS ON THE LEGALITY OF CLAIM OF DEDUCTION ON SALE OF CARBON CREDIT, THEN, NO PUR POSE SHALL BE SERVED FOR THE CONSTITUTION OF LARGER BENCH. A DECISION OF A HIGH COURT SHOULD ALWAYS PREVAIL OVER ANY DECISION OF THE RESPECTED TRIBUNAL EITHER DECIDED BY DIVISION BENCH OR EVEN BY LARGER BENCH. AT THE THRESHOLD HE PLACE RELIANCE ON THE DECI SION OF MY HOPE POWER LTD. 21 ITR 186 (HYD.)/ 151 TTJ 616 (SUPRA). THE ISSUE OF TAXABILITY OF SALE PROCEEDS OF CARBON CREDIT WAS DISCUSSED IN THIS DECISION. THE RESPECTED BENCH HAS HELD THAT CARBON CREDIT IS ACCREDITATION OF CAPITAL, HENCE, INCOME EARNED O N SALE OF CARBON CREDIT IS CAPITAL RECEIPT IN VIEW OF THE DECISION OF MAHESWARIDEVI JUTE MILLS, 57 ITR 36. THEREAFTER, HE HAS EMPHASIZED THAT THE SAID DECISION OF THE TRIBUNAL WAS CONTESTED BEFORE THE HONBLE ANDHRA PRADESH HIGH COURT CITED AS CIT VS MY HO ME POWER LTD., 365 ITR 82 (A.P.), ORDER DATED 19 - 02 - 2014. THE HONBLE HIGH COURT HAS HELD THAT THE ITAT HAD CORRECTLY HELD IT AS CAPITAL RECEIPT AND CANNOT BE TREATED AS BUSINESS RECEIPT OF THE ASSESSEE. HE HAS, THEREFORE, EMPHASIZED THAT THE ISSUE IS NOW STOOD SQUARELY COVERED BY THE DECISION OF HONBLE HIGH COURT. HENCE, THE ADDITIONAL GROUND RAISED BY THE REVENUE DEPARTMENT DESERVES TO BE DISMISSED. HE HAS REFERRED TO A LATEST DECISION OF ITAT F BENCH, MUMBAI PRONOUNCED IN THE CASE OF M/S. ULTRATECH CE MENT LTD., AY 2007 - 08 WHEREIN CROSS APPEALS HAVE BEEN FILED BEARING ITA NO.7502 AND 8143/MUM/2010 AND OTHERS ORDER DATED 20 - 02 - 2014 WHEREIN THE BELATED GROUND OF APPEAL WAS ADMITTED AND THEREAFTER, AFTER REFERRING THE FOLLOWING DECISIONS IT WAS HELD THAT P ROCEEDS REALIZED FROM SALE OF CERS GENERATED OUT OF PROJECTS REGISTERED WITH UNFCCC IS CAPITAL RECEIPT. THE LEARNED AR HAS ALSO PLACED ON RECORD A DECISION OF ITAT A BENCH, CHENNAI PRONOUNCED IN THE CASE OF M/S. VEDHA SPINNING MILLS VS DCIT, ASSESSMENT YEAR 2009 - 10 BEARING ITAT NO.630/MDS/2013, ORDER DATED 18 - 08 - 2014 WHEREIN THE ISSUE OF CARBON CREDIT WAS DECIDED IN 9 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF M/S. MY HOPE POWER LTD. (SUPRA), ALTHOUGH, THE DECISION OF APOLLO TIRES LTD. (SUPRA) WAS AS WELL ALSO CITED FROM THE SIDE OF THE REVENUE. THE LEARNED AR HAS PLEADED THAT IN THE LIGHT OF THE DECISION OF CIT VS SMT. GODAVARIDEVI SARAFF, 113 ITR 589, WHEREIN IT WAS HELD THAT THE LAW DECLARED BY A HIGH COURT IN A STATE IS BINDING ON TRIBUNAL IN ANOT HER STATE. HENCE, THE DECISION OF THE HONBLE A. P. HIGH COURT PRONOUNCED IN THE CASE OF MY HOPE POWER LTD. (SUPRA) HAS TO BE FOLLOWED BY THIS RESPECTED TRIBUNAL AS IT HAS ALREADY BEEN FOLLOWED BY SEVERAL OTHER TRIBUNALS, DECISIONS CITED (SUPRA). THE LEARN ED AR HAS ALSO MADE A STATEMENT AT THE BAR THAT SO FAR THERE IS NO OTHER CONTRARY VIEW EXPRESSED BY ANY OTHER HIGH COURT AND THAT THERE IS ONLY ONE DECISION OF A HIGH COURT AND THE SAME REQUIRES TO BE FOLLOWED AS HELD IN THE CASE OF SIFT COMMUNICATION LTD. VS DCIT , ITAT B BENCH, CHENNAI [ITA NO.851/MDS/2013 AY 2008 - 09], ORDER DATED 04 - 10 - 2013. 