DCIT, Circle-10(1), Kolkata, Kolkata V. M/s. Kanoria Chemicals & Ind. Ltd., Kolkata

CO 38/KOL/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3602 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 01-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: S JHAJHARIA
• Keywords: Validity of assessment; Reassessment proceedings
• Section: 143(3); 115JB; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM AND SHRI S.S.V. RAVI, JM] I.T.A. NO. 944/KOL/2016 ASSESSMENT YEAR: 2006-07 D.C.I.T., CIR 10(1).................................APPELLANT P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA 700 069. M/S. KANORIA CHEMICALS AND INDUSTRIES LTD...................................................RESPONDENT PARK PLAZA, 71, PARK STREET, KOLKATA 700 016. [PAN: AABCK 1291 K] C.O. NO. 38/KOL/2016 (ARISING OUT OF ITA NO. 944/KOL/2016) ASSESSMENT YEAR: 2006-07 M/S. KANORIA CHEMICALS AND INDUSTRIES LTD.........................................................APPELLANT PARK PLAZA, 71, PARK STREET, KOLKATA 700 016. [PAN: AABCK 1291 K] D.C.I.T., CIR 10(1)...............................RESPONDENT P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA 700 069. APPEARANCES BY: SHRI ARINDAM BHATTACHARJEE, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. SHRI S. JHAJHARIA, AR APPEARING ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : FEBRUARY 14, 2018 DATE OF PRONOUNCING THE ORDER : FEBRUARY 16, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(APPEALS) 10, KOLKATA DATED 26.02.2016 AND THE SAME IS BEING DISPOSED OF ALONG WITH THE CROSS-OBJECTION FILED BY THE ASSESSEE BEING C.O. NO. 38/K/2016. 2. THE SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION OF THE LD. CIT(A) OF THE ADDITION OF RS. 2,13,47,159/- 2 I.T.A. NO. 944/KOL/2016 & C.O. NO. 38/KOL/2016 ASSESSMENT YEAR: 2006-07 KANORIA CHEMICALS & INDUSTRIES LTD. MADE BY THE A.O. BY DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA TO THAT EXTENT. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS AND POWER. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 15.11.2006 DECLARING A TOTAL INCOME OF RS. 4,12,68,356/- UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS. 28,64,85,205/- UNDER SECTION 115JB OF THE ACT. IN THE SAID RETURN, DEDUCTION OF RS. 24,12,85,863/- WAS CLAIMED BY THE ASSESSEE COMPANY UNDER SECTION 80IA IN RESPECT OF PROFIT DERIVED FROM ITS POWER GENERATION UNIT. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 24.10.2010, THE CLAIM OF THE ASSESSEE COMPANY FOR DEDUCTION UNDER SECTION 80IA WAS FULLY ALLOWED BY THE A.O. SUBSEQUENTLY, HE NOTED FROM THE AUDITORS REPORT FILED BY THE ASSESSEE COMPANY IN FORM NO. 10CCB THAT IT HAD SOLD POWER TO UPPCL @ RS. 38,85,416/- PER MW/MU WHILE THE RATE CHARGED FOR INTER UNIT TRANSFER OF POWER WAS RS. 40,37,835/- PER MW/MU. ACCORDING TO THE A.O., THE ASSESSEE COMPANY THUS HAD INFLATED ITS INCOME OF THE ELIGIBLE UNIT BY RS. 2,13,47,159/- AND THE DEDUCTION UNDER SECTION 80IA TO THAT EXTENT WAS WRONGLY ALLOWED TO IT IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) LEADING TO ESCAPEMENT OF INCOME. HE, THEREFORE, REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 ON 31.03.2010 AFTER RECORDING THE REASONS. THE ASSESSEE COMPANY RAISED OBJECTION TO THE INITIATION OF REASSESSMENT PROCEEDINGS BY THE A.O., BUT OVERRULING THE SAME, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECTION 147/143(3) OF THE ACT VIDE AN ORDER DATED 28.12.2010. IN THE ASSESSMENT SO COMPLETED, HE DISALLOWED THE CLAIM OF THE 3 I.T.A. NO. 944/KOL/2016 & C.O. NO. 38/KOL/2016 ASSESSMENT YEAR: 2006-07 KANORIA CHEMICALS & INDUSTRIES LTD. ASSESSEE FOR DEDUCTION UNDER SECTION 80IA TO THE EXTENT OF RS. 2,13,47,159/- BY RELYING ON THE PROVISIONS OF SECTION 80IA(8) AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 6,31,22,705/-. 4. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) CHALLENGING THE VALIDITY OF THE SAID ASSESSMENT AS WELL AS DISPUTING THE ADDITION MADE THEREIN BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA TO THE EXTENT OF RS. 2,13,47,159/-. THE LD. CIT(A) DID NOT FIND MERIT IN THE PRELIMINARY ISSUE RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE ASSESSMENT MADE BY THE A.O. UNDER SECTION 147/143(3) AND UPHOLDING THE VALIDITY OF THE SAID ASSESSMENT, HE DECIDED THIS ISSUE AGAINST THE ASSESSEE. AS REGARDS THE ISSUE OF DISALLOWANCE MADE BY THE A.O. UNDER SECTION 80IA, THE LD. CIT(A) FOUND THAT A SIMILAR ISSUE WAS DECIDED BY ITAT IN FAVOUR OF THE ASSESSEE FOR A.Y. 2007-08 VIDE AN ORDER DATED 31.08.2012 PASSED IN ITA NO. 334/K/2011. HE ACCORDINGLY FOLLOWED THE SAID ORDER OF THE ITAT AND DELETED THE ADDITION OF RS. 2,13,47,159/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA. AGGRIEVED BY THIS RELIEF ALLOWED BY THE LD. CIT(A) TO THE ASSESSEE, REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL WHILE THE ASSESSEE COMPANY HAS ALSO FILED A CROSS-OBJECTION RAISING THE ISSUE RELATING TO THE VALIDITY OF ASSESSMENT MADE BY THE A.O. UNDER SECTION 147/143(3) OF THE ACT. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE AS INVOLVED IN THIS APPEAL OF THE REVENUE RELATING TO 4 I.T.A. NO. 944/KOL/2016 & C.O. NO. 38/KOL/2016 ASSESSMENT YEAR: 2006-07 KANORIA CHEMICALS & INDUSTRIES LTD. DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA HAD COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 AND VIDE ITS ORDER DATED 31.08.2012 (SUPRA), THE SAME WAS DECIDED BY THE TRIBUNAL VIDE PARAGRAPH NO 8 OF ITS ORDER WHICH READS AS UNDER: 8. HENCE, WE ARE OF THE VIEW THAT THE MARKET VALUE FOR THE PURPOSE OF SUB- SECTION 8 OF SECTION 80IA OF THE ACT IS A PRICE ARRIVED AT BETWEEN BUYER AND SELLER IN THE OPEN MARKET WHERE TRANSACTION TAKES PLACE IN NORMAL COURSE OF BUSINESS IN CONTRAST TO A SITUATION WHERE PRICE IS FIXED BETWEEN A BUYER AND A SELLER NEGOTIATION DONE UNDER LEGISLATIVE MANDATE. THE CLAIM OF DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF ITS CAPTIVE POWER UNDER TAKING ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRIC POWER AND POWER GENERATED BY ASSESSEE UNUSED IN ITS OWN CONSUMPTION AS WELL AS SALE TO STATE ELECTRICITY BOARD, THE PRICE AT WHICH POWER WAS SUPPLIED BY ASSESSEE TO BOARD WAS DETERMINED ENTIRELY IN TERM OF STATUTORY REGULATION AND SUCH A PRICE CANNOT BE EQUATED AS MARKET VALUE APPEARING IN EXPLANATION APPENDED TO SECTION 80IA(8) OF THE ACT AND FOR THE PURPOSES OF COMPUTATION OF DEDUCTION UNDER THIS SECTION EXCLUDING THE DUTIES, CESS, TAXES ETC. EVEN OTHERWISE, IN THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS GRAPHITE INDIA G.A. NO. 3114 OF 2008, ITA NO. 733 OF 2008 DATED 10.012.2008. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED IN PRINCIPLE BUT SUBJECT TO RE-COMPUTATION OF DEDUCTION U/S 80IA OF THE ACT EXCLUDING THE ELECTRICITY DUTY, TAXES ETC. BY THE A.O. 6. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE DECISION OF THE TRIBUNAL GIVING RELIEF TO THE ASSESSEE ON THE SIMILAR ISSUE FOR A.Y. 2007-08 HAS ALREADY BEEN UPHELD BY THE HONBLE KOLKATA HIGH COURT VIDE ITS JUDGMENT DELIVERED ON 8 TH MAY, 2013 IN ITAT NO. 58 OF 2013. THE ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE THUS IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR A.Y. 2007-08 AND EVEN THE LEARNED DR HAS NOT DISPUTED THIS POSITION. THE GROUND RAISED BY THE REVENUE IN ITS APPEAL ALSO MAKES IT CLEAR THAT THIS 5 I.T.A. NO. 944/KOL/2016 & C.O. NO. 38/KOL/2016 ASSESSMENT YEAR: 2006-07 KANORIA CHEMICALS & INDUSTRIES LTD. APPEAL IS FILED BY THE REVENUE TO KEEP THIS ISSUE ALIVE AS THE APPEAL FILED BY IT AGAINST THE JUDGMENT OF HONBLE KOLKATA HIGH COURT IN A.Y. 2007-08 IS PENDING. WE, THEREFORE, RESPECTFULLY FOLLOW THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN ASSESSEES OWN CASE FOR A.Y. 2007-08 ON A SIMILAR ISSUE AND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS. 2,13,47,159/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 7. AS REGARDS THE CROSS-OBJECTION FILED BY THE ASSESSEE, IT IS OBSERVED THAT THE ISSUE RAISED THEREIN CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 147/143(3) HAS BECOME INFRUSTUOUS OR ACADEMIC AS A RESULT OF OUR DECISION RENDERED HEREIN ABOVE UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ENTIRE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80IA IN THE SAID ASSESSMENT. WE, THEREFORE, DO NOT CONSIDER IT NECESSARY OR EXPEDIENT TO ADJUDICATE UPON THE ISSUE RAISED IN THE CROSS-OBJECTION OF THE ASSESSEE AND DISMISS THE SAID CROSS- OBJECTION AS INFRUCTUOUS. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND CROSS-OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH FEBRUARY, 2018. SD/- SD/- (S.S.VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16/02/2018 BISWAJIT, SR. PS 6 I.T.A. NO. 944/KOL/2016 & C.O. NO. 38/KOL/2016 ASSESSMENT YEAR: 2006-07 KANORIA CHEMICALS & INDUSTRIES LTD. COPY OF ORDER FORWARDED TO: 1. M/S. KANORIA CHEMICALS AND INDUSTRIES LTD., PARK PLAZA, 71, PARK STREET, KOLKATA 700 016. 2. DCIT, CIR 10(1), P-7, CHOWRINGHEE SQUARE, KOLKATA 700 016. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA