Asstt.Commissioner of Income Tax-1(2), RAIPUR (CG) V. M/s Real Ispat and Power Limited, RAIPUR (CG)

CO 8/BIL/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1543 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 3 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: G S AGRAWAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER ITA NO. 38 / BLPR /201 2 & CO NO. 08 / BLPR /201 2 / ASSESSMENT YEAR: 2008 - 09 ASSTT. COMMISSIONER OF INCOME - TAX - 1(2), RAIPUR (CG) VS. M/S. REAL ISPAT & POWER LTD., VRINDAVAN, OPP. HOLY HEART SCHOOL, CIVIL LINES, RAIPUR PAN: AABCR 9986 L CH / (APPELLANT) / (RESPONDENT /CROSS - OBJECTOR ) REVENUE BY : SHRI D.K. JAIN, DR ASSESSEE BY : SHRI G.S. AGRAWAL , AR / DATE OF HEARING : 0 8 / 10 /2015 / DATE OF PRONOUNCEMENT: 09 / 10 /201 5 / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROSS - OBJECTION THEREOF FILED BY THE ASSESSEE, BOTH AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , RAIPUR (CG), D ATED 06 .0 1 .201 2 , PERTAINING TO ASSESSMENT YEAR 200 8 - 09 . 2. AT THE TIME OF HEARING BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE, SHRI D.K. JAIN, REQUESTED FOR ADJOURNMENT; HOWEVER, IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE GROUND NO.1 OF THE REVENUES APPEAL IS COVERED BY THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT AND IN RESPECT OF GROUND NO.2, THE ASSESSEE ITSELF HAS ALLOCATED MORE COMMON EXPENDITURE TOWARDS THE POWER DIVISION. IN ITA NO. 38/BLPR/2012 & CO 08/BLPR/ 2012 ACIT VS. - REAL ISPAT AND POWER LTD AY: 2008 - 09 2 VIEW OF ABOVE, THE REQUEST FOR ADJOURNMENT OF LEARNED DEPARTMENTAL REPRESENTATIVE WAS REJECTED AND THE MATTER WAS HEARD. 3. GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: - WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,04,55,735/ - MADE BY THE AO FOR CLAIMING DEDUCTION U/S 80IA ON ACCOUNT OF POWER SUPPLIED TO ITS FERRO DIVISION ON A HIGHER RATE BY RESTRICTING POWER TRANSFER RATE AS PER MARKET VALUE AT RS.2.80 PER UNIT AS SUPPLIED TO CSEB INSTEAD OF RATE CHARGED AT RS.3/ - PER UNIT. 4. AT THE OUTSET, THE LEARNED COUNSEL POINTED OUT THAT THE ID ENTICAL ISSUE IS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GODAWARI POWER & ISPAT LTD VIDE TAX CASE NO.31 OF 2012 . HE POINTED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS STATED THAT THE RATE AT WHICH POWER IS SOLD BY THE CHHATTISGARH STATE ELECTRICITY BOARD TO THE CONSUMER IS THE MARKET RATE AND NOT THE RATE AT WHICH THE CHHATTISGARH STATE ELECTRICITY BOARD PURCHASES THE POWER. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSEE HAS TRANSFERRED ELECTRICITY TO ITS FERRO DIVISION @ RS.3/ - PER UNIT. AS PER ASSESSING OFFICER, IF THE ASSESSEE HAD SUPPLIED THE ELECTRICITY TO CSEB, IT WOULD HAVE RECEIVED RS.2.80 / - PER UNIT. THEREFORE, THE ASSESSING OFFICER CONSIDERED THE MARKET RATE FOR SUPPLY OF ELECTRICITY TO FERRO DIVISION AT RS.2.80 / - PER UNIT AS AGAINST RS.3/ - PER UNIT CLAIMED BY THE ASSESSEE. ITA NO. 38/BLPR/2012 & CO 08/BLPR/ 2012 ACIT VS. - REAL ISPAT AND POWER LTD AY: 2008 - 09 3 ACCORDINGLY, THE PROFIT OF ELECTRICITY DIVISION WAS REVISED WHI CH REDUCED THE CLAIM OF DEDUCTION U/S 80IA OF ELECTRICITY DIVI SION. ON APPEAL, THE CIT(A) ACCEPTED ASSESSEES CONTENTION . NOW, WE FIND THE ISSUE TO BE COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GODAWARI POWER & ISPAT LTD, RAIPUR, WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT UPHELD THE ORDER OF THE ITAT WITH THE FOLLOWING FINDINGS: - 28. THE CHHATTISGARH - COMPANY IS A COMPANY WHICH IS GENERATING POWER. IT IS NEITHER CONSUMER OF THE ELECTRICITY, NOR IT IS SUPPLYI NG 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 POWER 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 SUPP LIES ELECTRICITY TO THE STEEL - DIVISION. HAD THE STEEL DIVISION NOT TAKEN POWER FROM THE CPP THEN IT HAD TO PURCHASE 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 COMPUTED 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 SU PPLIER AS THIS IS NOT THE RATE FOR WHICH A CONSUMER OR THE STEEL DIVISION COULD HAVE PURCHASED POWER IN THE OPEN 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 ILLE GALITY 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. ITA NO. 38/BLPR/2012 & CO 08/BLPR/ 2012 ACIT VS. - REAL ISPAT AND POWER LTD AY: 2008 - 09 4 33. IT IS ADMITTED BY THE DEPARTMENT THAT IN CHHATTISGARH THE POWER WAS SUPPLI ED 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. 35. IN VIEW OF ABOVE , THE QUESTION IS DECIDED AGAINST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. THE TAX APPEALS HAVE NO MERIT. THEY ARE DISMISSED. 6. FROM THE ABOVE, IT IS CLEAR THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT THE ASSESSING OFFICER COMMITTED AN ILLEGALITY IN COMPUTING THE MARKET VALUE BY TAKING INTO ACCOUNT THE RATE CHARGED TO SUPPLIER; IT SHOULD HAVE BEEN COMPARED WITH THE MARK ET VALUE OF THE POWER SUPPLIED TO THE CONSUMER. IN THE CASE UNDER APPEAL BEFORE US ALSO, THE ASSESSING OFFICER COMPUTED THE MARKET VALUE OF POWER BY TAKING THE RATE WHICH THE ASSESSEE WOULD HAVE CHARGED TO CHHATTISGARH STATE ELECTRICITY BOARD WHILE THE CI T(A) HAS ACCEPTED THE ASSESSEES CONTENTION THAT THE MARKET VALUE SHOULD BE COMPARED WITH THE MARKET VALUE OF THE POWER AT WHICH THE CHHATTISGARH STATE ELECTRICITY BOARD SUPPLIES THE POWER TO THE CONSUMER. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. GODAWARI POWER & ISPAT LTD (SUPRA), UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD AND REJECT THE GROUND NO.1 OF THE REVENUES APPEAL. 7. WITH REGARD TO GROUND NO.2 OF THE REVENUES APPEAL, THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE ASSESSMENT ORDER AND HAS ITA NO. 38/BLPR/2012 & CO 08/BLPR/ 2012 ACIT VS. - REAL ISPAT AND POWER LTD AY: 2008 - 09 5 POINTED OUT THAT THERE WAS A COMMON EXPENDITURE OF RS.14,26,890/ - AND OUT OF WHICH RS.6,09,425/ - OUGHT TO HAVE BEEN ALLOCAT ED TO POWER DIVISION AND CONSEQUENTLY, THE CLAIM U/S 80IA OF THE POWER DIVISION SHOULD HAVE BEEN REDUCED BY RS.6,09,425/ - . HE STATED THAT SINCE THE ASSESSEE HAS NOT ALLOCATED THE COMMON EXPENDITURE TO THE POWER DIVISION, THE ASSESSING OFFICER WAS FULLY JU STIFIED IN ALLOCATING PART OF THE COMMON EXPENDITURE TO THE POWER DIVISION. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD ALREADY ALLOCATED THE EXPENDITURE TO THE POWER DIVISION AND IN FACT THE ALLOCATION MADE BY THE ASSESSEE WAS M UCH MORE THAN WHAT IS ALLOCATED BY THE ASSESSING OFFICER. HE REFERRED TO PAGE NO.38 OF THE ASSESSEES PAPER BOOK AND POINTED OUT THAT THE ASSESSEE HAS ALREADY ALLOCATED THE COMMON EXPENDITURE TO THE EXTENT OF RS.14,23,373/ - . HE SUBMITTED THAT TOTAL COMMON EXPENDITURE WAS RS.81,04,994/ - AND THE ASSESSEE ALLOCATED IT IN THE RATIO OF SALE OF ALL THE UNITS. THE SALE OF THE POWER DIVISION WAS 17.56% OF THE TOTAL SALES OF THE ASSESSEE AND THEREFORE, 17.56% OF THE ENTIRE COMMON EXPENDITURE WAS ALLOCATED TOWARDS THE POWER DIVISION AND WAS REDUCED FROM THE PROFIT OF POWER DIVISION WHILE CLAIMING DEDUCTION U/S 80IA. THESE FACTS ARE NOT CONTROVERTED BY THE REVENUE. WE, THEREFORE, FIND THAT THE ASSESSEE HAS ALREADY ALLOCATED MORE COMMON EXPENSES I.E., TO THE EXTENT OF RS.14,23,373/ - TO THE POWER DIVISION WHILE AS PER ASSESSING OFFICER THE ASSESSEE SHOULD HAVE ALLOCATED RS.6,09,425/ - . IT SEEMS THAT THE ASSESSING OFFICER DID NOT NOTICE THE COMMON EXPENSES ALREADY ALLOCATED BY THE ASSESSEE. WHEN THE ASSESSEE HAS ALREAD Y ALLOCATED MORE COMMON EXPENSES THAN WHAT IS WORKED OUT BY THE ASSESSING OFFICER, IN OUR OPINION, NO FURTHER COMMON EXPENDITURE NEEDS TO BE ALLOCATED TO POWER DIVISION SO AS TO REDUCE ITS INCOME AND DEDUCTION U/S 80IA. ITA NO. 38/BLPR/2012 & CO 08/BLPR/ 2012 ACIT VS. - REAL ISPAT AND POWER LTD AY: 2008 - 09 6 ACCORDINGLY, WE DO NOT FIND ANY MER IT IN GROUND NO.2 OF THE REVENUES APPEAL AND THE SAME IS REJECTED. 8. THE CROSS - OBJECTION BY THE ASSESSEE IS ONLY IN SUPPORT OF THE CIT(A) AND THE SAME IS HELD TO BE INFRUCTUOUS AND REJECTED. 9. IN THE RESULT, THE REVENUES APPEAL AS WELL AS ASSESSEE S CROSS - OBJECTION, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 09 TH OCTOBER, 2015 AT RAIPUR . SD/ - SD/ - (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (G.D. AGRAWAL) VICE - PRESIDENT RAIPUR ; DATED 09 / 1 0 /201 5 BIJU T., PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, RAIPUR