10 . HAVING HEARD SUBMISSIONS OF BOTH THE SIDES AT LENGTH, WE ARE OF THE CONSIDERED VIEW THAT THE MERITS OF THIS ISSUE, WHETHER PROFIT EARNED ON SALE OF CARBON CRED IT IS CAPITAL RECEIPT OR NOT, HAS ALREADY BEEN JUDICIOUSLY CONSIDERED BY SEVERAL HONBLE COURTS. HENCE, IN OUR HUMBLE OPINION, IT STOOD COVERED IN FAVOUR OF THE TAX PAYER. SO FAR AS THE FACTS OF THE CASE IS CONCERNED, THE ADMITTED FACTUAL POSITION WAS THAT THE ASSESSEE HAD SOLD CER FOR A CONSIDERATION OF RS.7,82,87,701/ - AND THE AMOUNT WAS INCLUDED I N THE TOTAL SALES OF THE POWER DIVISION FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 80IA OF THE IT ACT. THE REVENUE DEPARTMENT HAS CHALLENGED THE RELIEF GRANTED B Y THE LEARNED CIT (A) BY RAISING A LEGAL GROUND THAT THE SALE OF CARBON CREDIT IS NOT INCOME DERIVED FROM THE BUSINESS OF GENERATION OF POWER. ON THIS ISSUE, THE LEARNED CIT (A) HAS EXPRESSED HIS OPINION THAT PROFIT ON SALE OF CARBON CREDIT IS DERIVED IN T HE COURSE OF BUSINESS OF GENERATION OF POWER. AT THAT POINT OF TIME WHEN THE APPEAL WAS HEARD BY THE FIRST APPELLATE AUTHORITY, THE LARGER ISSUE WHETHER THE RECEIPT ON SALE OF CARBON CREDIT IS A CAPITAL RECEIPT OR NOT, WAS NOT ADJUDICATED UPON. NOW, THE SI TUATION IS THAT AS SOON AS THE REVENUE DEPARTMENT HAS RAISED THE SAID ADDITIONAL GROUND, THE RESPONDENT ASSESSEE HAS RAISED AN ADDITIONAL CROSS OBJECTION IN ADDITION TO THE CROSS OBJECTION ALREADY RAISED. THE ADDITIONAL GROUND OF THE CROSS OBJECTION OF THE RESPONDENT ASSESSEE IS THAT THE PROFIT EARNED ON ACCOUNT OF SALE OF CARBON CREDIT IS TO BE HELD AS CAPITAL RECEIPT IN VIEW OF THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT PRONOUNCED IN THE CASE OF MY HOME POWER LTD., 365 ITR 82 (A.P.). IN THE INT EREST OF NATURAL JUSTICE, WE HAVE, THEREFORE, CONSOLIDATED BOTH THE ISSUES AND THOUGHT IT 10 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 PROPER TO TAKE A HOLISTIC VIEW IN RESPECT OF THE PROFIT EARNED ON SALE OF CARBON CREDIT. RATHER, AT THIS JUNCTURE, IT IS WORTH TO MENTION THAT THIS VERY COMBINATION W HETHER BOTH OF US ARE PARTIES, HAVE HEARD A CASE OF ACIT VS NAKODA ISPAT LTD., RAIPUR WHILE CAMPING AT ITAT RAIPUR BENCH, RAIPUR AND IN ITA NO.109/BLPR/2011 AND ITA NO.71/BLPR/2012 ALONG WITH C. O. NOS. 136 AND 137/BLPR/2015 FOR ASSESSMENT YEARS 2008 - 09 AN D 2009 - 10 AS WELL AS OF ACIT VS VANDANA ISPAT LTD., ITA NO.216/BLPR/2011 AND CO NO.139/BLPR/2015 CONSOLIDATED ORDER DATED 30 - 10 - 2015 AND ARRIVED AT THE CONCLUSION AS UNDER. - 13. NOW WE FIND THAT THE HONBLE HIGH COURT HAS HELD THAT THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE IS A CAPITAL RECEIPT ON THE FACTS AND CIRCUMSTANCES OF THE SAID CASE. THE FACTS LEADING TO THE EMERGENCE OF CARBON CREDIT IN THE CASES WE ARE ADJUDICATING ARE ALSO THE SAME. THERE IS NO DISPUTE THAT THE PROCESS BY WHICH CARBON CREDIT IS GENERATED BY THE ASSESSEE IN THIS CASE IS DIFFERENT FROM THE ONE DEALT WITH IN THE CASE OF THE ASSESSEE MY HOPE POWER LTD. NOW WE HAVE A SITUATION WHERE ON SIMILAR FACTS THERE IS HONBLE HIGH COURT DECISION HOLDING THAT IN THESE FACTS, THE CARBON CREDI T SALES ARE CAPITAL RECEIPTS. THERE ARE SEVERAL TRIBUNAL DECISIONS WHICH HAVE FOLLOWED THIS DECISION. LEARNED D. R. HAS ONLY BEEN ABLE TO POINT OUT BEFORE US THE DECISION OF ITAT, COCHIN BENCH IN THE CASE OF APOLLO TYRES LTD. VS ACIT (SUPRA) WHEREIN IT HAS BEEN HELD THAT CARBON CREDIT SALE IS A REVENUE RECEIPT. NOW IT IS SETTLED LAW IN THE ORDER OF JUDICIAL PRECEDENCE THAT THE DECISION OF HONBLE HIGH COURT TAKES PRECEDENCE OVER INFERIOR COURT/TRIBUNALS DECISION. IT IS ALSO SETTLED LAW THAT WHATSOEVER AMOUN T OF WISDOM IS DISPLAYED BY INFERIOR TRIBUNALS AND COURT THE SAME CANNOT OVERRIDE THE DECISION OF HONBLE HIGH COURT. EXACTLY SIMILAR VIEWS WERE ALSO HELD BY SEVERAL OTHER ITAT DECISIONS QUOTED BY THE LEARNED COUNSEL OF THE ASSESSEE REPRODUCED HEREIN ABOVE . IN THESE CIRCUMSTANCES WE HOLD THAT THE CARBON CREDIT SALE EMANATING TO THE ASSESSEE IS A CAPITAL RECEIPT NOT EXCIGIBLE TO TAX. ACCORDINGLY THIS CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED AND WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO PAY ANY TAX O N THE CARBON CREDIT SALE RECEIPT. 14. BEFORE PARTING WE WOULD LIKE TO MENTION THAT CARBON CREDIT AS MENTIONED ABOVE IS GENERATED UNDER THE KYOTO PROTOCOL AND BECAUSE OF INTERNATIONAL UNDERSTANDING. BRIEFLY IN THE PRESENT CASE THE FLUE GAS FLOW FROM SPONGE IRON ROTARY KILN IS PASSED THROUGH BURNING CHAMBER AND WASTE HEAT RECOVERY BOILER TO PRODUCE STEAM. THE STEAM SO GENERATED OPERATES THE TURBINE TO GENERATE ELECTRICITY. THIS TECHNOLOGY OF GENERATION OF ELECTRICITY RESULTS INTO REDUCTION OF GREEN HOUSE GASE S. FOR THIS THE PRODU CERS ARE GRANTED CARBON CREDIT. THE PRODUCERS OF SUCH CARBON CREDI T 11 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 CAN SELL THEM TO OTHER ASSESSEES WHO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO PROTOCOL. THUS THE CARBON CREDIT CAN ALSO BE SAID TO BE A GRANT AS INTERNATIONAL AG ENCY GRANTS THE SAME. CARBON CREDIT HENCE EMANATES OUT OF SUCH TECHNOLOGY AND PLANT AND MACHINERY WHICH CONTRIBUTE TO REDUCTION OF GREEN HOUSE GASES. THUS THESE CARBON CREDITS ARE ALSO MEANT TO PROMOTE SUCH INVESTMENTS WHICH ARE ADMITTEDLY CAPITAL IN NATUR E. HENCE SEEN FROM THIS ANGLE ALSO THE CARBON CREDIT IS A CAPITAL RECEIPT. 15. IN THE RESULT, THE CROSS OBJECTION IS ALLOWED. 16. NOW THE ISSUE RAISED IN REVENUES APPEAL WAS THAT WHETHER THE LEARNED CIT ( APPEALS) IS CORRECT OR NOT IN DELETING THE DISALL OWANCE OF CLAIM U/S 80IA WITH RESPECT TO THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE. WE FIND THAT AS WE HAVE ALREADY HELD THAT THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE IS A CAPITAL RECEIPT AND HENCE THE SAME IS NOT LIABLE TO TAX. THE ADJUDICATION OF ISSUE RAISED BY THE REVENUE IS ONLY OF ACADEMIC INTEREST. ACCORDINGLY WE ARE NOT ENGAGING UNDER THE SAME. HENCE THIS GROUND RAISED BY THE REVENUE IS DISMISSED AS INFRUCTUOUS. WE, THEREFORE, CONCLUDE THAT THE LEGAL ISSUE RAISED BY THE REVENUE DEPARTMENT A S PER THE ADDITIONAL GROUND STOOD MERGED WITH THE ADDITIONAL CROSS OBJECTION RAISED FROM THE SIDE OF THE RESPONDENT ASSESSEE/ CROSS OBJECTOR IN THE LIGHT OF THE PRECEDENCE CITED ABOVE AS WELL AS THE VIEW ALREADY EXPRESSED BY US AS REPRODUCED HEREIN ABOVE ( SUPRA). THEREFORE, THE GROUNDS RAISED BY THE REVENUE DEPARTMENT ARE HEREBY DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 11 . THE REVENUE HAS RAISED ONE MORE GROUND AS REPRODUCED BELOW: WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CA SE, THE CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE AND ADDITION OF RS.1,66,68,207/ - MADE BY THE AO OUT OF THE CLAIM OF ASSESSEE U/S 80IA OF THE IT ACT. 12 . THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAD TRANSFERRED ELECTRICITY TO ITS STEEL DI VISION @3.01 PER UNIT. THE AO HAS COMPARED THE RATE OF SUPPLY OF ELECTRICITY WITH THE RATE OF CSEB WHICH WAS STATED TO BE RS.2.80 PER UNIT. THEREFORE, THE ALLEGATION OF THE AO WAS THAT THE ELECTRICITY WAS TRANSFERRED AT HIGHER RATE TO ONE OF THE DIVISION W HICH WAS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE IT ACT. BY THIS METHOD, THE ASSESSEE HAD REDUCED THE PROFIT OF THE STEEL DIVISION WHICH WAS SUBJECT TO TAX AT 12 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 NORMAL RATE OF INCOME TAX. THE RELEVANT PORTION OF THE OBSERVATION OF THE AO IS AS UNDER: - 18. INTER UNIT SALE OF ELECTRICITY: 18.1 AS STATED EARLIER, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SPONGE IRON, FERRO ALLOYS, STEEL BILLET ETC. AND ELECTRICITY. THE FIRST THREE ITEMS ARE INCLUDED IN THE STEEL DIVISION. THE FURNA CE AND THE KILN OF THE STEEL DIVISION RUN ON ELECTRICITY PRODUCED BY ITS OWN POWER PLANT. AFTER TRANSFERRING THE ELECTRICITY PRODUCED IN THE POWER PLANT TO THE STEEL DIVISION, THE REMAINING ELECTRICITY IS SOLD BY THE ASSESSEE. DETAILS OF POWER SALES WERE R EQUISITIONED. IN THE DIVISION WISE ACCOUNTS, TOTAL REVENUE ON ACCOUNT OF THE STEEL DIVISION MANUFACTURING AND TRADING IS RS.3203083786/ - AND RS.11534632/ - RESPECTIVELY AND THAT ON ACCOUNT OF SALE OF POWER IS RS.23119424/ - AN SALE OF CARBON CREDIT IS RS.782 87701/ - THE ASSESSEE COMPANY HAS TRANSFERRED THE ELECTRICITY TO ITS THREE DIVISIONS NAMELY SPONGE IRON DIVISION, SMS DIVISION AND FERRO DIVISION. DURING THE YEAR UNDER CONSIDERATION TOTAL OF 7,98,65,740 UNITS OF ELECTRICITY HAS BEEN TRANSFERRED TO ALL THE THREE DIVISIONS WHICH HAS BEEN BILLED AT THE PRICE AT WHICH THE STEEL INDUSTRIES PROCURES THE POWER FROM CHHATTISGARH STATE ELECTRICITY BOARD (CSEB). IN TERMS OF MONEY IT COMES TO RS.24,02,92,279/ - I. E. AT THE RATE OF RS.3.01 PER UNIT. THE AO HAS CONCLUD ED THAT THE SUPPLY OF POWER WAS MADE TO A CAPTIVE UNIT @RS.3.01 PER UNIT WITH THE PURPOSE TO REDUCE THE PROFIT OF STEEL DIVISION, ALTHOUGH, THE ASSESSEE HAD SUPPLIED ELECTRICITY8 TO CSEB @ RS.2.80 PER UNIT. AS A RESULT, RE - CALCULATION WAS MADE BY THE AO AN D THE DISALLOWANCE WAS MADE TO REDUCE THE CLAIM OF DEDUCTION U/S 80IA (4) OF THE ACT BY RS.1,66,68,207/ - . BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 13. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, THE LEARNED CI T(A) HAS PLACED RELIANCE ON THE DECISION OF M/S. JINDAL STEELS & POWER LTD., 16 SOT 509 (DEL.) AS WELL AS THE DECISION OF DALMIA CEMENT (BHARAT) LTD. 32 SOT 164 (DEL.). SINCE, THE RELIEF WAS GRANTED, THE REVENUE IS IN APPEAL BEFORE US. 14. ON THIS ISSUE, WE HAVE HEARD BOTH THE SIDES. ON THE ISSUE WHETHER THE TARIFF DETERMINED BY STATE ELECTRICITY BOARD REPRESENTS MARKET VALUE OR NOT, A DETAILED VERDICT HAS ALREADY BEEN PRONOUNCED BY THE HONBLE JURISDICTIONAL HIGH COURT. IN THE CASE OF CIT VS M/S. GODAVARI POWER & ISPAT LTD. THE HONBLE HIGH COURT OF CHHATTISGARH AT BILAS PUR IN TAX 13 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 CASE NO.31/2012 VIDE JUDGMENT DATED 02 ND AUGUST, 2013 HAS OPINED AS UNDER: - 28. THE CHHATTISGARH - COMPANY IS A COMPANY WHICH IS GENERATING POWER. IT IS NEITHER CONSUMER OF THE EL ECTRICITY, NOT IT IS SUPPLYING POWER TO A CONSUMER. IT ALSO CANNOT SELL POWER TO ANY CONSUMER DIRECTLY. IT HAS TO COMPULSORILY SELL IT TO THE BOARD. 29. THE POWER SOLD BY THE CHHATTISGARH - COMPANY TO THE BOARD IS A SALE TO A COMPANY WHICH ITSELF SUPPLIES P OWER TO THE CONSUMERS. IT IS NOT SALE OF POWER TO THE CONSUMER. 30. THE STEEL - DIVISION OF THE ASSESSEE IS A CONSUMER. THE CPP OF THE ASSESSEE SUPPLIES ELECTRICITY TO THE STEEL - DIVISION. HAD THE STEEL - DIVISION NOT TAKEN POWER FROM THE CPP THEN IT HAD TO PU RCHASE POWER FROM THE BOARD. THE CPP HAS CHARGED THE SAME RATE FROM THE STEEL - DIVISION THAT THE STEEL - DIVISION HAD TO PAY TO THE BOARD IF THE POWER WAS PURCHASED FROM THE BOARD. 31. THE MARKET VALUE OF THE POWER SUPPLIED TO THE STEEL - DIVISION SHOULD BE CO MPUTED CONSIDERING THE RATE OF POWER TO A CONSUMER IN THE OPEN MARKET AND IT SHOULD NOT BE COMPARED WITH THE RATE OF POWER WHEN IT IS SOLD TO A SUPPLIER AS THIS IS NOT THE RATE FOR WHICH A CONSUMER OR THE STEEL - DIVISION COULD HAVE PURCHASED POWER IN THE OP EN MARKET. THE RATE OF POWER TO A SUPPLIER IS NOT THE MARKET RATE TO A CONSUMER IN THE OPEN MARKET. 32. IN OUR OPINION, THE AO COMMITTED AN ILLEGALITY IN COMPUTING THE MARKET VALUE BY TAKING INTO ACCOUNT THE RATE CHARGED TO A SUPPLIER; IT SHOULD HAVE BEEN COMPARED WITH THE MARKET VALUE OF POWER SUPPLIED TO A CONSUMER. 33. IT IS ADMITTED BY THE DEPARTMENT THAT IN CHHATTISGARH THE POWER WAS SUPPLIED TO THE INDUSTRIAL CONSUMERS AT THE RATE OF RS.3.20/ - PER UNIT FOR THE AY 2004 - 05 AND RS.3.75 PER UNIT FOR THE AYS 2005 - 06 AND 2006 - 07. IT WAS THIS RATE THAT WAS TO BE CONSIDERED WHILE COMPUTING THE MARKET VALUE OF THE POWER. 34. THE CIT - A AND THE TRIBUNAL HAD RIGHTLY COMPUTED THE MARKET VALUE OF THE POWER AFTER CONSIDERING IT WITH THE RATE OF POWER AVAILABLE IN THE OPEN MARKET NAMELY THE PRICE CHARGED BY THE BOARD. THERE IS NO ILLEGALITY IN THEIR ORDERS. 14 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 35. IN VIEW OF THE ABOVE, THE QUESTION IS DECIDED AGAINST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. THE TAX APPEALS HAVE NO MERIT. THEY ARE DISMISSED. 15. RESPECTFULLY FOLLOWING THE ABOVE, DECISION WE FIND NO FALLACY IN THE VIEW EXPRESSED BY THE LEARNED CIT (A). HENCE, THE SAME IS HEREBY CONFIRMED. GROUND OF APPE AL OF THE REVENUE IS DISMISSED. 6 . IN THE LIGHT OF THE DECISION ALREADY TAKEN BY US, WE HEREBY D ISMISS GROUND NO.1 OF THE REVENUES APPEAL AND ALLOW THE GROUND RAISED BY THE ASSESSEE/CROSS OBJECTOR IN THE CROSS OBJECTION. 7 . THE REVENUE HAS ALSO RAISED OTHER TWO GROUNDS I.E. GROUND NOS. 2 AND 3. THE SAME ARE REPRODUCED BELOW: 2. WHETHER IN LAW AND O N FACTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE AND ADDITION OF RS.2,00,000/ - MADE BY THE AO ON ACCOUNT OF TRAVELLING EXPENSES WHEN THE PURPOSE OF TRAVEL HAS NOT BEEN EXPLAINED AND DO NOT CONTAIN THE RELEVANT DET AILS. 3. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.2,33,642/ - MADE BY THE AO ON ACCOUNT OF TEMPLE & POOJA EXPENSES WHEN THE EXPENSES ON TEMPLE AND POOJA ARE PERSONAL AND NOT FOR T HE WELFARE OF THE EMPLOYEES. 8 . AFTER HEARING BOTH THE SIDES, WE HAVE NOTICED THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC REASON THAT WHY THE EXPENDITURE IN QUESTION WAS NOT ADMISSIBLE; SPECIFICALLY WHEN THE CLAIM OF THE ASSESSEE WAS THAT THE SAME WERE W HOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF ASSESSEES BUSIN ESS. IN A VERY CRYPTIC MANNER, HE HAS HELD THAT THE PURPOSE OF THE TRAVEL WAS NOT EXPLAINED AND THE TEMPLE AND POOJA EXPENDITURE ARE PERSONAL AND NOT FOR WELFARE OF THE EMPLOYEES. HENCE, HE HAD MADE DISALLOWANCE OF RS.2,00,000/ - AND RS.2,33,642/ - RESPECTIVELY ON AD - HOC BASIS. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE LEARNED CIT(A) HAS REVERSED THE IMPUGNED AD - HOC DISALLOWANCE ON THE GROUND THAT EVEN ON VERIFICATIO N OF BILLS AND VOUCHERS, NO 15 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 SPECIFIC INSTANCE WAS MENTIONED BY THE AO IN SUPPORT OF THE SAID DISALLOWANCES. WE ARE ALSO OF THE VIEW THAT ESTIMATION IN QUESTION PERTAINING TO TRAVELLING EXPENSES AND TEMPLE & POOJA EXPENSES WAS NOT BASED UPON ANY COGENT EVID ENCE. AS A RESULT, WE HEREBY CONFIRM THE FINDINGS OF THE LEARNED CIT (A) AND DISMISS THESE TWO GROUNDS OF APPEAL OF THE REVENUE. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDE R PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOV., 2015. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED : 30 TH NOV., 2015. LAKSHMIKANT DEKA/SR. PS COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T., CONCERNED 4. CIT ( APPEALS) - I, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FIL E TRUE COPY BY ORDER ASSISTANT REGI STRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. 16 ITA NO .110 /BLPR /2011 C. O. NO.138/BLPR/2015 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 23.11.2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 26.11.2015 / 30.11.2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER