Kesoram Industries Ltd., Kolkata V. Add.CIT,Range-5, Kolkata

ITA 1037/KOL/2012

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6532 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA; SAUR
• Assessee Lawyers: D S DAMLE
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Proportionate interest; Question of law; Revised return
• Section: 43B; 143(3); 14A; 260A; 32; 28; 154

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $%&% , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 773/KOL/2013 ASSESSMENT YEAR: 2009-10 KESORAM INDUSTRIES LIMITED (PAN: AABCK 2417 P) VS. ADDL. CIT RANGE - 5, KOL. APPELLANT RESPONDENT I.T.A. NO. 1037/KOL/2012 ASSESSMENT YEAR: 2008-09 KESORAM INDUSTRIES LIMITED (PAN: AABCK 2417 P) VS. ADDL. CIT RANGE - 5, KOL. APPELLANT RESPONDENT I.T.A. NO. 1722/KOL/2012 ASSESSMENT YEAR: 2008-09 ADDL. CIT RANGE - 5, KOL. VS. KESORAM INDUSTRIES LI MITED (PAN: AABCK 2417 P) APPELLANT RESPONDENT I.T.A. NO. 1188/KOL/2016 ASSESSMENT YEAR: 2008-09 KESORAM INDUSTRIES LIMITED (PAN: AABCK 2417 P) VS. DY. CIT RANGE - 5, KOL. APPELLANT RESPONDENT I.T.A. NO. 1995/KOL/2013 ASSESSMENT YEAR: 2009-10 DY. CIT RANGE - 5, KOL. VS. KESORAM INDUSTRIES LIMI TED (PAN: AABCK 2417 P) APPELLANT RESPONDENT I.T.A. NO. 505/KOL/2017 ASSESSMENT YEAR: 2009-10 KESORAM INDUSTRIES LIMITED (PAN: AABCK 2417 P) VS. DY. CIT RANGE - 5, KOL. APPELLANT RESPONDENT ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 2 DATE OF HEARING 26.03.2018 DATE OF PRONOUNCEMENT 26.04.2018 FOR THE APPELLANT SHRI D. S. DAMLE, AR FOR THE RESPONDENT SHRI G. MALLIKARJUNA, CIT DR & SHRI SAURABH KUMAR ADDL. CIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THESE SIX APPEALS, FOUR BY THE ASSESSEE AND TWO BY THE REVENUE RELATE TO ASSESSMENT YEARS 2008-09 AND 2009-10. SINCE THE ISSUES INVOLVE D IN THESE APPEALS ARE COMMON AND INTER-LINKED THE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP FOR A.Y. 2008-09 BEING THE CROS S-APPEALS IN (ITA NO. 1037/KOL/2012 AND 1722/KOL/2012) ARISING OUT OF THE ORDER OF THE LD. CIT(A) VI, KOLKATA HERE-IN-AFTER LD. CIT(A) DATED 27.04.2012 PASSED AG AINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) PASSED BY THE A.O. DATED 31.12.2010, AND THE OTHER ASSESSEES APPEAL IN ITA NO. 1188/KOL/2016 ARISING OUT OF THE APPELLATE ORDE R OF THE LD. CIT(A) 17, KOLKATA DATED 04.03.2016 PASSED AGAINST THE ORDER UNDER SECTION 2 50/143(3) PASSED BY THE A.O. WITH A VIEW TO GIVE EFFECT TO THE LD. CIT(A)S ORDER DATED 27.04.2012. FIRST WE WILL TAKE UP FOR A.Y. 2008-09 (ITA NO. 103 7/KOL/2012 I.E. ASSESSEES APPEAL. 3. GROUND NO. 1 TO 4 ARE DIRECTED AGAINST THE ACTIO N OF THE LD. CIT(A) WHO CONFIRMED THE DISALLOWANCE AGGREGATING TO RS. 61,47,311/- MAD E BY THE A.O. UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER THE ACT) READ W ITH RULE 8D OF THE INCOME TAX RULES, 1962 (HERE-IN-AFTER THE RULES). ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 3 4. BRIEFLY STATED THE FACTS OF THE CASES ARE THAT D URING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE DERIVED DIVIDEND INCOME TO THE TUNE OF RS. 3,55,81,107/- WHICH WAS EXEMPT UNDER SECTION 10(34) OF THE ACT. FOR EARNING THE EXEMPT I NCOME, THE ASSESSEE HAD OFFERED DISALLOWANCE OF RS. 10,00,000/- UNDER SECTION 14A I N THE RETURN OF INCOME. IN THE ASSESSMENT PROCEEDINGS, THE A.O. DID NOT ACCEPT THE DISALLOWANCE OFFERED BY APPELLANT. REFERRING TO THE DECISION OF THE SPECIAL BENCH OF T HE TRIBUNAL (MUMBAI) IN THE CASE OF DAGA CAPITAL MANAGEMENT LTD. (117 ITD 169, HE INVOKED AN D APPLIED THE PROVISIONS OF RULE 8D AND MADE THE FOLLOWING DISALLOWANCE: 1. RULE 8D(2)(I) DEMAT CHARGES RS. 62,905/- 2. RULE 8D(2)(II) INTEREST EXPENSES RS. 41,66,919/ - 3. RULE 8D(2)(III) ADMINISTRATIVE EXPENSES RS. 19,1 7,487/- TOTAL RS. 61,47,311/- AGGRIEVED BY THE ORDER OF THE ACTION OF THE A.O., THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE LD. CIT(A) VI, KOLKATA WHO UPHELD THE DISALLOWANCE OF RS. 61,41,311/- MADE UNDER SECTION 14A OF THE ACT. AGGRIEVED THE ASSESSE E IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. AT THE OUTSET ITSELF, THE LEARNED AR SHRI, D.S. DAMLE, FCA APPEARING ON BEHAL F OF THE APPELLANT ASSESSEE DID NOT DISPUTE THE DISALLOWANCE MADE BY THE A.O. UNDER RUL E 8D(2)(I) ON ACCOUNT OF DEMAT CHARGES. THEREFORE, THE SAME IS CONFIRMED. COMING T O THE DISALLOWANCE OF PROPORTIONATE INTEREST UNDER RULE 8D(2)(II), THE LEARNED AR CONT ENDED THAT THE INVESTMENTS WERE MADE BY THE ASSESSEE-COMPANY OUT OF ITS OWN FUNDS WHICH WAS SUFFICIENT TO COVER THE COST OF INVESTMENT AND THAT NO INTEREST BEARING BORROWED FU NDS WERE UTILIZED TO MAKE INVESTMENT WHICH YIELDED THE EXEMPT INCOME. FOR BUTTRESSING TH IS ARGUMENT, THE LEARNED AR DREW OUR ATTENTION TO THE AUDITED ACCOUNTS WHICH WE NOT AS U NDER: ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 4 PARTICULARS AMOUNT (31.03.2008) AMOUNT (31.03.2007) SHARE CAPITAL 45.75 CRORES 45.74 CRORES RESERVE 936.17 CRORES 608.69 CRORES OWN FUNDS 981.92 CRORES 654.43 INVESTMENTS 47.88 CRORES 28.87 CRORES THUS WE NOTE THAT THE ASSESSEE IN FACT HAD OWN FUN DS TO THE TUNE OF RS. 981.92 CRORES AND THE INVESTMENT IS ONLY RS. 47.88 CRORES. THE LE ARNED AR PLACED RELIANCE ON THE JUDGMENT OF THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF CIT VS RASOI LTD. (ITA 109 OF 2016 DATED 15.02.2017) AND HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS HDFC BANK (383 ITR 529) AND RELIANCE UTILITIES AND POWER LTD. (313 ITR 340). 6. WE NOTE THAT THE ASSESSEE HAD OWN FUNDS OF RS. 9 81.92 AND THE INVESTMENTS WERE ONLY TO THE TUNE OF RS. 47.88 CRORES AT THE END OF THE YEAR. FROM THIS FIGURES WE FIND THAT THE ASSESSEE HAD AT ITS DISPOSALS SUFFICIENT FUNDS TO M AKE THE INVESTMENT WHICH YIELDED EXEMPT INCOME. WE FURTHER NOTE THAT IN THE PAST YEARS, THE DEPARTMENT DID NOT DISPUTE THE FACT THAT THE INVESTMENTS WERE MADE OUT OF OWN FUNDS. WE NOTE THAT IN A.Y. 2007-08, THE REVENUE HAD IN FACT INVOKED PROVISIONS OF SECTION 14A AND D ISALLOWED THE PROPORTIONATE INTEREST. HOWEVER, IN THE APPELLATE ORDER FOR A.Y. 2007-08, T HE LD. CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAD DEMONSTRATED THAT INV ESTMENTS WERE OUT OF OWN FUNDS AND NOT FROM BORROWED FUNDS AND WE NOTE THAT THE LD. CIT(A) ACTION OF DELETION OF INTEREST WAS UPHELD BY THIS TRIBUNAL. WE RELY ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS RASOI LTD. (SUPRA) WHEREIN THE HONB LE HIGH COURT TAKING NOTE OF THE JUDGMENT PASSED BY THE CO-ORDINATE BENCH OF THE CAL CUTTA HIGH COURT IN DHANUKA & SONS 339 ITR 319 HELD AS UNDER: ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 5 IT APPEARS FOR BOTH THE ASSESSMENT YEARS THE APPEL LATE AUTHORITY HELD THAT THERE WAS NO FINDING OF DIRECT NEXUS BETWEEN THE BORROWED FUND A ND INVESTMENT IN SHARES. THE ASSESSEE'S OWN FUNDS WERE FAR IN EXCESS OF THE AVERAGE TOTAL I NVESTMENTS. THERE COULD NOT BE ANY PRESUMPTION OF UTILIZATION OF BORROWED FUNDS. HENCE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D (2 ) (II) WAS DELETED WHILE DISALLOWAN CE OFINDIRECT EXPENSES OF RS.1,82,346/ - BY APPLICATION OF RULE 8D(2) (III)UPHELD WITH THE DIRE CTION TO ALLOW RELIEF OF THE SUM ALREADY DISALLOWED BY THE APPELLANT ITSELF. ON APPEAL PREFERRED BY THE REVENUE THE TRIBUNAL HEL D AS FOLLOWS: - WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FA CTS ANDCIRCUMSTANCES OF THE CASE. WE FIND THAT NOW THE REVENUE COULD NOT ESTABLISH THAT THE INVESTMENTS MADE IN SHARES GIVING EXEMPTED INCOMEIS OUT OF BORROWED FUNDS ON WHICH IN TEREST IS PAID BY ASSESSEE.THERE IS NO NEXUS WHATSOEVER. ON SPECIFIC QUERY LD. SR. DR COUL D NOT CONTROVERT THAT THE ASSESSEE HAS MADE IN INVESTMENT IN SHARES GIVING EXEMPT INCOME O UT OF OWN FUNDS WHICH IS AT ABOUT 2429 LACS AND INVESTMENT IS AT RS.365 LACS ONLY. ON CE THIS FACT HAS NOT BEEN DENIED AND CIT(A) HAS CATEGORICALLY OBSERVED THAT THE ASSESSEE HAS MADE INVESTMENT IN SHARES OUT OF ITS OWN FUNDS NO DISALLOWANCE CAN BE ATTRIBUTED QUA THE INTEREST PAID ON BORROWED FUNDS FOR INVESTING THE SAME IN INTEREST FREE FUNDS. IN V IEW OF THE ABOVE, WE CONFIRM THE ORDER OF CIT (A) ON THE COMMON ISSUE...............' WE FIND THAT THIS CASE HAS YIELDED CONCURRENT FINDI NG OF FACTS REGARDING EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSE OF EARNING THE EXEMPT INCOME, BY THE APPELLATE AUTHORITY AND THE TRIBUNAL. AS SUCH THERE IS NO SCO PE FOR INTERFERENCE WITH SUCH CONCURRENT FINDINGS OF FACTS. WE, THEREFORE, ARE NOT SATISFIED THAT THE CASE INVOLVES ANY SUBSTANTIAL QUESTION OF LAW. THE APPLICATION AND APPEAL ARE THUS DISMISSED. 7. SIMILARLY IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) WERE THE HONBLE BOMBAY HIGH COURT HAS HELD AS UNDER: 10. IF THERE BE INTEREST-FREE FUNDS AVAILABLE TO A N ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST-FREE FUNDS AVAILABLE. IN OUR OPINION THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL WORKS LTD.'S CASE (SUPRA) HAD THE OC CASION TO CONSIDER THE DECISION OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD.'S CASE (SUPRA) WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE THE SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS AND IN THESE CIRCUMSTANCES THE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSIDERABLE FORCE, BUT CONSIDERING THE FACT TH AT THE CONTENTION HAD NOT BEEN ADVANCED ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 6 EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOMBERS OF INDIA LTD.'S CASE (SUPRA) THE CALCUTTA HIGH COURT HAD COME TO TH E CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY AND TH E PROFITS WERE DEPOSITED IN THE OVERDRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOUL D BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERD RAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, THERE WAS S UFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRI NCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AN D/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST -FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION IS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE CIT (APPEALS) AND ITAT. 11. CONSIDERING THE ABOVE, IN OUR OPINION, THERE IS NO MERIT IN THIS APPEAL WHICH IS ACCORDINGLY DISMISSED. 8. WE ALSO RELY ON THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS HDFC HELD AS UNDER: KEEPING THE AFORESAID POSITION OF LAW IN MIND, WE SHALL NOW EXAMINE THE IMPUGNED ORDER OF THE TRIBUNAL. THE ISSUE BEFORE THE TRIBUNAL AS RAIS ED BY THE PETITIONER WAS THAT SECTION 14A OF THE ACT WOULD HAVE NO APPLICATION TO DISALLOW INTER EST EXPENDITURE ON FUND BORROWED IN RESPECT OF THE TAX FREE RETURNS ON THE SECURITIES, FOR THE FOLLOWING TWO REASONS: (A) THE PETITIONER WAS POSSESSED OF SUFFICIENT INTEREST FREE FUNDS OF RS. 2153 CRORES AS AGAINST THE INVESTMENT IN TAX FREE SECURITIES OF RS . 52.02 CRORES. CONSEQUENTLY, THERE IS A PRESUMPTION THAT THE INVESTMENT WHICH HAS BEEN MA DE IN THE TAX FREE SECURITIES HAS COME OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH THE PETITIONER. THIS IS SO AS IT HAS BEEN HELD BY THIS COURT IN THE PETITIONERS OWN CAS E FOR AN EARLIER ASSESSMENT YEAR BEING HDFC BANK LTD. (SUPRA). THIS DECISION ON THE ABOVE ISSUE HAS BEEN ACCEPTED BY THE REVENUE. THIS IS EVIDENCES BY THE FACT ALTHOUGH AN APPEAL HAS BEEN FILED TO THE SUPREME COURT WITH REGARD TO ANOTHER ISSUE ARISING FROM THE ORDER IN HDFC BANK LTD. (SUPRA) NAMELY BROKEN PERIOD INTEREST, NO APPE AL ON THIS ISSUE AS RAISED BEFORE THE TRIBUNAL HAS BEEN CHALLENGED BEFORE THE SUPREME COURT, AND (B) IN ANY EVENT, THE TAX FREE INVESTMENT IN SECURITIES WERE THE PETITION ERS STOCK-IN-TRADE. CONSEQUENTLY, THERE WOULD BE NO OCCASION TO INVOKE SECTION 14A OF THE ACT AS HELD BY THIS COURT IN INDIA ADVANTAGE SECURITIES LTD. (SUPRA) WHEREIN THE REVENUES APPEAL FROM THE ORDER OF THE TRIBUNAL WAS DISMISSED, TO CONTEND THAT NO D ISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT IN RESPECT OF EXEMPTED INCOM E ARISING FROM STOCK-IN-TRADE. IT IS CLEAR THAT FOR THE FIRST TIME IN THE CASE OF HDFC BANK LTD. (SUPRA) THAT THIS COURT TOOK A VIEW THAT THE PRESUMPTION WHICH HAS BEEN LAID DOWN IN RELIANCE UTILITIES & POWER LTD. (SUPRA) WITH REGARD TO INVESTMENT IN TAX FREE SECUR ITIES COMING OUT OF ASSESSEES OWN FUNDS IN ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 7 CASE THE SAME ARE IN EXCESS OF THE INVESTMENTS MADE IN THE SECURITIES (NOTWITHSTANDING THE FACT THAT THE ASSESSEE CONCERNED MAY ALSO HAVE TAKEN SOM E FUNDS ON INTEREST) APPLIES, WHEN APPLYING SECTION 14A OF THE ACT. THUS, THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA) FOR THE FIRST TIME ON 23 RD JULY, 2014 HAS SETTLED THE ISSUE BY HOLDING THAT T HE TEST OF PRESUMPTION AS HELD BY THIS COURT IN RELIANCE UTILITIES AND POW ER LTD. (SUPRA) WHILE CONSIDERING SECTION 36(1)(III) OF THE ACT WOULD APPLY WHILE CONSIDERING THE APPLICATION OF SECTION 14A OF THE ACT. THE AFORESAID DECISION OF THIS COURT IN HDFC BANK L TD. (SUPRA) ON THE ABOVE ISSUE HAS ALSO BEEN ACCEPTED BY THE REVENUE IN AS MUCH AS EVEN THO UGH THEY HAVE FILED AN APPEAL TO THE SUPREME COURT AGAINST THE ORDER ON THE OTHER ISSUE THEREIN VIZ. BROKEN PERIOD INTEREST, NO APPEAL HAS BEEN PREFERRED BY THE REVENUE ON THE ISS UE OF INVOKING THE PRINCIPLES LAID DOWN IN RELIANCE UTILITIES & POWER LTD. (SUPRA) IN ITS APPL ICATION TO SECTION 14A OF THE ACT. THEREFORE, THE ISSUE WHICH AROSE FOR CONSIDERATION BEFORE THE TRIBUNAL HAD NOT BEEN DECIDED BY THIS COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA). IT AROSE A ND WAS SO DECIDED FOR THE FIRST TIME BY THIS COURT IN HDFC BANK LTD. (SUPRA). THUS, THERE IS NO CONFLICT AS SOUGHT TO BE MADE OUT BY THE IMPUGNED ORDER. THUS, THE IMPUGNED ORDER HAS PROCEE DED ON A FUNDAMENTALLY ERRONEOUS BASIS AS THE PRESUMPTION CANVASSED BY THE PETITIONER BEFO RE THE TRIBUNAL ON THE BASIS OF THE RATIO OF THE DECISION OF THE COURT IN HDFC BANK LTD. (SUPRA) . AT THE HEARING MR. SURESH KUMAR, LEARNED COUNSEL FO R THE REVENUE URGED THAT ON THE FACTS OF THIS CASE NO FAULT CAN BE FOUND WITH THE ORDER OF T HE TRIBUNAL. IT IS SUBMITTED THAT THE PETITIONER WAS NOT ABLE TO ESTABLISH BEFORE THE ASS ESSING OFFICER AND THE CIT(A) THAT THE AMOUNTS INVESTED IN THE INTEREST FREE SECURITIES CA ME OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE PETITIONER. IN THAT VIEW OF THE MATTER, IT IS S UBMITTED BY HIM THAT THE ORDER OF THIS COURT IN HDFC BANK LTD. (SUPRA) WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. WE ARE UNABLE TO UNDERSTAND THE ABOVE SUBMISSION. THE ASSESSING OFFI CER PASSED THE ASSESSMENT ORDER ON 22 ND DECEMBER, 2010 UNDER SECTION 143(3) OF THE ACT. THE CIT(A) PASSED AN ORDER ON 21 ST NOVEMBER, 2011 DISMISSING THE PETITIONERS APPEAL. ON BOTH THE DATES WHEN THE ORDERS WERE PASSED BY THE ASSESSING OFFICER AND CIT(A), THE AUT HORITIES DID NOT HAVE THE BENEFIT OF THE ORDER OF THIS COURT IN HDFC BANK LTD. (SUPRA) RENDE RED ON 23 RD JULY, 2014.ONCE THE ISSUE IS SETTLED BY THE DECISION OF THIS COURT IN HDFC BANK LTD. (SUPRA), THERE IS NOW NO NEED FOR THE ASSESSEE TO ESTABLISH WITH EVIDENCE THAT THE AMOUNT S WHICH HAS BEEN INVESTED IN THE TAX FREE SECURITIES HAVE COME OUT OF INTEREST FREE FUNDS AVA ILABLE WITH IT. THIS IS BECAUSE ONCE THE ASSESSEE IS POSSESSED OF INTEREST FREE FUNDS SUFFIC IENT TO MAKE THE INVESTMENT IN TAX FREE SECURITIES, IT IS PRESUMED THAT IT HAS BEEN PAID FO R OUT OF THE INTEREST FREE FUNDS. CONSEQUENTLY, WE DO NOT FIND ANY MERIT IN THE ABOVE SUBMISSION MA DE AT THE HEARING ON BEHALF OF THE REVENUE. 9. FOLLOWING THE AFORESAID RATIO DECIDENDI OF THE A BOVE JUDGMENTS, WE FIND THAT THE OWN FUNDS OF THE ASSESSEE ARE SUFFICIENT TO MAKE THE CO ST OF THE INVESTMENTS WHICH YIELDED EXEMPT INCOME. THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD WHICH PROVES THAT THE INVESTMENT WAS MADE OUT OF THE BORROWED FUNDS. WE A RE, THEREFORE, OF THE VIEW THAT THE INVESTMENT MADE OUT OF THE ASSESSEES OWN FUNDS AND ACCORDINGLY THE ADDITION MADE BY THE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 8 A.O. AND CONFIRMED BY THE LD. CIT(A) UNDER SECTION 14A READ WITH RULE 8D(2)(II) AMOUNTING TO RS. 41,66,919/- IS TO BE DELETED AND W E ORDER ACCORDINGLY. 10. NOW COMING TO THE DISALLOWANCE OF RS. 19,17,487 /- MADE UNDER RULE 8D(2)(III), WE FIND FORCE IN THE ALTERNATE ARGUMENT OF LEARNED AR THAT ONLY DIVIDEND BEARING INVESTMENT OF SCRIPS ARE TO BE CONSIDERED FOR MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN THIS REGARD, RELIANCE WAS PLACED BY THE LEARNED AR ON TH E DECISION OF THE TRIBUNAL IN THE CASE REI AGRO LTD. REPORTED IN 143 ITD 141 KOLKATA WHICH WE NOTE IS VERY WELL FOUNDED WHEREIN IT WAS HELD: (8.1) THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT -MATTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. T HE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHI CH DOES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INTO CONSIDERAT ION THE INVESTMENT WHICH HAS GIVEN RISE TO THIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL I NCOME. UNDER THE CIRCUMSTANCES, THE COMPUTATION OF THE DISALLOWANCES UNDER SECTION 14A READ WITH RULE 8D(2)(III0, WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED IN THE FILE O F THE A.O. FOR RECOMPUTATION IN LINE WITH THE DIRECTION GIVEN ABOVE. NO DISALLOWANCE UNDER SECTIO N 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. 11. IN VIEW OF THE AFORESAID FINDINGS AND RESPECTIV ELY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL, WE REMAND THIS ISS UE TO THE FILE OF A.O. WITH THE DIRECTION TO CONSIDER ONLY THE INVESTMENT WHICH YIELDED DIVID END INCOME TO THE ASSESSEE FOR COMPUTING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D(2)(II) OF THE RULES. 12. WE FURTHER DIRECT THAT AFTER RE-WORKING THE GRO SS DISALLOWANCE OF RULE 8D IN TERMS OF THE DISCUSSION AND DIRECTION GIVEN ABOVE, THE A.O. SHALL REDUCE THE SUM OF RS. 10,00,000/- ALREADY SUO-MOTO DISALLOWED BY THE ASSESSEE UNDER S ECTION 14A AND THE NET SUM SO COMPUTED ALONE SHALL BE ADDED BACK TO THE TOTAL INC OME. HOWEVER, IN CASE THE REVISED DISALLOWANCE UNDER SECTION 14A WORK OUT AT A SUM LO WER THAN THE AMOUNT OF RS. 10,00,000/- SUO-MOTO DISALLOWED BY THE ASSESSEE, THEN THE A.O. SHALL RESTRICT THE DISALLOWANCE UNDER ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 9 SECTION 14A TO RS. 10,00,000/-. THEREFORE, GROUNDS RAISED BY ASSESSEES APPEAL ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 13. NOW WE TAKE UP REVENUES APPEAL IN ITA 1722/KOL /2012 PREFERRED BY THE REVENUE. GROUND NO. 1 IS AGAINST THE ACTION OF THE LD. CIT(A ) IN DELETING THE DISALLOWANCE OF RS. 1,65,748/- MADE ON ACCOUNT OF ADVANCES WRITTEN OFF. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAD WRITTEN OFF CERTAIN D EBIT BALANCES FROM ITS BALANCE SHEET AGGREGATING TO RS. 1,65,748/- AND DEBITED IT TO ITS PROFIT AND LOSS ACCOUNT BEING NO LONGER RECOVERABLE. THE ADVANCES WRITTEN OFF COMPRISED OF THE UNADJUSTED BALANCES OF SUPPLIES OF RAW MATERIALS AND STORES WHICH HAD REMAINED OUTSTAN DING OVER A LONG PERIOD OF TIME WHICH WERE RAW MATERIALS/ITEMS OF STORES AND THE AMOUNT D UE FROM EXCISE AUTHORITIES AND ACCORDING TO THE ASSESSEE, WHICH WAS ALSO NO LONGER RECOVERABLE TO IT. BEFORE THE A.O. THE BREAK-UP OF ADVANCES WRITTEN OFF AS AFORESAID WAS F URNISHED. THE A.O. OBSERVED THAT THE AMOUNTS IN QUESTION WERE NOT RECEIVABLE AS TRADING DEBTS BUT WERE OUTSTANDING ADVANCES AND DEPOSIT AND THEREFORE, THE CLAIM OF THE ASSESSEE WA S UNTENABLE AND THESE SUMS DID NOT SATISFY THE CONDITIONS PRESCRIBED IN SECTION 36(2) READ WIT H SECTION 36(1)(VII) OF THE ACT. ON APPEAL, THE LD. CIT(A)-VI, KOLKATA FOLLOWING THE ORDER OF H IS PREDECESSOR FOR A.Y. 2006-07, DELETED THE DISALLOWANCE MADE BY THE A.O. AGGRIEVED THE REVENUE IS BEFORE US. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE NOTE THAT THE ISSUE UNDER DISPUTE IS SQUARELY COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 931/KOL/2012 DATED 29.02.2016 FOR A.Y. 2005-06 WHEREIN ON IDENTICAL FACTS AND CIRCUMSTANCES HELD AS UNDER: '8.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE FACTS OF THE CASE THAT THE DEPOSITS A ND ADVANCES WERE GIVEN IN THE ORDINARY COURSE OF BUSINESS AND WERE LYING IN THE BOOKS OF T HE ASSESSEE COMPANY FOR QUITE A LONG TIME. THE SOME WERE CONSIDERED IRRECOVERABLE BY THE ASSES SEE AND HAD WRITTEN OFF THE SAME IN ASST YEAR 2005-06 AND HENCE THE SAME IS TO BE CONSIDERED AS A TRADING LOSS U/S 28 OF THE ACT. WE HOLD THAT THE LEARNED CITA) HAD RIGHTLY DELETED THE ADDITION MADE IN THIS REGARD. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 10 ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. ' 15. THE FACTS IN THE YEAR UNDER DISPUTE ARE ANALOGO US TO THAT IN THE EARLIER YEARS AND SINCE NO CHANGE IN LAW OR FACTS COULD BE POINTED OUT BY T HE REVENUE SO RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUPRA), WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF LD. CIT(A), IN THIS REGARD. ACCORDINGLY GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 16. GROUND NO. 2 IS AGAINST THE ACTION OF THE LD. C IT(A) DIRECTING THE A.O. TO ALLOW FURTHER DEPRECIATION OF RS. 1,15,41,587/- UNDER SEC TION 32 OF THE ACT. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS NOT CLAIMED D EPRECIATION ON CERTAIN ASSETS IN THE RETURN OF INCOME FILED BEFORE A.Y. 1999-2000. HOWEVER LATE R ON BY WAY OF AN APPLICATION UNDER SECTION 154 OF THE ACT DATED 24.05.2001, THE ASSESS EE COMPANY CLAIMED DEPRECIATION ON SUCH ASSETS AS WELL. THIS APPLICATION UNDER SECTION 154 WAS REJECTED BY A.O. THE ASSESSEE DID NOT CHALLENGE THE SAID REJECTION ORDER PASSED B Y AO UNDER SECTION 154 FOR A.Y. 1999- 2000 WHICH WAS BASED ON THE BONA FIDE BELIEF THAT T HE ASSESSEES PETITION UNDER SECTION 154 WOULD BE ALLOWED. THE ASSESSEE THEREAFTER IN THE RE TURNS FILED FOR THE YEARS 2000-01 AND ONWARDS HAD CLAIMED DEPRECIATION ON THE REDUCED WDV OF THE BLOCK OF ASSETS. HOWEVER, SINCE THE AO DID NOT GRANT THE DEPRECIATION ON DEPR ECIABLE ASSETS IN A.Y. 1999-2000, THE WDV TO BE CARRIED FORWARD TO A.Y. 2000-01 AND ONWAR DS WERE REQUIRED TO BE MODIFIED UPWARDS. ACCORDINGLY, FOR THE SUBSEQUENT ASSESSMENT YEARS I.E. FOR A.Y. 2000-01 TO A.Y. 2002-03, THE ASSESSEE FILED REVISED COMPUTATION OF DEPRECIATION ENHANCING THE OPENING VALUE OF WDV AS ON 01.04.1991 (SINCE THE DEPRECIAT ION WAS NOT ALLOWED BY THE A.O. IN A.Y. 1999-2000 AND CLAIMED FOR THE DEPRECIATION BY WAY OF RECTIFICATION APPLICATION UNDER SECTION 154 OF THE ACT). ALTHOUGH THE APPLICATION U NDER SECTION 154 OF THE ACT WERE REJECTED BY THE A.O., THE APPELLATE AUTHORITIES I.E. THE LD. CIT(A) AS WELL AS THIS TRIBUNAL ALLOWED THE CLAIM AND DIRECTED THE A.O. TO GRANT DEPRECIATION O N SUCH ENHANCED WDV OF THE BLOCK OF ASSETS. FOLLOWING THE DECISION OF THIS TRIBUNAL IN A.Y. 2000-01 TO 2002-03, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE HAVE SINCE ALLOWED THE CLAIM OF RECTIFIED DEPRECIATION ON THE ENHANCED WDV IN A.Y. 2003-04 TO 2007-08 AS WELL THAT THOUGH THE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 11 A.O. IN THE ASSESSMENT ORDER FOR A.Y. 2008-09 HAS D ULY SET OUT THE AFORESAID BACKGROUND FACTS BUT STILL DISALLOWED THE CLAIM OF FURTHER DEP RECIATION TO THE EXTENT OF RS. 1,15,41,587/- ON THE PREMISE THAT THE DEPARTMENT IS IN APPEAL UND ER SECTION 260A BEFORE THE HONBLE CALCUTTA HIGH COURT AGAINST THE EARLIER ORDERS OF T HE TRIBUNAL IN A.Y. 2000-01 TO 2005-06. AGGRIEVED BY THE DISALLOWANCE, THE ASSESSEE PREFERR ED APPEAL BEFORE THE LD. CIT(A) TO ALLOW THE CLAIM FOR FURTHER DEPRECIATION WHO FOLLOW ING THE APPELLATE ORDER OF THE EARLIER YEARS PASSED BY HIS PREDECESSORS AND THIS TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE. AGGRIEVED THE REVENUE IS BEFORE US. 17. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIAL AVAILABLE ON RECORD. TAKING NOTE OF THE FACT THAT THE ISSUE IS S QUARELY COVERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR A.Y. 2001-02 TO 2007-08 IN FAV OUR OF THE ASSESSEE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) IN FOLLOWING THE DEC ISION OF THIS TRIBUNAL DELETING THE DISALLOWANCE OF DEPRECIATION. GROUND NO. 2 OF THE R EVENUES APPEAL IS DISMISSED. 18. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN ACCEPTING THE ASSESSEES CLAIM FOR CONSIDERING THE MARKET VALUE OF ELECTRICITY FOR THE PURPOSE OF SECTION 80IA TO BE THE AVERAGE LANDED COST OF EL ECTRICITY AT WHICH THE ASSESSEE PROCURED ELECTRICITY FROM THE RESPECTIVE STATE ELECTRICITY B OARDS (HEREIN AFTER SEBS). BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND SALE OF CEMENT, RAYON, FIRE BRICKS, CAST IRON PIPES, TYRES AND TUBE S AND VARIOUS FORMS OF CHEMICALS. THE ASSESSEE-COMPANY HAS SET UP TWO POWER PLANTS FOR IT S CEMENT UNIT AT VASAVADATTA CEMENT UNIT KARNATAKA AND ONE THERMAL POWER PLANT IS FOR I TS TYRE AND RAYON UNIT AT BALASORE, ORISSA AND HOOGHLY, WEST BENGAL RESPECTIVELY. THE ELECTRIC ITY GENERATED BY THESE POWER PLANTS WERE TRANSFERRED ONLY TO THE ASSESSEES MANUFACTURI NG UNITS. THERE WAS NO SALE OF ELECTRICITY TO ANY OUTSIDER DURING THE PREVIOUS YEAR RELEVANT T O THE ASSESSMENT YEAR 2008-09. FOR THE PURPOSE OF COMPUTING THE ELIGIBLE DEDUCTION UNDER S ECTION 80IA IN RESPECT OF CAPTIVE POWER PLANTS (HEREIN AFTER CPP), THE ASSESSEE ASCERTAINED THE SELLING PRICE OF POWER WITH THE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 12 REFERENCE TO RATE AT WHICH ASSESSEES MANUFACTURING UNDERTAKINGS PROCURED THE POWER FROM SEBS OF THE RESPECTIVE STATES. BEFORE THE A.O., THE ASSESSEE-COMPANY FURNISHED COMPLETE DETAILS OF THE CPPS ALONG WITH THE FORM 10 CCB AND THE SEPARATE AUDITED ACCOUNTS. THE MANNER IN WHICH THE MARKET RATES OF THE ELECTRICITY ARE ARRIVED AT, WAS ALSO EXPLAINED TO THE A.O. HOWEVER, THE A.O. DID NOT AGREE WITH THE MANNE R IN WHICH THE TRANSFER VALUE OF ELECTRICITY WAS COMPUTED BY THE ASSESSEE. THE A.O. WAS OF THE VIEW THAT CPPS WERE NOT PERMITTED TO SALE POWER INDEPENDENTLY TO ANY THIRD PARTIES BUT THEY WERE OBLIGATED TO SALE SURPLUS POWER ONLY TO SEBS AND THAT TOO AT THE TARI FF RATE AT WHICH POWER WAS BEING PURCHASED BY THE SEBS, FROM OTHER POWER GENERATING COMPANIES. BASED ON THIS UNDERSTANDING THE A.O. WAS OF THE VIEW THAT THE OP EN MARKET VALUE FOR THE PURPOSE OF SECTION 80IA(8) SHOULD BE THE RATE AT WHICH THE SEB S PROCURED POWER FROM THE ELECTRICITY GENERATING COMPANIES BECAUSE IN HIS OPINION, NO IND EPENDENT MARKET / SALE RATE WAS AVAILABLE. ACCORDING TO AO, THE ADOPTION OF SALE PR ICE REALIZED BY SEBS FROM ITS CONSUMERS WAS NOT INDICATIVE OF THE OPEN MARKET RATE OF THE ELECTRICITY SINCE IT WAS HIGHER THAN THE PRICE AT WHICH SEB WAS PURCHASING POWER FROM GENERA TING COMPANIES. THE A.O. OBSERVED THAT THE PER UNIT SELLING PRICE OF SEB NOT ONLY INC LUDED THE COST OF ELECTRICITY PURCHASED OR GENERATED BUT ALSO THE COST INCURRED ON DISTRIBUTIO N, STORAGE, TRANSMISSION LOSS AND ITS OWN PROFIT MARGINS AND HENCE RATE AT WHICH SEBS SUPPLIE D ELECTRICITY TO ITS CONSUMERS WERE NOT RELIABLE MEASURE FOR ESTABLISHING OPEN MARKET RATE . REFERRING TO THE TARIFF RATE AT WHICH ORISSA ELECTRICITY BOARD PROCURED POWER FROM POWER GENERATING COMPANIES LOCATED IN THE STATE, THE A.O. REWORKED THE PROFITABILITY OF ALL T HE FOUR CPPS BY SUBSTITUTING THE VALUE OF ELECTRICITY ADOPTED BY THE ASSESSEE WITH WHICH MUCH LOWER FIGURES. BY SUCH SUBSTITUTION, THE A.O. DETERMINED LOWER PROFITS ELIGIBLE FOR DEDUCTIO N IN RESPECT OF THE FOUR POWER PLANTS UNDER SECTION 80IA OF THE ACT. AGGRIEVED, THE ASSES SEE PREFERRED APPEAL BEFORE THE LD. CIT(A) VI, KOLKATA WHO PRINCIPALLY ACCEPTED THE A SSESSEES CONTENTION THAT THE RATE AT WHICH THE STATE ELECTRICITY BOARDS SOLD THE ELECTRI CITY TO THE ASSESSEE REPRESENTED OPEN MARKET VALUE OF THE POWER AND WHICH COULD BE ADOPTE D AS THE BASIS FOR DETERMINING PROFITS ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 13 ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE AC T. FURTHER THE LD. CIT(A) HELD THAT THE TARIFF RATE TO BE ADOPTED FOR ASCERTAINING TRANSFER PRICE OF POWER FOR CAPTIVE CONSUMPTION SHOULD BE THE WEIGHTED AVERAGE OF THE ANNUAL CONSUM PTION OF ELECTRICITY SOURCED FROM SEBS BUT SO HOWEVER THAT SUCH RATE SHOULD BE REDUCED BY THE AMOUNT OF ELECTRICITY DUTY AND CESS CHARGED BY THE SEBS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ON THE OTHER HAND, THE ASSESSEE SUPPORTE D THE ORDER OF THE LD. CIT(A) IN TERMS OF RULE 27 OF THE RULES AND PRAYED THAT EVEN THE ELECT RICITY DUTY AND CESS CHARGED BY THE SEBS SHOULD BE TAKEN INTO ACCOUNT WHILE WORKING OUT WEIG HTED AVERAGE PRICE OF ELECTRICITY. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE LEARNED DR APPEARING ON BEHALF OF THE REVENUE SUBMITTED WHILE DECIDING T HE ISSUE IN FAVOUR OF THE ASSESSEE, THE LD. CIT(A) HAS SUBSTANTIALLY RELIED ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS ITC LTD. FOR ITA NO . 18/KOL/2006 DATED 30.06.2006. THE LEARNED DR STATED THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF ITC LTD. (SUPRA) WAS REVERSED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD. (236 TAXMAN 612) AND RATIO LAID DOWN IN THE JUDGMENT OF THE HON BLE HIGH COURT SUPPORTED THE AOS CONTENTION THAT THE RATE OF ELECTRICITY FOR THE PUR POSE OF SECTION 80IA SHOULD BE THE PRICE AT WHICH ELECTRICITY GENERATING COMPANIES SOLD POWER T O THE DISTRIBUTION COMPANIES AT THE PRICE FIXED BY THE STATE REGULATORY COMMISSION. THEREFORE , THE LEARNED DR PRAYED FOR REVERSAL OF THE LD. CIT(A)S ORDER ON THE ISSUE. 20. ON THE OTHER HAND, THE LEARNED AR APPEARING ON BEHALF OF THE ASSESSEE RELIED ON THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS BIRLA CORPORATION LTD. (ITA NO. 971/KOL/2012 AND 298/KOL/2013 DATED 2 5.08.2017 WHEREIN THIS TRIBUNAL AFTER CONSIDERING THE JUDGMENT OF THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF CIT VS ITC LTD. (SUPRA) AND THE PROVISIONS OF ELECTRICITY ACT, 2003 AND THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF THIRU AROORAN SUGAR LTD.VS CIT 227 ITR 432 (SC) HAD HELD THAT THE OPEN MARKET VALUE OF ELECTRICITY FOR THE PURPOSES O F SECTION 80IA SHOULD BE THE PRICE AT ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 14 WHICH THE ASSESSEE PROCURED POWER FROM SEBS. THE LE ARNED AR POINTED OUT THAT THE ITCS CASE DECIDED BY HONBLE CALCUTTA HIGH COURT AND WHI CH HAS BEEN RELIED UPON BY LD. DR, RELATES TO A.Y. 2002-03, WHEN THE PROVISIONS OF IND IAN ELECTRICITY ACT, 1910 & ELECTRICITY (SUPPLY) ACT, 1948 WERE IN FORCE. ACCORDING TO THE LEARNED AR UNDER THE ERSTWHILE REGULATORY FRAMEWORK, THE ELECTRICITY GENERATING CO MPANY COULD ONLY SELL OR SUPPLY POWER TO THE STATE ELECTRICITY BOARDS (SEBS) AND THAT TOO AT THE PRESCRIBED TARIFFS / RATES FIXED BY THE REGULATORY COMMISSION. TAKING THIS SPECIFIC FACTUAL POSITION INTO ACCOUNT, THE HONBLE CALCUTTA HIGH COURT HELD THAT THE POWER GENERATING COMPANIES WERE NOT PERMITTED TO SELL ELECTRICITY TO ANY CONSUMER DIRECTLY BUT UNDER THE LAW IT WAS COMPULSORY REQUIRED TO SELL THE POWER TO THE DISTRIBUTION COMPANIES AND THAT TOO AT THE TARIFF RATE FIXED BY THE REGULATORY COMMISSION. IN THESE CIRCUMSTANCES, THEREFORE THE O NLY MARKET RATE AVAILABLE FOR SALE OF ELECTRICITY BY CPPS WAS THE TARIFF RATE AT WHICH EL ECTRICITY GENERATING COMPANY SOLD POWER TO SEBS AND NONE ELSE. THE LEARNED AR SUBMITTED THAT T HE REGULATORY FRAMEWORK, UNDERWENT SEA CHANGE AFTER THE ELECTRICITY ACT 2003 WAS ENACT ED AND CAME INTO FORCE IN 2003 PURSUANT TO WHICH THE BUSINESS OF GENERATION, TRANSMISSION A ND DISTRIBUTION OF POWER WAS DEREGULATED AND CPPS WERE PERMITTED TO UNDERTAKE SALE OF POWER TO THIRD PARTY CONSUMER ON THE TERMS MUTUALLY AGREEABLE. POWER GENERATORS WERE ALSO PERM ITTED TO PURCHASE AND SALE POWER THROUGH POWER EXCHANGES ESTABLISHED IN THE COUNTRY. IN THE COURSE OF HEARING OF THE APPEAL, THE LEARNED AR WAS DIRECTED TO FURNISH THE SUBMISSI ON SETTING FORTH THE RELEVANT REGULATORY PROVISIONS APPLICABLE TO THE CPPS, PARTICULARLY WIT H REFERENCE TO THE FACTS OF THE ASSESSEES CASE WHICH WOULD PROVE THAT THE ASSESSEES CPPS WER E NOT LEGALLY OBLIGED TO SELL ELECTRICITY ONLY AT THE RATE DETERMINED BY THE STATE REGULATORY COMMISSION. IN RESPONSE THE LEARNED AR OF THE ASSESSEE FURNISHED A WRITTEN NOTE ALONG W ITH A PAPER BOOK TO SUPPORT HIS CONTENTION THAT THE ASSESSEES CPPS WERE NOT OBLIGE D TO SELL POWER ONLY TO ANY SPECIFIED DISTRIBUTION COMPANY AT THE RATE PRESCRIBED BY REGU LATORY COMMISSION. RATHER THE APPELLANT WAS ENTITLED TO HAVE OPEN ACCESS FOR SALE OF ELEC TRICITY AT THE MARKET DRIVEN RATES. IN THIS ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 15 CONTEXT WE WOULD LIKE TO REPRODUCE THE SUBMISSIONS OF THE LEARNED AR CONTAINED OF THE WRITTEN NOTE AS EXTRACTED BELOW; 2. THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE & SALE OF CEMENT, RAYON, FIRE-BRICKS, CAST IRON PIPES, TYRES & TUBES AND VAR IOUS FORMS OF ACIDS & CHEMICALS. THE ASSESSEE-COMPANY HAS THE FOLLOWING THREE FACTORIES IN THE STATES OF KARNATAKA, ORISSA & WEST BENGAL WHERE IT HAS SET-UP AND OPERATES CAPTIVE POW ER PLANTS (CPP) 3. EACH OF THE CPP ABOVE, IS A SEPARATE & INDEPENDE NT UNDERTAKING. SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED FOR EACH OF THE CPP. THE PO WER GENERATED BY THE CPPS IS INTERNALLY CONSUMED AT THE FACTORIES OF THE ASSESSEE-COMPANY. FOR THE PURPOSES OF COMPUTING THE BENEFIT OF DEDUCTION U/S 80IA, THE ASSESSEE-COMPANY IS REQU IRED TO ASCERTAIN THE OPEN MARKET VALUE OF POWER IN TERMS OF SUB-SECTION (8) OF SECTION 80IA. THE RATE SO COMPUTED IS CONSIDERED TO BE THE SALE RATE AT WHICH THE ELECTRICITY IS TRANSFERR ED BY CPPS TO OTHER UNITS. IN THE RELEVANT AYS 2008-09 & 2009-10 IN CONSIDERATION, THE ASSESSEE-CO MPANY HAD ARRIVED AT THE FOLLOWING MARKET RATES OF THE ELECTRICITY TRANSFERRED BY THE CPPS TO OTHER UNITS. 4. IN THE COURSE OF ASSESSMENT THE ASSESSEE-COMPANY HAD FURNISHED THE COMPLETE DETAILS OF THE THREE CPPS ALONG WITH FORM 10CCBS AND THE AUDITED S EPARATE ACCOUNTS. THE MANNER IN WHICH THE MARKET RATES OF THE ELECTRICITY WERE ARRI VED AT, WAS ALSO EXPLAINED TO THE AO. THE AO WAS HOWEVER NOT AGREEABLE TO THE EXPLANATIONS PU T FORTH BY THE ASSESSEE- COMPANY. INSTEAD, IT WAS THE AO'S CASE THAT THE 'OPEN MARKET VALUE' FOR THE PURPOSES OF SECTION 80IA SHOULD BE THE RATE AT WHICH THE SEB PROCURED POWER FROM ELECTRICITY GENERATING COMPANIES BECAUSE IN HIS OPINION THE CPPS WERE NOT PERMITTED TO SELL POWER TO ULTIMATE CONSUMERS BUT WAS OBLIGED TO SELL SURPLUS POWER ONLY TO SEB AND T HAT TOO AT THE RATE AT WHICH POWER WAS BEING PURCHASED BY SEBS FROM OTHER GENERATING COMPA NIES. ACCORDING TO AO THE SALE PRICE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 16 REALIZED BY SEBS WERE HIGHER THAN THE PRICE AT WHIC H SEB WAS PURCHASING POWER FROM GENERATING COMPANIES. ACCORDING TO AO THE PER UNIT SELLING PRICE OF SEB NOT ONLY INCLUDED THE COST OF ELECTRICITY PURCHASED OR GENERATED BUT ALSO THE COST INCURRED ON DISTRIBUTION, STORAGE, TRANSMISSION LOSS AND ITS OWN PROFIT MARGI NS. BASED ON CERTAIN TARIFF RATES AVAILABLE FROM THE WEBSITE OF ORISSA ELECTRICITY COMMISSION, THE AO MADE SOME EXTRAPOLATIONS AND COMPUTED THE TRANSFER RATES FOR ALL THE FOUR CPPS A S FOLLOWS: 5. AGGRIEVED BY SUCH ACTION OF THE AO, THE ASSESSEE COMPANY PREFERRED AN APPEAL BEFORE THE CIT(A)-VI, KOLKATA. IN THE APPELLATE ORDERS PASSED FOR AYS 2008-09 & 2009-10 DATED 27.04.2012 & 09.01.2013 RESPECTIVELY, THE CIT(A) HE LD THAT THE PRICES AT WHICH THE ELECTRICITY WAS SUPPLIED BY THE RESPECTIVE SEBS TO THE ASSESSEE -COMPANY (EXCLUDING DUTIES & CESS ETC. LEVIED THEREON) TO BE THE TRANSFER VALUE FOR THE PU RPOSES OF SECTION 80IA(4) OF THE ACT. THE RATES SO DETERMINED BY CIT(A) ARE AS FOLLOWS: AGGRIEVED BY SUCH APPELLATE ORDERS OF THE CIT(A), T HE REVENUE IS IN APPEAL BEFORE THE HON'BLE ITAT, KOLKATA. 6. IN THE COURSE OF HEARING HELD ON EARLIER OCCASIO N, THE HONBLE BENCH HAD EXTENSIVELY HEARD THE ARGUMENTS OF BOTH THE SIDES. BEFORE THE HONBLE TRIBUNAL, THE ID. DR APPEARING ON BEHALF OF THE REVENUE HAD RELIED ON THE JUDGMENT OF THE CA LCUTTA HIGH COURT IN THE CASE OF ITC LIMITED (236 TAXMAN 612) TO SUPPORT THE REVENUE'S C ASE THAT THE RATE OF ELECTRICITY FOR THE PURPOSES OF SECTION 801A SHOULD BE THE PRICE AT WHI CH ELECTRICITY GENERATING COMPANIES SELL POWER TO THE DISTRIBUTION COMPANIES AT THE PRICE FI XED BY REGULATORY COMMISSION. ON THE OTHER HAND, THE UNDERSIGNED APPEARING ON BEHALF OF THE APPELLANT HAD PLACED RELIANCE ON THE APPELLATE ORDER OF THE COORDINATE BENCH OF ITAT, KO LKATA IN THE CASE OF DY.CIT VS BIRLA CORPORATION LTD (ITA NOS. 971/KOL/ 2012 & 298/KOL/2 013) DATED 25.08.2017 WHEREIN THE HONBLE ITAT, KOLKATA AFTER CONSIDERING THE JUDGME NT OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. ITC LTD. (SUPRA) AND THE PROVISION S OF ELECTRICITY ACT, 2003 AND THE DECISION OF APEX COURT IN THE CASE OF THIRU AROORAN SUGARS L TD (227 ITR 432) UPHELD THE ASSESSEE'S ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 17 CONTENTION THAT THE OPEN MARKET VALUE OF ELECTRICIT Y FOR THE PURPOSES OF SECTION 80IA SHOULD BE THE PRICE AT WHICH THE ASSESSEE PROCURES POWER FROM SEBS. 7. IN THE COURSE OF ORAL ARGUMENTS, IT WAS EXPLAINE D THAT THE JUDGMENT OF THE CALCUTTA HIGH COURT PROCEEDED ON THE PREMISE THAT THE ELECTRICITY GENERATING COMPANIES COULD ONLY SELL OR SUPPLY POWER TO THE STATE ELECTRICITY BOARDS AND TH AT TOO AT THE PRESCRIBED TARIFFS RATES BY THE REGULATORY COMMISSION. IT PROCEEDED ON THE PREMISE THAT AS PER THE REGULATORY FRAMEWORK IN FORCE, THE POWER GENERATING COMPANIES WERE NOT PERM ITTED TO SELL ELECTRICITY TO ANY CONSUMER DIRECTLY BUT THE LAW REQUIRED THE GENERATING COMPAN IES TO COMPULSORILY SELL THE POWER TO THE DISTRIBUTION COMPANIES AND TO NONE ELSE. THEREFORE, IN ABSENCE OF ANY ALTERNATE RATES, THE HIGH COURT HELD THAT THE PRICE AT WHICH ELECTRICITY GENERATING COMPANY SOLD POWER TO SEBS WAS ONLY AVAILABLE MARKET RATE WHICH COULD BE ADOPT ED FOR THE PURPOSES OF SECTION 80IA(4) OF THE ACT. IN THIS REGARD IT WAS EXPLAINED THE RELEVA NT YEAR IN QUESTION IN THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD ( SUPRA) WAS FINANCIAL YEAR 2001-02 I.E. PRIOR TO THE INTRODUCTION OF ELECTRICITY ACT, 2003. IT WAS SUBMITTED THAT UNTIL 2002-03, THE ELECTRICITY GENERATING COMPANIES COULD ONLY SELL OR SUPPLY POWER TO THE STATE ELECTRICITY BOARDS. HOWEVER SUBSEQUENT TO THE ENACTMENT OF ELEC TRICITY ACT, 2003, THE ELECTRICITY HAD BEEN DE-REGULATED AND IT WAS LEGALLY PERMISSIBLE FO R THE ELECTRICITY GENERATING COMPANIES TO SUPPLY POWER TO OTHER CONSUMERS AND DETERMINED THE PRICING THROUGH COMPETITIVE BIDDING PROCESS OR ANY OTHER MUTUALLY AGREED TERMS. 8. BEFORE THE HON'BLE TRIBUNAL IT WAS FURTHER EXPLA INED THAT THE RATIO LAID BY THE CALCUTTA HIGH COURT IN THE DECISION OF CIT VS ITC LTD (SUPR A) THAT ELECTRICITY COULD BE SUPPLIED AT THE FIXED TARIFF RATES IN TERMS OF SECTION 61 & 62 OF E LECTRICITY ACT, 2003 WAS ERRONEOUS. IT WAS EXPLAINED THAT IN ELECTRICITY ACT, 2003; WHICH CAME INTO FORCE FROM 2003 AND ONWARDS; THE LEGISLATURE FORMULATED AND LAID DOWN THE OPEN ACCES S POLICY WHEREBY ELECTRICITY-GENERATING COMPANIES COULD SUPPLY TO OTHER CONSUMERS DIRECTLY. APPROPRIATE PROVISIONS WERE PUT IN PLACE TO ENSURE THAT THE MARKET VALUE OF SUCH ELECT RICITY SUPPLIED UNDER OPEN ACCESS WAS THROUGH COMPETITIVE BIDDING AND AT A FAIR & TRANSPA RENT PRICE. IN THE CIRCUMSTANCES THE UNDERSIGNED HAD EXPLAINED THAT THE ASSUMPTION MADE BY THE CALCUTTA HIGH COURT IN THE DECISION OF CIT VS ITC LTD (SUPRA) AS WELL AS THE A O IN THE IMPUGNED ORDER THAT ELECTRICITY COULD BE SUPPLIED ONLY AT THE TARIFF RATES FIXED BY REGULATORY COMMISSION WAS FACTUALLY INCORRECT. IN THIS CONTEXT, REFERENCE WAS MADE TO T HE APPELLATE ORDER OF THE COORDINATE BENCH OF ITAT, KOLKATA IN THE CASE OF DY.CIT VS BIRLA COR PORATION LTD (SUPRA), WHEREIN THE TRIBUNAL APPRECIATING THE PROVISIONS CONCERNING OPE N ACCESS POLICY IN ELECTRICITY ACT, 2003 AND THE RELEVANT REGULATIONS FORMULATED IN THAT REG ARD BY THE RESPECTIVE STATE ELECTRICITY COMMISSIONS HELD THAT THE RATIO LAID DOWN IN THE JU DGMENT OF CALCUTTA HIGH COURT IN THE DECISION OF CIT VS ITC LTD (SUPRA) WAS DISTINGUISHA BLE AND ACCORDINGLY DID NOT FOLLOW THE SAME. ON THE CONTRARY THE HON'BLE TRIBUNAL DISMISSE D THE REVENUE'S APPEAL AGAINST THE CIT(A)'S ORDER FOR AYS 2008-09 & 2009-10 WHICH ARE THE SAME ASSESSMENT YEARS NOW BEING ADJUDICATED BY THE HON'BLE TRIBUNAL. IT WAS ALSO PO INTED OUT THE APPEALS ADJUDICATED BY THE COORDINATE BENCH IN THE CASE OF DY.CIT VS BIRLA COR PORATION .LTD (SUPRA) AROSE FROM THE ORDERS DATED 29.03.2012 & 07.12.2012 PASSED BY THE CIT(A)-VI, KOLKATA FOR THE AYS 2008-09 & 2009-10. THE PRESENT APPEALS ALSO AROSE FROM THE APPELLATE ORDERS DATED 27.04.2012 & 09.01.2013 PASSED BY THE SAME CIT(A)-VI, KOLKATA FO R THE AYS 2008-09 & 2009-10 RESPECTIVELY. IT WAS SUBMITTED THAT THE BASIC REASO NING ADOPTED BY THE CIT(A) IN THE CASE OF ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 18 BIRLA CORPORATION LTD (SUPRA) AND IN THE CASE OF AS SESSEE-COMPANY WERE IDENTICAL & SAME BECAUSE THE BACKGROUND FACTS AND THE LEGAL ISSUES G OVERNING THE ALLOWABILITY OF DEDUCTION U/S 80IA WERE ONE AND THE SAME. 9. APPRECIATING THE CONTENTIONS PUT FORTH IN THE CO URSE OF HEARING, THE HON'BLE TRIBUNAL HAD DIRECTED THE ASSESSEE TO FURNISH THE RELEVANT EXTRA CTS OF ELECTRICITY ACT, 2003 AND THE REGULATIONS FRAMED BY THE RESPECTIVE STATE ELECTRIC ITY COMMISSIONS IN ORDER TO SUBSTANTIATE THAT OPEN ACCESS WAS LEGALLY PERMISSIBLE. THE ASSES SEE WAS ALSO REQUIRED TO ESTABLISH THAT APART FROM SEBS; POWER COULD BE SUPPLIED TO OTHER C ONSUMERS DIRECTLY AND THAT THE RATES AT WHICH POWER COULD BE SUPPLIED WAS VARIABLE AND COUL D BE DETERMINED AT VALUES DIFFERENT FROM THE FIXED TARIFF RATES IN TERMS OF SECTION 61 & 62 OF THE ELECTRICITY ACT, 2003. IN VIEW OF THE FOREGOING THEREFORE THE ASSESSEE-COMPANY IS PLACING ON RECORD A FURTHER PAPER BOOK COMPRISING OF 1-73 PAGES . 10. IT WOULD FIRST BE RELEVANT TO SET OUT THE PERTI NENT PROVISIONS OF THE ELECTRICITY ACT OF 2003 CONTAINING THE 'OPEN ACCESS' POLICY. THE TERM 'OPEN ACCESS' HAS BEEN DEFINED IN CLAUSE (47) OF SECTION 2 OF THE ELECTRICITY ACT 2003 WHICH READS A S FOLLOWS: OPEN ACCESS' MEANS THE NON-DISCRIMINATORY PROVISI ON FOR THE USE OF TRANSMISSION LINES OR DISTRIBUTION SYSTEM OR ASSOCIATED FACILITIES WITH S UCH LINES OR SYSTEM BY ANY LICENSEE OR CONSUMER OR A PERSON ENGAGED IN GENERATION IN ACCOR DANCE WITH THE REGULATIONS SPECIFIED BY THE APPROPRIATE COMMISSION; 10.1 FROM THE ABOVE IT SHALL BE OBSERVED THAT 'OPEN ACCESS' IS DEFINED TO MEAN GIVING NON- DISCRIMINATORY USE OF THE TRANSMISSION LINES & ASSO CIATED FACILITIES BY THE REGULATORY COMMISSION TO BOTH THE POWER GENERATOR / SUPPLIER A ND THE CONSUMER. THE RELEVANT PROVISIONS CONCERNING THE ABOVE OPEN ACCESS IS CONTAINED IN SECTION 42 OF THE ELECTRICITY ACT, 2003 READ AS FOLLOWS: 42.(1) IT SHALL BE THE DUTY OF A DISTRIBUTION LIC ENSEE TO DEVELOP AND MAINTAIN AN EFFICIENT,, CO- ORDINATED AND ECONOMICAL DISTRIBUTION SYSTEM IN HIS AREA OF SUPPLY AND TO SUPPLY ELECTRICITY IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN THIS AC T. (2) THE STATE COMMISSION SHALL INTRODUCE OPEN ACCES S IN SUCH PHASES AND SUBJECT TO SUCH CONDITIONS, (INCLUDING THE CROSS SUBSIDIES, AND OTH ER OPERATIONAL CONSTRAINTS) AS MAY BE SPECIFIED WITHIN ONE YEAR OF THE APPOINTED DATE BY IT AND IN SPECIFYING THE EXTENT OF OPEN ACCESS IN SUCCESSIVE PHASES AND IN DETERMINING THE CHARGES FOR WHEELING, IT SHALL HAVE DUE REGARD TO ALL RELEVANT FACTORS INCLUDING SUCH CROSS SUBSIDIES, AND OTHER OPERATIONAL CONSTRAINTS: PROVIDED THAT SUCH OPEN ACCESS MAY BE ALLOWED BEFOR E THE CROSS SUBSIDIES ARE ELIMINATED ON PAYMENT OF A SURCHARGE IN ADDITION TO THE CHARGES F OR WHEELING AS MAY BE DETERMINED BY THE STATE COMMISSION: PROVIDED FURTHER THAT SUCH SURCHARGE SHALL BE UTILI SED TO MEET THE REQUIREMENTS OF CURRENT LEVEL OF CROSS SUBSIDY WITHIN THE AREA OF SUPPLY OF THE DISTRIBUTION LICENSEE : PROVIDED ALSO THAT SUCH SURCHARGE AND CROSS SUBSIDI ES SHALL BE PROGRESSIVELY REDUCED AND ELIMINATED IN THE MANNER AS MAY BE SPECIFIED BY THE STATE COMMISSION: PROVIDED ALSO THAT SUCH SURCHARGE SHALL NOT BE LEVI ABLE IN CASE OPEN ACCESS IS PROVIDED TO A PERSON WHO HAS ESTABLISHED A CAPTIVE GENERATING PLA NT FOR CARRYING THE ELECTRICITY TO THE DESTINATION OF HIS OWN USE. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 19 (3) WHERE ANY PERSON, WHOSE PREMISES ARE SITUATED W ITHIN THE AREA OF SUPPLY OF A DISTRIBUTION LICENSEE, (NOT BEING A LOCAL AUTHORITY ENGAGED IN T HE BUSINESS OF DISTRIBUTION OF ELECTRICITY BEFORE THE APPOINTED DATE) REQUIRES A SUPPLY OF ELE CTRICITY FROM A GENERATING COMPANY OR ANY LICENSEE OTHER THAN SUCH DISTRIBUTION LICENSEE} SUC H PERSON MAY BY NOTICE, REQUIRE THE DISTRIBUTION LICENSEE FOR WHEELING SUCH ELECTRICITY IN ACCORDANCE WITH REGULATIONS MADE BY HE A E COMMISSION AND THE DUTIES OF THE DISTRIBUTION L ICENSEE WITH RESPECT TO SUCH SUPPLY SHALL BE OF A COMMON CARRIER PROVIDING NON-DISCRIMINATORY OP EN ACCESS. (4) WHERE THE STATE COMMISSION PERMITS A CONSUMER OR CLASS OF CONSUMERS TO RECEIVE SUPPLY OF ELECTRICITY FROM A PERSON OTHER THAN THE DISTRIB UTION LICENSEE OF HIS AREA OF SUPPLY, SUCH CONSUMER SHALL BE LIABLE TO PAY AN ADDITIONAL SURCH ARGE ON THE CHARGES OF WHEELING, AS MAY BE SPECIFIED BY THE STATE COMMISSION, TO MEET THE F IXED COST OF SUCH DISTRIBUTION LICENSEE ARISING OUT OF HIS OBLIGATION TO SUPPLY. (5) EVERY DISTRIBUTION LICENSEE SHALL, WITHIN SIX M ONTHS FROM THE APPOINTED DATE OR DATE OF GRANT OF LICENCE, WHICHEVER IS EARLIER, ESTABLISH A FORUM FOR REDRESSAL OF GRIEVANCES OF THE CONSUMERS IN ACCORDANCE WITH THE GUIDELINES AS MAY BE SPECIFIED BY THE STATE COMMISSION. (6) ANY CONSUMER, WHO IS AGGRIEVED BY NON-REDRESSAL OF HIS GRIEVANCES UNDER SUB-SECTION (5), MAY MAKE A REPRESENTATION FOR THE REDRESSAL OF HIS GRIEVANCE TO AN AUTHORITY TO BE KNOWN AS OMBUDSMAN TO BE APPOINTED OR DESIGNATED BY THE STAT E COMMISSION. (7) THE OMBUDSMAN SHALL SETTLE THE GRIEVANCE OF THE CONSUMER WITHIN SUCH TIME AND IN SUCH MANNER AS MAY BE SPECIFIED BY THE STATE COMMISSION. (8) THE PROVISIONS OF SUB-SECTIONS (5),(6) AND (7) SHALL BE WITHOUT PREJUDICE TO RIGHT WHICH THE CONSUMER MAY HAVE APART FROM THE RIGHTS CONFERRED U PON HIM BY THOSE SUB-SECTIONS. 10.2 FROM THE ABOVE PROVISIONS IT IS APPARENT THAT THE LEGISLATURE HAS SPECIFICALLY DIRECTED THE STATE REGULATORY COMMISSIONS TO FRAME OPEN ACCE SS POLICIES IN SUCCESSIVE PHASES WITHIN A PERIOD OF ONE YEAR. THE LEGISLATURE HAS LEFT IT TO THE DISCRETION OF THE REGULATORY COMMISSION TO DRAWN UP THE FRAMEWORK OF OPEN ACCESS OF ELECTRI CITY BOTH BY GENERATING COMPANIES AS WELL AS THE CONSUMERS. IN THE ABOVE PROVISION, IT HAS FU RTHER BEEN CLARIFIED THAT THE COMMISSION SHALL ONLY DETERMINE, LEVY AND COLLECT THE' HEELING CHARGES' UNDER OPEN ACCESS. 10.3 CLAUSE (3) OF THE ABOVE SECTION 42 OF THE ACT; SPECIFICALLY PERMITS PERSONS TO OBTAIN ELECTRICITY DIRECTLY FROM OTHER GENERATING COMPANIE S UNDER NON-DISCRIMINATORY OPEN ACCESS, APART FROM THE DISTRIBUTION LICENSEE OF THE AREA IN WHICH THE PERSON IS SITUATED, ONLY BY WAY OF GIVING A NOTICE. ON CONJOINT READING OF ALL THE CLA USES CONTAINED IN THE ABOVE PROVISION, IT IS APPARENT THAT THE ELECTRICITY ACT OF 2003 HAD PERMI TTED OPEN ACCESS OF ELECTRICITY TO BOTH CONSUMERS AS WELL AS GENERATING COMPANIES AND IT WA S ONLY THE CHARGES FOR WHEELING OF ELECTRICITY WHICH LEFT TO THE REGULATORY COMMISSION TO DETERMINE AND CHARGE FROM THE SUPPLIERS. 10.4 THE ABOVE SUBMISSION IS FURTHER FORTIFIED FROM THE PROVISIONS OF SECTION 49 OF THE ELECTRICITY ACT OF 2003 WHICH READS AS FOLLOWS: 49. WHERE THE APPROPRIATE COMMISSION HAS ALLOWED OP EN ACCESS TO CERTAIN CONSUMERS UNDER SECTION 42, SUCH CONSUMERS NOTWITHSTANDING THE PROV ISIONS CONTAINED IN CLAUSE (D) OF SUB- SECTION (1) OF SECTION 62, MAY ENTER INTO AN AGREEM ENT WITH ANY PERSON FOR SUPPLY OR PURCHASE OF ELECTRICITY ON SUCH TERMS AND CONDITIONS (INCLUD ING TARIFF) AS MAY BE AGREED UPON BY THEM. 10.5 THE ABOVE PROVISION MAKES IT CLEAR THAT WHERE OPEN ACCESS IS PERMITTED IN TERMS OF SECTION 42, THEN THE ELECTRICITY RATES NEED NOT BE THE TARIFF RATES FIXED BY REGULATORY ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 20 COMMISSION IN TERMS OF SECTION 61 OF THE ACT BUT TH E CONSUMERS CAN ENTER INTO INDEPENDENT AGREEMENTS FOR PURCHASE OF ELECTRICITY ON SUCH TERM S & CONDITIONS AS MAY BE MUTUALLY AGREED UPON. IN THE CIRCUMSTANCES, UNDER THE PROVISIONS OF ELECTRICITY ACT, 2003 NOT ONLY IS OPEN' ACCESS PERMITTED BUT EVEN THE RATES FOR SUPPLY OF E LECTRICITY UNDER OPEN ACCESS IS LEFT TO THE DISCRETION OF THE CONTRACTING PARTIES. 10.6 THE ABOVE PROPOSITION IS FURTHER FORTIFIED FRO M SECTION 86 OF ELECTRICITY ACT, 2003 WHICH LAYS DOWN THE PROVISIONS CONCERNING THE STATE ELECT RICITY COMMISSIONS. THE EXTRACTS OF THE PROVISION IS AS FOLLOWS: 86. (1) THE STATE COMMISSION SHALL DISCHARGE THE FO LLOWING FUNCTIONS, NAMELY: - (A) DETERMINE THE TARIFF FOR GENERATION, SUPPLY, TR ANSMISSION AND WHEELING OF ELECTRICITY, WHOLESALE, BULK OR RETAIL, AS THE CASE MAY BE, WITH IN THE STATE: PROVIDING THAT WHERE OPEN ACCESS HAS BEEN PERMITTED TO A CATEGORY OF CONSUMERS UNDER SECTION 42, THE STATE COMMISSION SHALL DETERMINE ON LY THE WHEELING CHARGES AND SURCHARGE THEREON, IF ANY, FOR THE SAID CATEGORY OF CONSUMERS ;' 10.7 THE PROVISO TO SUB-SECTION (1) OF SECTION 86 M AKES IT ABUNDANTLY CLEAR THAT THE STATE ELECTRICITY COMMISSION DOES NOT HAVE THE POWER TO R EGULATE THE RATES FOR SUPPLY OF ELECTRICITY PERMITTED UNDER OPEN ACCESS. THE STATE ELECTRICITY COMMISSION CAN ONLY DETERMINE & LEVY THE CHARGES FOR WHEELING OF THE ELECTRICITY THROUGH THE STATE TRANSMISSION LINES BY THE SUPPLIER TO THE CONSUMER. 11. IN VIEW OF THE ABOVE FRAMEWORK LAID DOWN IN THE ELECTRICITY ACT 2003, THE STATES ACROSS INDIA FORMULATED THE REGULATIONS FOR OPEN ACCESS OF ELECTRICITY IN THE RESPECTIVE STATES, WHICH ARE ON IDENTICAL LINES [REFER PAGES 65 TO 67 OF PAP ER BOOK]. SINCE IN THE PRESENT CASE THE DEDUCTION CLAIMED PRIMARILY RELATES TO CPPS SITUATE D IN THE STATE OF KARNATAKA, THE ASSESSEE HAS ENCLOSED THE REGULATIONS FRAMED BY THE KARNATAK A ELECTRICITY REGULATORY COMMISSION ('KERC') FOR OPEN ACCESS OF ELECTRICITY IN THE YEAR 2004. THE COPY OF THE RELEVANT REGULATIONS, ARE AT PAGES 24 TO 35 OF THE PAPER BOOK. FROM PERUS AL OF THE REGULATIONS IT SHALL BE OBSERVED THAT PURSUANT TO THE PROVISIONS OF ELECTRICITY ACT OF 2003 DE- REGULATING ELECTRICITY; THE KERC HAD FRAMED THE REGULATIONS ALLOWING OPEN ACCESS OF ELECTRICITY BOTH TO CONSUMERS, POWER GENERATING COMPANIES & DISTRIBUTORS. IN THE PRESCR IBED REGULATIONS, KERC LAID DOWN . MANNER IN WHICH BOTH CONSUMERS AND SUPPLIERS COULD AVAIL OF THE OPEN ACCESS FACILITIES AND THE USAGE OF TRANSMISSION LINES. APART FROM LAYING DOWN THE MANNER OF DETERMINATION & LEVY OF 'WHEELING CHARGES', KERC DID NOT FRAME ANY REGUL ATION OR RULE FOR PRICING OF ELECTRICITY UNDER OPEN ACCESS WHICH CLEARLY SHOWS THAT THE PRIC ING OF ELECTRICITY WAS COMPLETELY DE- REGULATED AND THE CONTRACTING PARTIES WERE FREE TO ASCERTAIN & DETERMINE THE PRICE OF SUPPLY OF POWER ON MUTUALLY AGREED TERMS & CONDITIONS. 12. IN FURTHERANCE TO THE ABOVE AND SPECIFICALLY IN THE CONTEXT OF CPP OPERATED BY THE ASSESSEE-COMPANY IN THE STATE OF KARNATAKA, THE ASS ESSEE HAS ENCLOSED A SAMPLE ORDER NO. D/01/02/2205 DATED 27.02.2007 PASSED BY KERC IN THE MATTERS OF CPPS LOCATED IN THE STATE OF KARNATAKA FOR THE YEAR 2007. IN THAT ORDER KERC LAID DOWN THE GUIDELINES CONTAINING TERMS & MANNER IN WHICH EVEN CPPS COULD SUPPLY POWE R UNDER OPEN ACCESS. THIS ORDER OF 2007 FURTHER FORTIFIES THAT POWER COULD BE SUPPLIED BY CPPS TO OTHER CONSUMERS DIRECTLY AND THAT THE RATES AT WHICH POWER COULD BE SUPPLIED WAS LEFT AT THE DISCRETION OF THE CONTRACTING PARTIES AND/ OR IT WAS TO BE DETERMINED THROUGH COM PETITIVE BIDDING PROCESS. IN VIEW OF THE FOREGOING, THE ASSESSEE-COMPANY HAS ALSO ENCLOSED H EREWITH SAMPLE COPIES OF APPROVALS ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 21 GRANTED BY THE KERC IN THE YEARS 2011 & 2017 TO ITS THERMAL POWER PLANTS AT KARNATAKA PERMITTING IT TO SUPPLY POWER TO OTHER CONSUMERS DI RECTLY UNDER OPEN ACCESS SCHEME [REFER PAGES 58 TO 61 OF PAPER BOOK]. 13. THE ASSESSEE-COMPANY HAS FURTHER ENCLOSED THE D ATA COMPLIED FROM THE OFFICIAL WEB SITE OF INDIA ENERGY EXCHANGE ('IEX') IN THE YEARS 2007 & 2 008 TO SHOW THAT THE POWER WAS BEING OPENLY TRADED ON RECOGNIZED PLATFORM AT PRICES WHIC H WERE DETERMINED THROUGH THE PREVAILING MARKET FORCES AND NOT THE TARIFF RATES FIXED BY REG ULATORY COMMISSION. FROM THE DATA ENCLOSED AT PAGES 62 TO 64 OF THE PAPER BOOK AS T RADED IN THE MARKET AT A PRICE AS HIGH AS RS. 7.670 DURING 2008. 14. IN VIEW OF THE ABOVE SET OUT FACTS, PROVISIONS OF ELECTRICITY ACT OF 2003, ORDERS OF STATE REGULATORY COMMISSION AND DATA OBTAINED FROM IEX, I T IS CLEAR THAT THE PROPOSITION PUT FORTH BY THE AO IN THE IMPUGNED ORDER THAT THE ELECTRICIT Y GENERATING COMPANIES COULD ONLY SELL OR SUPPLY POWER ONLY TO THE STATE ELECTRICITY BOARDS A ND THAT TOO AT THE PRESCRIBED TARIFFS RATES BY THE REGULATORY COMMISSION IS WHOLLY ERRONEOUS AN D FACTUALLY INCORRECT. ACCORDINGLY EVEN THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD (SUPRA) IS NOT APPLICABLE BECAUSE THE REGULATORY FRAMEWORK GOVERNI NG THE GENERATION & SUPPLY OF ELECTRICITY UNDERWENT SEA-CHANGE AFTER THE PROVISIONS OF ELECTR ICITY ACT OF 2003 CAME IN FORCE. 15. IT IS FURTHER PERTINENT TO SUBMIT THAT THE ISSU E OF ALLOWABILITY OF DEDUCTION UNDER SECTION 801A IN RESPECT OF PROFITS DERIVED BY CPP CAME UP F OR CONSIDERATION BEFORE ANOTHER COORDINATE BENCH IN THE CASE OF M/S ELECTROSTEEL CA STINGS LTD IN I.T. (SS) NO. 47 TO 60/KOL/2014, 313 AND 256/KOL/2015, 66 AND 124/KOL/2 016 DATED 25TH NOVEMBER 2016. IN RESPECT OF APPEALS RELATING TO ABATED ASSESSMENT YE ARS, THE REVENUE HAD RELIED ON THE JUDGMENT OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD (SUPRA) TO CONTEND THAT THE DEDUCTION WAS REQUIRED TO BE ALLOWED TAKING INTO AC COUNT THE PRICE AT WHICH DISTRIBUTION COMPANIES WERE PURCHASING ELECTRICITY. AFTER TAKING INTO ACCOUNT THE PROVISIONS OF THE ELECTRICITY ACT OF 2003, AND THE REGULATORY PROVISI ONS APPLICABLE IN THE STATE OF WEST BENGAL, THE COORDINATE BENCH ACCEPTED THE ASSESSEE'S CONTEN TION THAT IN VIEW OF THE PROVISIONS OF ELECTRICITY ACT OF 2003, WHICH WERE APPLICABLE IN T HE CONCERNED AY 2011-12, THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD ( SUPRA) WAS NOT APPLICABLE. 16. IT IS ALSO PERTINENT TO SUBMIT THAT SUBSEQUENT TO RENDERING OF THE JUDGMENT OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS ITC LTD (SUPRA), T HE COORDINATE BENCHES OF THE TRIBUNAL AT KOLKATA IN THE FOLLOWING CASES DISMISSED THE REVENU E'S APPEAL AGAINST THE CIT(A)'S ORDER WHEREIN THE RELIEF WAS ALLOWED UNDER SECTION 801A I N RESPECT OF PROFITS OF CPPS BY TAKING SELLING PRICE OF ELECTRICITY EQUAL TO THE LANDED CO ST AT WHICH THE ELECTRICITY WAS SUPPLIED BY SEBS TO THE ASSESSEE'S OTHER UNITS CONSUMING ELECTR ICITY. DY.CIT VS KANORIA CHEMICALS & INDUSTRIES LTD (ITA N O.944/K/16) GRAPHITE INDIA LTD VS ADDL.CIT (ITA NO. 304-305/K/0 8) 17. IT IS FURTHER PERTINENT TO SUBMIT THAT THE GUJA RAT HIGH COURT IN ITS JUDGMENT DATED 03.10.2016 IN THE CASE OF PR.CIT VS GUJARAT ALKALIE S & CHEMICALS LTD (ITA NO. 544 OF 2016) DISMISSED THE REVENUE'S APPEAL ON THE FOLLOWING SPE CIFIC QUESTION: (II) WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN ALLO WING THE ASSESSEES CLAIM OF DEDUCTION OF RS.1954 CRORES U/S 80IA(4) OF THE IT. ACT,1961, WHE N THE ASSESSEE HAD ADOPTED RATE OF POWER GENERATION AT RS.4.73 PER UNIT} RATE ON WHICH THE G EB SUPPLIED POWER TO ITS CONSUMERS ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 22 IGNORING THE RATE OF RS.2.36 PER UNIT, THE RATE ON WHICH POWER GENERATING COMPANY SUPPLIED ITS POWER TO GEB? 18. FROM THE ABOVE IT WILL BE OBSERVED THAT THE GUJ ARAT HIGH COURT SPECIFICALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE DEDUCTION UNDER SECTION 80IA IN RESPECT OF CPP SHALL BE COMPUTED BY TAKING THE PER UNIT SELLIN G PRICE OF ELECTRICITY EQUAL TO THE RATE AT WHICH THE ASSESSEE PURCHASED THE ELECTRICITY FROM S EB. 19. IN THE SAID JUDGMENT THE GUJARAT HIGH COURT ALS O HELD THAT FOR THE PURPOSES OF ADOPTING MARKET RATE OF ELECTRICITY, THE COMPONENT OF DUTY & TAX CHARGED BY SEB WILL ALSO BE TAKEN INTO ACCOUNT. THE JUDGMENT OF THE GUJARAT HIGH COURT THU S UPHOLDS THE DIRECTION OF THE HON'BLE I TAT , KOLKATA IN THE CASE OF DY.CIT VS BIRLA CORPOR ATION LTD (SUPRA). RESPECTFULLY RELYING ON THE SAID JUDGMENT OF GUJARAT HIGH COURT, IT IS PRAY ED THAT THE RELIEF CLAIMED BY THE COMPANY IN APPLICATION UNDER RULE 27 MAY KINDLY BE ALLOWED ON THE SAME LINES [REFER PAGES 68 TO 73 OF PAPER BOOK]. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE DOCUMENTS IN THE PAPER BOOK WHICH INTER ALIA CONTAINED ELECTRICITY ACT, 20 03, KERC REGULATIONS 2004, COPY OF KERCS ORDER DATED 27.02.2007 APPROVING OPEN ACCESS TO CPPS FOR SUPPLY OF ELECTRICITY ETC. THE BONE OF CONTENTION BETWEEN THE PARTIES IS THE ADOPTION OF THE MOST APPROPRIATE RATE AT WHICH SALE OF ELECTRICITY WOULD BE VALUED FOR TH E PURPOSE OF DETERMINING THE PROFITABILITY OF ALL THE FOUR CPPS. IT IS NOT IN DISPUTE THAT DUR ING THE RELEVANT YEAR, THE ASSESSEE OPERATED FOUR CPPS IN THE STATE OF KARNATAKA, ORISSA AND WES T BENGAL AND THE POWER GENERATED WAS ENTIRELY SUPPLIED AND CONSUMED BY MANUFACTURING UND ERTAKINGS OF THE ASSESSEE. THE A.O. PER-SE DID NOT DISPUTE THE FACT THAT THE CPPS CONST ITUTED SEPARATE AND DISTINCT UNDERTAKINGS AND WERE ELIGIBLE FOR CLAIMING THE DEDUCTION UNDER SECTION 80IA OF THE ACT. HOWEVER, ON PERUSAL OF THE WORKING OF THE PROFITABILITY, THE A. O. FOUND THAT THE TRANSFER PRICE FOR POWER WAS CONSIDERED BY THE ASSESSEE EQUAL TO THE PRICE A T WHICH THE ELECTRICITY WAS PROCURED BY THE MANUFACTURING UNDERTAKINGS FROM THE RESPECTIVE SEBS. REFERRING TO EXPLANATION TO SECTION 80IA, THE A.O. HELD THAT FOR THE PURPOSES O F SECTION 80IA,THE TERM MARKET VALUE MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD O RDINARILY FETCH IN THE OPEN MARKET. ACCORDING TO THE A.O., SUCH MARKET VALUE WAS TO BE ASCERTAINED FROM THE VIEW POINT OF THE POWER GENERATING UNDERTAKINGS CLAIMING THE DEDUCTIO N AND NOT FROM THE PERSPECTIVE OF THE MANUFACTURING UNDERTAKING WHICH WAS THE CAPTIVE CON SUMER OF THE CPP. WE NOTE THAT THE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 23 A.O. PROCEEDED ON THE PREMISE THAT THE CPP OWNED BY THE ASSESSEE WAS NOT ALLOWED TO SELL ITS POWER TO THE FINAL CONSUMER BUT WAS ALLOWED TO SELL THE SAME ONLY TO GRID OF THE SEB IN CASE OF EXCESS PRODUCTION. SAVE AND EXCEPT SUCH MON OPOLY BUYER, THE CPP WAS NOT PERMITTED TO SELL POWER TO ANYONE ELSE. ACCORDING T O THE A.O., THEREFORE, THE MARKET VALUE WHICH THE ASSESSEE WAS LIKELY TO FETCH BY SALE OF E XCESS POWER TO MONOPOLY BUYER LIKE SEB REPRESENTED THE MARKET VALUE. IN THE AOS OPINION T HE RATES AT WHICH THE SEBS WERE SELLING POWER TO THE CONSUMERS WERE MUCH HIGHER THAN THE PR ICE AT WHICH THE POWER WAS PURCHASED FROM THE CPPS BECAUSE IN ADDITION TO PROFIT MARGIN OF THE SEB, SUCH PRICE ALSO INCLUDED THE COSTS TOWARDS DISTRIBUTION, STORAGE, TRANSMISSION L OSSES ETC. 22. WE NOTE THAT THE SOLE BASIS FOR AOS INFERENCE AGAINST THE ASSESSEE WAS HIS BELIEF THAT THE CPP OR INDEPENDENT POWER PRODUCER WAS NOT ALLOW ED TO SELL POWER TO ANY PERSON OTHER THAN THE SEBS OR POWER DISTRIBUTION COMPANIES. ACCO RDING TO THE A.O., THERE WAS MONOPOLY BUYER WHO ALONE WAS PERMITTED TO PURCHASE THE POWER AT THE PRICE DETERMINED IN THE SOLE DISCRETION OF THE SEBS AND THEREFORE, THE PRICE AT WHICH THE SEBS WERE PURCHASING POWER ALONE REPRESENTED THE MARKET VALUE FOR THE POWER GE NERATED BY CPPS. WE ALSO NOTE THAT THE PREMISE ON WHICH THE A.O. PROCEEDED WAS ANALOGOUS T O THE PREMISE ON WHICH THE HONBLE CALCUTTA HIGH COURT DECIDED THE REVENUES APPEAL IN THE CASE OF ITC LTD. (SUPRA). IN THAT CASE ALSO THE HONBLE HIGH COURT PROCEEDED ON PREMI SE THAT THE INDEPENDENT POWER PRODUCERS OR CPPS COULD SELL THE POWER ONLY TO POWE R DISTRIBUTION COMPANIES AND THAT TOO AT THE RATES DETERMINED BY THE STATE REGULATORY COMMIS SION. IN OTHER WORDS IN THE OPINION OF THE A.O. AND THE HONBLE HIGH COURT THE POWER PRODU CERS WERE NECESSARILY REQUIRED TO SELL THE POWER IN THE REGULATED MARKET WHERE PRICES WERE FIXED AT THE DISCRETION OF THE STATE ELECTRICITY BOARDS AND / OR REGULATORY COMMISSIONS AND THE POWER GENERATING COMPANIES HAD NO OPTION OR DISCRETION TO DETERMINE THE SELLIN G RATE. HOWEVER, IN THE CASE IN HAND THERE IS A CHANGE OF SCENARIO BEFORE US AND THE LEARNED A R OF THE ASSESSEE IN HIS DETAILED PRESENTATION (SUPRA) HAS BROUGHT OUT THE SALIENT FE ATURES OF THE ELECTRICITY ACT 2003 BY WHICH CPPS WERE GRANTED OPEN ACCESS BY LAW. IN TERMS OF THE OPEN ACCESS GRANTED, THE POWER ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 24 GENERATING COMPANIES WERE FREE TO SELL THE POWER TO ANY THIRD PARTY AT THE PRICES MUTUALLY AGREED AND IN SUCH CASE, THE REGULATORY COMMISSION WAS REQUIRED TO DETERMINE ONLY THE WHEELING CHARGES WHICH THE TRANSMISSION COMPANIES / AUTHORITIES COULD LEVY. IN THIS REGARD, THE USEFUL REFERENCE MAY ALSO BE MADE TO KE RCS ORDER DATED 27.02.2007. IN THIS ORDER, THE COMMISSION EXPLAINED THE SALIENT FEATURE S OF THE NATIONAL ELECTRICITY POLICY ISSUED BY THE GOVERNMENT OF INDIA ON 12.02.2005 WITH REGAR D TO CAPTIVE GENERATION. THE SAID ORDER EXPLAINS THAT THE ELECTRICITY ACT 2003, PUT IN PLAC E HIGHLY LIBERAL FRAME WORK FOR POWER GENERATION WHEREIN THERE IS NO REQUIREMENT OF LICEN SING FOR GENERATION OF POWER. THE REQUIREMENT OF TECHNO-ECONOMIC CLEARANCE OF CEA FOR THERMAL GENERATION WAS NO LONGER THERE. CAPTIVE GENERATION HAS BEEN FREED FROM ALL C ONTROLS. THE SAID POLICY FURTHER CLARIFIED THAT THE CAPTIVE GENERATING PLANTS WERE PERMITTED T O SELL ELECTRICITY TO LICENSEES AND CONSUMERS WHEN THEY WERE ALLOWED OPEN ACCESS BY S ERCS UNDER SECTION 42 OF THE ELECTRICITY ACT, 2003. THE TARIFF POLICY ISSUED BY GOVERNMENT OF INDIA ON 06.01.2006 ALSO PROVIDED THAT THE SOLE PURPOSE OF FREELY ALLOWING C APTIVE GENERATION WAS TO ENABLE INDUSTRIES TO ACCESS RELIABLE QUALITY AND COST EFFECTIVE POWER . AS PER THE RECOMMENDATION MADE, THE SERCS WERE REQUIRED TO ENCOURAGE THE DISTRIBUTION L ICENSEES TO PROCURE POWER FROM CPPS THROUGH COMPETITIVE BIDDING ON A COMPOSITE TARIFF B ASIS. FROM A CONJOINT READING OF THE PROVISIONS OF THE ELECTRICITY ACT 2003, KERCS OPEN ACCESS REGULATION NOTIFIED IN 2004 AND THE ORDER OF THE KERC DATED 27.02.2007, IT THER EFORE, APPEARS THAT THERE WAS NO STATUTORY BAR ON THE CPPS TO SELL ELECTRICITY TO AN Y THIRD PARTY AND THAT TOO AT THE RATE MUTUALLY AGREED BY AND BETWEEN THE PARTIES. WE, THE REFORE, FIND THAT THE VERY FOUNDATION ON WHICH THE A.O. HELD THAT THE ASSESSEE HAD NO OPTION BUT TO SELL ELECTRICITY TO SEB ALONE WAS FACTUALLY WRONG AND MISPLACED AND THEREFORE, LEGALL Y UNTENABLE IN THE CHANGED FACTUAL SCENARIO AS DISCUSSED ABOVE. 23. THE LEARNED AR DREW OUR ATTENTION TO THE CHART PUBLISHED BY THE INDIAN ENERGY EXCHANGE (IEX) FOR THE YEARLY POWER PRICE PREVAILIN G ON THE IEX IN DIFFERENT REGIONS DURING THE YEAR2008-09. THE SAID CHART WE NOTE GAVE BREAK UP OF POWER PRICE AT WHICH THE POWER ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 25 WAS PURCHASED AND SOLD BY POWER PRODUCERS, DISTRIBU TION COMPANIES ETC IN DIFFERENT REGIONS OF THE COUNTRY. FROM THE SAID CHART IT APPEARS THAT THE AVERAGE POWER UNIT PRICE OF THE EASTERN REGION IN THE YEAR 2008 WAS RS. 7.53/-. SIM ILARLY FOR THE SOUTHERN REGION OF RS. 7.54 PER UNIT. SIMILAR PRICES PREVAILED IN 2009 AS WELL. THE FOREGOING DOCUMENTS THEREFORE PROVE THAT THE A.O.S PRESUMPTION THAT THE ASSESSEE WAS LEGALLY OBLIGED TO SELL ELECTRICITY ONLY TO THE POWER DISTRIBUTION COMPANIES AND SEBS A ND THAT TOO AT THE CONTROLLED PRICES WAS DEVOID OF ANY LEGAL OR FACTUAL FOUNDATION. WE NOTE THAT THIS SPECIFIC ISSUE WAS ADJUDICATED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CA SE OF DCIT VS BIRLA CORPORATION LTD. TO WHICH ONE OF US WAS SIGNATORY. IN THE SAID DECISION , THE CO-ORDINATE BENCH OF THIS TRIBUNAL, AFTER CONSIDERING THE RATIO LAID DOWN BY THE HONBL E SUPREME COURT IN THE CASE THIRU AROORAN SUGAR LTD. HELD AS FOLLOWS: 5.6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK AND THE RELEVANT PROVISION S OF THE ELECTRICITY ACT, 2003 AS DETAILED SUPRA. WE FIND THAT THE MAIN THRUST OF ORDER OF L D CITA WAS BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF ITC LTD, W HICH WAS MODIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT. THE LD AR FAIRLY BROUGH T TO OUR ATTENTION THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ITC LTD BE FORE US AND HAD DULY DISTINGUISHED THE SAME AS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE , AS ADMITTEDLY, THE ASST YEAR BEFORE HONBLE CALCUTTA HIGH COURT IN ITC LTD WAS ASST YEA R 2002-03. THE SAID DECISION IN ITC LTD FOR ASST YEAR 2002-03 WAS RENDERED BY TAKING IN TO ACCOUNT THE RELEVANT PROVISIONS OF INDIAN ELECTRICITY ACT, 1910 AND ELECTRICITY (SUPPL Y) ACT, 1948. THESE ACTS WERE REPEALED AND A NEW ELECTRICITY ACT 2003 WAS INTRODUCED WITH EFFE CT FROM 10.6.2003. HENCE FOR THE ASST YEARS 2008-09 AND 2009-10 (I.E THE YEARS UNDER APPE AL BEFORE US) , THE ASSESSEE WOULD BE GOVERNED BY THE PROVISIONS OF ELECTRICITY ACT, 2003 . 5.6.1. WE HAVE ALREADY SEEN THAT THE ITCS CASE IN HONBLE CALCUTTA HIGH COURT, PROCEEDED ON THE BASIS THAT THE OPEN MARKET FOR THE CAPTIVE P OWER PLANT WAS ONLY A DISTRIBUTION COMPANY OR A COMPANY ENGAGED BOTH IN GENERATION AND DISTRIB UTION AND THAT THE RATE AT WHICH ELECTRICITY COULD BE SOLD BY THE CAPTIVE POWER PLAN T WAS THE ONE FIXED BY THE TARIFF REGULATORY COMMISSION. HOWEVER, SUCH POSITION HAS UNDERGONE SE A CHANGE INASMUCH AS DURING THE RELEVANT PREVIOUS YEARS IT WAS OPEN TO THE ASSESSEE TO SELL EVEN TO A CONSUMER AND THE PRICE FOR SALE TO A DISTRIBUTION COMPANY OR TO A CONSUMER THAT COULD BE MUTUALLY AGREED UPON NOTWITHSTANDING THE TARIFF FIXED BY THE STATE REGUL ATORY COMMISSION. WE FIND THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASST YEAR 2009-10, TH E ASSESSEE INFACT SOLD ELECTRICITY AT RATES HIGHER THAN THAT CHARGED FROM IT BY THE STATE ELECT RICITY BOARD. THE ASSESSEE NEVERTHELESS MADE THE COMPUTATION FOR THE PURPOSE OF SECTION 80I A OF THE ACT WITH REFERENCE TO THE PRICE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 26 CHARGED FROM IT BY THE STATE ELECTRICITY BOARD. I N SUCH CIRCUMSTANCES, WE HOLD THAT, WHEN IT WAS PERMISSIBLE FOR THE ASSESSEE TO SELL ELECTRICIT Y TO CONSUMERS AND DISTRIBUTION LICENSEES AT RATES HIGHER THAN THAT PAID BY IT TO THE STATE ELEC TRICITY BOARD, THE PRICE CHARGED BY THE STATE ELECTRICITY BOARD WOULD BE A VERY GOOD INDICATION O F THE MARKET VALUE OF ELECTRICITY AND THE ASSESSEE DID NOT COMMIT ANY ERROR IN ADOPTING SUCH PRICE FOR WORKING OUT THE AMOUNT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 5.6.2. WE FIND THAT THE RELIANCE PLACED BY THE LD A R ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THIRU AROORAN SUGARS LTD. V C IT, (1997) 227 ITR 432 (SC), WHEREIN AT PAGE 441, IT WAS HELD AS UNDER:- IN VIEW OF THE AFORESAID, IT IS VERY DIFFICULT TO UPHOLD THE CONTENTION OF MR. NARIMAN THAT IN ORDER TO FIND OUT THE MARKET PRICE, THERE HAS TO BE AN ACTUAL MARKET WHERE THERE WILL BE A CONCOURSE OF BUYERS AND SELLERS. THIS ARGUMENT WAS SPECIFICALLY REJECTED BY LORD PEARSON L. J., IN THE CASE OF BUILDING AND CIVIL ENGINEERIN G HOLIDAYS SCHEME MANAGEMENT LTD. V. POST OFFICE [1966] 1 QB 247 (CA), IN THE FOLLOWING WORDS (PAGE 268): WHAT IS MEANT BY MARKET VALUE ? IT IS NOT REASON ABLE TO SUPPOSE THAT FOR THE PURPOSES OF THIS PROVISO THERE IS NO MARKET VALUE UNLESS THERE IS A CONCOURSE OF BUYERS AND SELLERS. THERE IS NO NEED TO INFER THAT THERE MUST BE AN OPEN MARK ET, OR THAT THERE MUST BE A PRICE FLUCTUATING ACCORDING TO THE PRESSURES OF SUPPLY AN D DEMAND. IN THAT CASE LORD DENNING ALSO EXPLAINED THE CONCEP T OF MARKET VALUE IN THE FOLLOWING WORDS (PAGE 264): WHAT IS THE MARKET VALUE OF THESE STAMPS ? . . . IT DOES NOT CONNOTE A MARKET WHERE BUYERS AND SELLERS CONGREGATE. THE MARKET VALUE HERE MEA NS THE PRICE AT WHICH THE GOODS COULD BE EXPECTED TO BE BOUGHT AND SOLD AS BETWEEN WILLIN G SELLER AND WILLING BUYER, EVEN THOUGH THERE MAY BE ONLY ONE SELLER OR ONE BUYER, AND EVEN THOUGH ONE OR BOTH MAY BE HYPOTHETICAL RATHER THAN REAL. THESE ARE THE PRINCIPLES UNIVERSALLY APPLIED TO FIN D OUT THE PRICE AT WHICH THE GOODS ARE ORDINARILY SOLD IN THE OPEN MARKET. FOR DETERMINATI ON OF MARKET VALUE, THERE IS NO PRE- REQUISITE THAT AN OPEN MARKET WHERE BUYERS AND SELL ERS CONGREGATE TO BUY AND SELL GOODS MUST EXIST. IN THE INSTANT CASE, THE ASSESSEE-COMPA NY ACTUALLY BOUGHT SUGARCANE FROM A LARGE NUMBER OF GROWERS YEAR AFTER YEAR IN THE ORDI NARY COURSE OF BUSINESS. THE PRICE AT WHICH IT BUYS SUGARCANE MUST BE TAKEN TO BE THE MAR KET PRICE. IF THE PRICE IS CONTROLLED BY THE SUGARCANE CONTROL ORDER, THE CONTROLLED PRICE W ILL BE TAKEN AS THE MARKET PRICE, BECAUSE IT IS AT THIS PRICE THAT A WILLING BUYER AN D A WILLING SELLER ARE EXPECTED TO TRANSACT BUSINESS. AS LORD DENNING POINTED OUT, IT DOES NOT MAKE ANY DIFFERENCE TO THIS POSITION THAT THE ASSESSEE WAS THE ONLY BUYER IN THE REGION WHERE ITS FACTORY WAS LOCATED. (EMPHASIS ADDED) ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 27 5.6.3. THE LD AR SUBMITTED THAT AS HELD IN THE AFOR ESAID JUDGEMENT OF THE HONBLE SUPREME COURT, THE PRICE PAID BY AN ASSESSEE FOR PURCHASE O F RAW MATERIAL REPRESENTS THE MARKET PRICE OF SUCH RAW MATERIAL PRODUCED BY THE ASSESSEE. THE SAID JUDGMENT WAS HELD NOT TO APPLY IN ITCS CASE BECAUSE THE HONBLE COURT WAS OF THE VIE W THAT ELECTRICITY COULD NOT BE SOLD TO THE CONSUMER BECAUSE OF SPECIFIC PROHIBITION IN THE ERS TWHILE ELECTRICITY ACT AND AS SUCH THE PRICE TO THE CONSUMER COULD NOT BE TAKEN INTO ACCOUNT. WE FIND THAT THAT IS NOT THE POSITION IN THE INSTANT CASE. HENCE WE ARE IN AGREEMENT WITH THE A RGUMENTS OF THE LD AR. 5.6.4. WE FIND THAT THE METHOD ADOPTED BY THE ASSES SEE VIZ. TO TAKE THE AVERAGE RATE CHARGED BY THE STATE ELECTRICITY BOARD FOR THE PREVIOUS MON TH IS QUITE APPROPRIATE AND REASONABLE FOR DETERMINING THE MARKET VALUE FOR THE MONTH OF SUPPL Y. THE ANNUAL WEIGHTED AVERAGE ADOPTED BY THE LD CITA WOULD RESULT IN VARIATIONS OCCURRING DURING THE YEAR AT DIFFERENT TIMES BEING MADE APPLICABLE UNIFORMLY FOR THE WHOLE YEAR. IN OU R CONSIDERED OPINION, THE ASSESSEES METHOD IS MORE APPROPRIATE AS IT FACTORS IN VARIATI ONS AS AND WHEN THEY TAKE PLACE. 24. WE ALSO NOTE THAT THE IDENTICAL ISSUE OF DETERM INATION OF POWER TARIFF RATE FOR ALLOWING DEDUCTION UNDER SECTION 80IA IN RESPECT OF PROFITS OF CPPS CAME UP FOR CONSIDERATION BEFORE THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE CAS E OF GRAPHITE INDIA LTD. VS ACIT IN ITA NO. 304-305/KOL/2008 AND DIT VS KANORIA CHEMICALS A ND INDUSTRIES LTD IN ITA NO. 944/KOL/2016, A PERUSAL OF THE SAID ORDERS REVEALS THAT THE CO-ORDINATE BENCHES HELD THAT FOR THE PURPOSE OF GRANTING THE DEDUCTION, THE PROFITS OF THE CPP SHOULD BE DETERMINED WITH REFERENCE TO THE POWER TARIFF/ RATE AT WHICH THE MA NUFACTURING UNDERTAKINGS BEING THE CAPTIVE CONSUMERS WERE PROVIDED ELECTRICITY BY THE SEBS. 25. WE ALSO NOTE THAT SIMILAR ISSUE WAS ALSO CONSID ERED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF TAMIL NADU PETRO PRODUCTS LTD. VS ACIT 338 ITR 648 WHEREIN THE HONBLE HIGH COURT HELD THAT THERE IS NO DIFFICULTY IN HOLDING THAT CAPTIVE CONSUMPTION OF THE POWER GENERATED BY THE ASSESSEE FROM ITS OWN PO WER PLANT WOULD ENABLE THE ASSESSEE TO DERIVE PROFITS AND GAINS BY WORKING OUT THE COST OF SUCH CONSUMPTION OF POWER IN AS MUCH AS THE ASSESSEE IS ABLE TO SAVE TO THAT EXTENT WHIC H WOULD CERTAINLY BE COVERED BY SECTION 80IA(1). THE HONBLE HIGH COURT THUS UPHELD THE ASS ESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA BY WAY OF DEDUCTION BY THE VALUE OF SU CH UNITS OF POWER CONSUMED BY ITS OWN PLANT BY WAY OF PROFITS AND GAINS FOR THE RELEVANT ASSESSMENT YEARS. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 28 26. WE FIND THAT THE FACTS OF THE ASSESSEES CASE A RE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF BIRLA CORPORATION LTD. (SUPRA). THE BASIC R EASON ADOPTED BY THE LD. CIT(A) IN ASSESSEES CASE WAS THE SAME AS IN THE CASE OF BIRL A CORPORATION LTD. (SUPRA) AND WE NOTE THAT THE SAME APPELLATE AUTHORITY HAS PASSED THE OR DER IN BOTH CASES I.E. IN ASSESSEES CASE AND THE BIRLA CORPORATION LTD. THEREFORE, FOLLOWING THE CO-ORDINATE BENCH DECISION IN THE CASE OF BIRLA CORPORATION LTD. (SUPRA), WE UPHOLD T HE IMPUGNED ORDER OF LD. CIT(A) AND DIRECTION OF THE LD. CIT(A) VI, KOLKATA AND DISMI SS GROUND NO 3 OF REVENUES APPEAL. 27. WE NOTE THAT IN THE COURSE OF APPELLATE PROCEED INGS THE ASSESSEE HAD FILED AN APPLICATION UNDER RULE 27 OF THE ITAT RULES WHEREIN THEY HAVE TAKEN THE PLEA THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. TO E XCLUDE THE ELECTRICITY DUTY AND CESS COMPONENT IN WORKING OUT THE WEIGHTED AVERAGE LANDE D COST OF THE ELECTRICITY SUPPLIED BY SEBS. IN THIS REGARD, THE LEARNED AR FILED A DETAIL ED CHART PROVIDING DETAILED BREAK UP OF MONTHLY LANDED COSTS OF ELECTRICITY SUPPLIED BY SEB S IN THE STATE OF KARNATAKA, ORISSA AND WEST BENGAL. REFERRING TO THE SAID CHART, THE LEARN ED AR STATED THAT IF ELECTRICITY DUTY AND CESS WAS INCLUDED THEN PER UNIT AVERAGE LANDED COST FOR KARNATAKA, ORISSA AND WEST BENGAL WORKS OUT TO RS. 6.35, RS. 3.72 AND RS. 4.90 AS AGA INST RS. 6.04, RS. 3.5 AND RS. 4.25 RESPECTIVELY WORKED OUT BY LD. CIT(A). THE LEARNED AR ALSO SUBMITTED THAT THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF BIRLA CORPORA TION LTD. (SUPRA) ACCEPTED SUCH PLEA OF THE ASSESSEE. IN THE SAID DECISION, THE CO-ORDINATE BENCH OF THE TRIBUNAL RELIED ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN THE CASE O F CIT VS SHAH ALLOYS LTD. IN TAX APPEAL NO. 2092 OF 2010 DATED 22.11.2011. THE LEARN ED AR SUBMITTED THAT IN THE LATER JUDGMENT IN THE CASE OF PR. CIT VS GUJARAT ALKALIS AND CHEMICALS LTD. (544 OF 2016 DATED 03.10.2016), THE HONBLE HIGH COURT REITERATED THE SAME VIEW. 28. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE W ORKING PROVIDED BY THE LEARNED AR AND ALSO THE DECISION RELIED UPON, WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS GUJARAT ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 29 ALKALIS AND CHEMICALS LTD. (SUPRA) WHEREIN THE HON BLE HIGH COURT FOLLOWING THE JUDGMENT IN THE CASE OF CIT VS SHAH ALLOYS LTD. (SUPRA) WHER EIN THE HONBLE HIGH COURT HAS HELD AS FOLLOWS: 2. IN BOTH THE TAX APPEALS THOUGH SLIGHTLY DIFFERE NTLY WORDED, THE QUESTIONS CONCERNING THE SAME ASSESSEE ARE IDENTICAL AND CONCERN THE ISSUE O F DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT GRANTED TO THE ASSESSEE BY THE TRIBU NAL ON CAPTIVE POWER GENERATION PLANT. THE SECOND QUESTION IS WITH RESPECT TO RECOGNISING SUCH CLAIM ON THE BASIS OF PURCHASE PRICE OF POWER FROM GEB AND SUBSTITUTING THE RATES OF 2.4 7 PER UNIT ADOPTED BY THE ASSESSING OFFICER. 3. SINCE BOTH THE ISSUES ARE COVERED BY VARIOUS JUD GMENTS OF THIS COURT, WE DO NOT FIND IT NECESSARY TO RECORD FACTS AT ANY LENGTH. DIVISION B ENCH OF THIS COURT BY JUDGEMENTDATED 22.11.2011 IN TAX APPEAL NO.2092 /2010 INSOMEWHAT S IMILAR CONTROVERSY OBSERVED AS UNDER : '3. WITH RESPECT TO QUESTION [B], THE ISSUE PERTAIN S TO SUB-SECTION (B) OF SECTION 80IA OF THE INCOME TAX ACT, 1961.THE ASSESSEE HAD A CPP UNIT GE NERATING ELECTRICITY, WHICH WAS SUPPLYING IT TO A GENERAL UNIT. THE ELECTRICITY GEN ERATEDIS BEING SUPPLIED TO OTHER CONSUMERS ALSO. THE CPP UNIT CHARGED RS.5.40 PS. PER UNIT FRO M THE GENERAL UNIT. THEASSESSING OFFICER APPLYING SUB-SECTION (B) OF SECTION 80IARESTRICTED THE SAME TO RS.5.32 PS. PER UNIT AND, THEREBY,RESTRICTED THE DEDUCTIONS CLAIMED BY THE AS SESSEE UNDER SECTION 80IA OF THE ACT. THIS RESTRICTION WAS PRIMARILY ONTHE BASIS THAT THE RATE OF RS.5.4O PS. CHARGED BY GUJARAT ELECTRICITY BOARD (GEB FOR SHORT) WAS INCLUSIVE O F 8 PAISEPER UNIT OF ELECTRICITY DUTY. THIS COMPONENT OF ELECTRICITYDUTY THE ASSESSING OFFICER DISCARDED FOR THE PURPOSES OFASCERTAINING MARKET VALUE OF THE ELECTRICITY GENERATED BYTHE CPP UNIT AND SUPPLIED TO ITS GENERAL UNIT. 4. CIT (APPEALS) CONFIRMED THE VIEW OF THE ASSESSIN G OFFICER ON THE SAME LINE OF REASONING. THE TRIBUNAL, HOWEVER, ONFURTHER APPEAL BY THE ASSE SSEE, REVERSED THE ORDERS PASSEDBY THE REVENUE AUTHORITIES REFERRING TO AND RELYING UPONTH E DECISIONS OF OTHER TRIBUNALS. THE TRIBUNAL WAS OF THEOPINION THAT THE MARKET VALUE OF THE ELECTRICITY SUPPLIED BYTHE CPP UNIT TO THE GENERAL UNIT WOULD BE THE SAME BEINGCHARGED BY GEB FROM THE CONSUMERS. 5. COUNSEL FOR THE REVENUE CONTENDED THAT THE COMPO NENT OF 8 PAISE PER UNIT WAS THE ELECTRICITY DUTY WHICH GEB WAS NOT AUTHORIZED TO RE TAIN BUT HAD TO PASS ON TO THE GOVERNMENT. IN ESSENCE, GEB WAS ONLY COLLECTING B P AISE PER UNIT AS ELECTRICITY DUTY FOR AND ON BEHALF OF THE GOVERNMENT. HE SUBMITTED THAT THE MARKET VALUE OF THE ELECTRICITY SHOULD BE RECKONED ON RS.5.32 PS. PER UNIT AS WAS DONE BY THE REVENUE AUTHORITY. 6. UNDER SUB-SECTION(B) OF SECTION SOIA OF THE ACT, IF IT IS FOUND THAT WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF THE ELIGIBLE BUSI NESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE OR WHERE ANY GOODS OR SE RVICES HELD FOR THE PURPOSES OF ANY OTHER ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 30 BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINESS AND IN EITHER CASE THE CONSIDERATION FOR SUCH TRANSFER DOES NOT CORRES POND TO THE MARKET VALUE OF SUCH GOODS AS ON THE DATE OF THE TRANSFER, THEN FOR THE PURPOSES OF DEDUCTION UNDER SECTION 80IA IN CASE OF THE ELIGIBLE BUSINESS AS IF THE TRANSFER HAD BEEN M ADE AT THE MARKET VALUE OF SUCH GOODS OR SERVICES. IT IS IN THIS CONTEXT THAT THE QUESTION O F SUBSTITUTING THE ACTUAL CONSIDERATION BY THE MARKET VALUE COMES INTO PICTURE. 7. WE MAY NOTICE THAT THE TRIBUNAL DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE THAT THE ELECTRICITY IS NEITHER GOODS NOR SERVICES AND THAT, TRANSFER OF ELECTRICITY, THEREFORE, WOULD NOT BE COVERED UNDER SUB-SECTION (8) OF SECTION BOIA OF THE ACT. HOWEVER, IN SO FAR AS THE TRIBUNAL'S REASONING TO ADOPT THE MARKET VALUE OF T HE GOODS AT RS.5.40 PS. PER UNIT IS CONCERNED, WE FIND NO ERROR. UNDISPUTEDLY, GEB SUPP LIED THE ELECTRICITY TO ITS CONSUMERS AT THE SAME RATE. THIS, THEREFORE, WAS A MARKET VALUE OF THE ELECTRICITY SUPPLIED BY THE CPP UNIT TO THE GENERAL UNIT. THE FACT THAT THIS AMOUNT OF R S.5.40 PS. COMPRISES OF A COMPONENT OF 8 PAISE, WHICH WAS ELECTRICITY DUTY, TO OUR MIND, WOU LD MAKE NO DIFFERENCE IN SO FAR AS THE MARKET VALUE IS CONCERNED. TO A CONSUMER, THE PRICE BEING PAID REMAINS 5.40 PS. PER UNIT. THE FACT THAT THE SELLER RETAINS ONLY RS.5.32 PS. OUT O F THE SAID COLLECTION AND PASSES ON B PAISE PER UNIT TO THE GOVERNMENT IN THE FORM OF ELECTRICITY D UTY, TO OUR MIND, WOULD MAKE NO DIFFERENCE. THIS QUESTION IS, THEREFORE, NOT REQUIRED TO BE CON SIDERED.' 4. THIS WAS FOLLOWED IN CASE OF COMMISSIONER OF INC OME-TAX V. SHAH ALLOYS LIMITED IN TAX APPEAL NO.2093/2010. THISWAS REITERATED IN TAX APPE AL NO. 1646 /2O1O IN CASE OF ACITBHARUCH CIRCLE, BHARUCH THROUGH COMMISSIONER V. PRAGATI GLASS WORKS PVT LTD. (ORDER DATED 30.1.2OL2), INWHICH FOLLOWING OBSERVATIONS WE RE MADE : '7. TO OUR MIND, TRIBUNAL HAS COMMITTED NO ERROR.AS SESSING OFFICER AND CLT(APPEALS) WHILE ADOPTING RS.4.51PER UNIT AS THE VALUE OF ELECTRICIT Y GENERATED BY ELIGIBLE UNITOF ASSESSEE AND SUPPLIED THROUGH ITS NON ELIGIBLE UNIT ONLY WORKED OUT COST OF SUCH ELECTRICITY GENERATION. IN FACTCLT(APPEALS) IN TERMS RECORDED THAT RS.4.51 WAS COMPUTEDAS THE REASONABLE VALUE OF THE ELECTRICITY GENERATED BYELIGIBLE UNIT OF ASSESSEE. THIS AMOUNT INCLUDED RS.4. 17 PERUNIT WHICH WAS THE COST OF ELECTRICITY GENERATION AND RS.0.34 PER UNIT WHICH WAS DUTY PAID BY THE ASSESSEE TOGEB FOR SUCH POWER GENERATION. THUS THE SUM OF RS.4.51PER UNIT ONLY REPRESENTED THE COST OF ELECTRICITY GENERATION TO THE ASSESSEE. IN SECTION 80IA(8) OF THE ACT WHAT ISREQUIRED TO BE ASCERTAINED IS THE MARKET VALUE OF THE GOODST RANSFERRED BY THE ELIGIBLE BUSINESS, WHEN SUCH TRANSFER ISBY ELIGIBLE BUSINESS TO ANOTHER NON ELIGIBLE BUSINESS OF THE SAME ASSESSEE AND THE CONSIDERATION RECORDED IN THEACCOUNTS OF THE EL IGIBLE BUSINESS DOES NOT CORRESPOND TOMARKET VALUE OF SUCH GOODS. TERM 'MARKET VALUE' I S FURTHEREXPLAINED IN EXPLANATION TO SAID SUB-SECTION TO MEAN INRELATION TO ANY GOODS OR SERV ICES, PRICE THAT SUCH GOODS ORSERVICES WILL ORDINARILY FETCH IN THE OPEN MARKET. TO OURMIND SUM OF RS.4.51 PER UNIT OF ELECTRICITY ONLYREPRESENTED COST OF ELECTRICITY GENERATION TO T HE ASSESSEE AND NOT THE MARKET VALUE THEREOF. IT IS NOT IN DISPUTE THAT THE GEB CHARGED RS.5 PER UNIT FOR SUPPLYING ELECTRICITY TO OTHER INDUSTRIES INCLUDING NON ELIGIBLE UNIT OF THE ASSESSEE ITSELF. TRIBUNAL THEREFORE, WHILE ADOPTING THE SAID BASE FIGURE AND EXCLUDING EXCISE DUTY THEREFROM TO WORK OUT RS.4.90 AS THE MARKET VALUE OF THE ELECTRICITY GENERATED BY THE AS SESSEE, TO OUR MIND, COMMITTED NO ERROR. IT ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 31 CAN BE EASILY SEEN THAT IF THE ASSESSEE WERE TO SUP PLY SUCH ELECTRICITY OR WAS ALLOWED TO DO SO IN THE OPEN MARKET, SURELY IT WOULD NOT FETCH RS. 4 .51 PER UNIT BUT RS. 5 PER UNIT AS WAS BEING CHARGED BY GEB. SINCE THE EXCISE DUTY COMPONENT THE REOF WOULD NOT BE RETAINED BY THE ASSESSEE, TRIBUNAL REDUCED THE SAID FIGURE BY THE N ATURE OF EXCISE DUTY AND CAME TO THE FIGURE OF RS.4.9O TO ASCERTAIN THE MARKET VALUE OF ELECTRI CITY GENERATED BY THE ELIGIBLE UNIT AND SUPPLIED TO NON ELIGIBLE BUSINESS OF THE ASSESSEE. NO ERROR WAS COMMITTED BY THE TRIBUNAL. NO QUESTION OF LAW THEREFORE, ARISES. TAX APPEAL IS DI SMISSED.' 5. ISSUE ONCE AGAIN REACHED THE DIVISION BENCH OF T HIS COURT IN CASE OF COMMISSIONER OF INCOME-TAX-I V. ALEMBICLIMITED IN TAX APPEAL NO.47L /2OOG AND CONNECTEDAPPEALS. THE DIVISION BENCH REFERRING TO EARLIER JUDGMENTSOF THE COURT HELD AS UNDER : '11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE PARTIES. WE HAVE ALSO CONSIDEREDTHE CASE LAWS CITED BY THE LEAR NED COUNSEL FOR THE ASSESSEE.TAKING INTO CONSIDERATION THE JUDGMENTS OF THIS COURT ANDOTHER HIGH COURTS, CITED ABOVE, WE ARE OF THE OPINION THATTHE TRIBUNAL HAS RIGHTLY ALLOWED THE CL AIM OF THE ASSESSEE.IN THAT VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY INTHE ORDER OF THE TRIBUNAL. THEREFORE, WE ANSWER QUESTION(C) AND (D) IN FAVOUR OF THE ASSESSEE AND A GAINST THEREVENUE.' 6. ISSUES ARE THUS CONSIDERED ON NUMBER OF OCCASION S BY THE COURT AND HELD AGAINST THE REVENUE. QUESTIONS ARE ANSWERED AGAINST THE REVENUE . BOTH THE TAX APPEALS ARE THEREFORE, DISMISSED. 29. WE ALSO RELY IN THE DECISION OF THE DCIT VS BIR LA CORPORATION LTD. (SUPRA) WHEREIN THE TRIBUNAL OBSERVED AS FOLLOWS: 5.6.5. EXCLUSION OF ELECTRICITY DUTY AND CESS AS DI RECTED BY LD CITA NOW COMING TO THE DECISION OF THE LD CITA TO EXCLUD E ELECTRICITY DUTY AND CESS, WE FIND THAT THE SAME HAS BEEN ADDRESSED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SHAH ALLOYS LTD IN TAX APPEAL NO. 2092 OF 2010 DATED 22. 11.2011, WHICH APPROVED THE VIEW TAKEN BY THE AHMEDABAD TRIBUNAL IN ITA NOS.844, 2072 AND 2073/AHD/2006 DATED 8.1.2010, THAT THE PRICE CHARGED BY THE ELECTRICITY BOARD INCLUSIV E OF THE AMOUNT OF ELECTRICITY DUTY REPRESENTED THE MARKET VALUE EVEN THOUGH THE ASSESS EE WAS NOT REQUIRED TO CHARGE ELECTRICITY DUTY. 5.6.6. IN VIEW OF OUR AFORESAID FINDINGS, WE DIRECT THE LD AO TO ACCORDINGLY MODIFY THE EARLIER YEARS PROFITS ALSO WHICH WERE MODIFIED BY HIM, IN T HE SAME LINES AS DIRECTED FOR ASST YEARS 2008-09 AND 2009-10 HEREIN. ACCORDINGLY, THE GROUN DS RAISED BY THE ASSESSEE IN THIS REGARD DESERVE TO BE ALLOWED AND THAT OF THE REVENUE DESER VE TO BE DISMISSED. 30. FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT H IGH COURT AND DECISION OF THE CO- ORDINATE BENCH, WE DIRECT THE A.O. TO ALLOW THE DED UCTION UNDER SECTION 80IA(4) BY ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 32 ADOPTING THE WEIGHTED AVERAGE LANDED COST OF ELECTR ICITY AT THE RATES OF RS. 6.35, RS. 3.72 AND RS. 4.90 IN RESPECT OF CPPS AT KARNATAKA, ORISSA AN D WEST BENGAL RESPECTIVELY. THE A.O. SHALL COMPUTE GROSS SALE / TRANSFER PRICE OF CPP, T AKING INTO ACCOUNT FOREGOING RATES AND ACCORDINGLY RE-WORK THE PROFITABILITY OF EACH CPP A ND THEREAFTER ALLOW THE DEDUCTION UNDER SECTION 80IA OF THE ACT. BEFORE THE A.O. WORKS OUT THE DEDUCTION PERMISSIBLE, AN OPPORTUNITY OF BEING HEARD SHALL BE AFFORDED TO THE ASSESSEE. GROUND NO. 3 OF THE REVENUES APPEAL IS DISMISSED. IN THE RESULT, REVENUES APPEA L IN ITA NO. 1722/KOL/2012 FOR A.Y. 2008-09 IS DISMISSED AND THE ASSESSEES PLEA UNDER RULE 27 OF THE ITATS RULE IS ALLOWED. 31. ITA NO. 1188/KOL/2016 FOR A.Y. 2008-09 (ASSESSE ES APPEAL) GROUND NO. 1 TO 4 IN THIS APPEAL ARE AGAINST THE A CTION OF THE LD. CIT(A)-17 { SECOND ROUND } DATED 04.03.2016 KOLKATA IN CONFIRMING THE A.O. S ORDER PASSED UNDER SECTION 250/143 WHEREIN THE A.O. RESTRICTED THE BENEFIT OF DEDUCTION UNDER SECTION 80IA ONLY TO THE EXTENT OF AMOUNT CLAIMED IN THE RETURN OF INCOME AS OPPOSED TO THE SPECIFIC DIRECTIONS ISSUED BY THE LD. CIT(A) VI, KOLKATA REQUIRING AO TO RE- COMPUTE THE ELIGIBLE PROFITS OF CPPS. 32. BRIEFLY STATED FACTS OF THE CASE ARE THAT IN TH E RETURN FILED UNDER SECTION 139(1) OF THE ACT, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTI ON 80IA IN RESPECT OF THE PROFITS DERIVED BY IT FOR CPPS AT RS. 37,38,67,760/-. IN ARRIVING A T THE DEDUCTION PERMISSIBLE IN TERMS OF SECTION 80IA, THE ASSESSEE HAD ADOPTED THE FOLLOWIN G SELLING RATES OF POWERS WHICH WAS CAPTIVELY CONSUMED BY ITS MANUFACTURING UNDERTAKING S: CPP PER UNIT KARNATAKA 4.28 ORISSA 4.06 WEST BENGAL 4.30 ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 33 33. IN THE ORDER FRAMED UNDER SECTION 143(3), THE A .O. HOWEVER HAD OBJECTED TO THE MANNER OF DETERMINATION OF SELLING OF POWER BY THE ASSESSEE AND RECOMPUTED IT AT THE FOLLOWING RATES: CPP PER UNIT KARNATAKA 1.92 ORISSA 2.02 WEST BENGAL 1.93 AGGRIEVED BY THE SAID ACTION, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) VI, { FIRST ROUND }KOLKATA. BEFORE THE LD. CIT(A), THE ASSESSEE TOOK THE FOLLOWING GROUNDS: 4A. THAT THE ASSESSING OFFICER ERRED IN FACTS AND IN LAW IN DISALLOWING THE CLAIM OF THE APPELLANT U/S 80IA OF THE ACT AMOUNTING TO RS. 37,3 8,67,760/-. B. THAT THE ASSESSING OFFICER ERRED IN FACTS AND IN LAW IN CONSIDERING THE PURCHASE PRICE OF POWER BY THE RESPECTIVE SEB TO BE THE MARKET RATE AS PER SECTION 80IA(8), WHEREAS THE JUDICIAL PRECEDENTS INDICATE THAT THE MARKET RATE W OULD BE THE SELLING PRICE OF SEB. C. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, PROFITS OF THE CAPTIVE POWER UNDERTAKING SHOULD BE COMPUTED ON THE BASIS OF THE PRICE OF THE POWER GENERATED BY THE APPELLANT AT THE AVERAGE ANNUAL LANDED COST OF ELECTRICITY PURCHASED BY THE ASSESSEE FROM THE RESPECTIVE SEBS. D. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, IN THE ABSENCE OF ANY STATUTORY PROVISION TO THE CONTRARY, THE LD. CIT(A) IS VESTED WITH THE PLENARY POWER TO ADMIT AND ADJUDICATE CLAIMS OF THE APPELLANT, BY PLACING RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. (SUPRA) REPORTED IN 187 ITR 688. E. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PROFIT FOR THE CAPTIVE UNDERTAKINGS IN KARNATAKA AND BANGALORE MAY BE RECOMPUTED BY CONSID ERING THE PRICE OF THE POWER GENERATED BY THE APPELLANT AT THE AVERAGE ANNUAL LA NDED COST OF ELECTRICITY PURCHASED BY THE ASSESSEE FROM THE RESPECTIVE SEBS. F. THAT THE ASSESSING OFFICER ERRED IN FACTS AND IN LAW IN CONSIDERING AN ARBITRARY ESTIMATED RATE AS THE BASIS FOR DISALLOWING THE CLAIM U/S 80I A OF THE ACT IN RESPECT OF UNDERTAKINGS IN WEST BENGAL AND KARNATAKA. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 34 34. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE T HE LD. CIT(A) IN THE FIRST ROUND, THE ASSESSEE HAD PLEADED THAT THE AVERAGE LANDED COST O F ELECTRICITY SHOULD BE ADOPTED AT OPEN MARKET VALUE FOR THE PURPOSE OF SECTION 80IA(8) OF THE ACT. THE ASSESSEE ADDITIONALLY SUBMITTED THAT IF THE AFORESAID CONTENTION IS ACCEP TED AND THE ANNUAL WEIGHTED AVERAGE LANDED COST OF ELECTRICITY FOR THE ELIGIBLE UNDERTA KINGS OF KARNATAKA IS ADOPTED THEN THE CLAIM UNDER SECTION 80IA WOULD INCREASE VIS--VIS T HE CLAIM MADE IN THE RETURN OF INCOME. IN THE APPELLATE ORDER, THE LD. CIT(A) PRINCIPALLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE ANNUAL WEIGHTED AVERAGE LANDED COS T OF ELECTRICITY TO THE ASSESSEE (EXCLUDING DUTY AND CESS) WAS THE MOST APPROPRIATE RATE FOR THE PURPOSE OF COMPUTING THE TRANSFER VALUE AND DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE RELEVANT FINDINGS AND DIRECTION ISSUED BY THE LD. CIT(A) IN THIS REGARD W ERE AS FOLLOWS: 32. THE HONBLE ITAT B BENCH, KOLKATA IN THE CAS E OF DCIT, CIR-8, KOLKATA VS M/S. ITC LTD. KOLKATA IN ITA NO. 18 (KOL) OF 2006 DECIDED ON 30.06.2006 HAS APPROVED IN THE SAME MANNER. THEREFORE, THE RATES CALCULATED IN THIS MAN NER ARE HELD TO BE FAIR, REASONABLE AND APPLICABLE TO THE APPELLANT AND ARE GIVEN AS FOLLOW S: SL NO. ASST. YEAR CPP IN KARNATAKA CPP IN WEST BENGAL CPP IN ORISSA 1 2008-09 6.04 4.25 3.50 33. THE RATES HAVE BEEN FURNISHED BY THE APPELLANT ON THE BASIS OF CALCULATION IN THE BILLS CHARGED BY THE STATE ELECTRICITY BOARD(S). THE BASI S FOLLOWED IS HELD FAIR AND REASONABLE AND APPROVED IN THE FACTS OF THE APPELLANT AND ALSO IN VIEW OF THE JUDGEMENT OF THE JURISDICTIONAL ITAT, KOLKATA AND OTHER APPELLATE AUTHORITIES ON TH IS ISSUE (SUPRA). HOWEVER, THE ASSESSING OFFICER WILL VERIFY THE QUANTITY OF THE UNITS CONSU MED AND THE FIGURES OF THE BILLS FROM THE ORIGINAL DOCUMENTS WHILE GIVING THE APPEAL EFFECT. IN CASE, THERE IS ANY VARIATION IN THE FIGURES AS GIVEN IN THE ANNEXURE A (ATTACHMENT OF 3 PAGES ), HE WILL MODIFY IT ACCORDINGLY AFATER GIVING DETAILED REASONING FOR THE SAME 35. IN COMPLIANCE WITH THE ABOVE DIRECTIONS IN THE COURSE OF HEARING CONDUCTED BEFORE AO, PRIOR TO PASSING OF THE IMPUGNED ORDER U/S 250/ 143(3) DATED 31.12.2012, THE ASSESSEE FURNISHED RELEVANT ELECTRICITY BILLS FOR VERIFICATI ON. IN THE ORDER PASSED U/S 250/143(3) GIVING ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 35 EFFECT TO THE APPELLATE ORDER DATED 27.04.2012 OF T HE LD. CIT(A)-VI, THE A.O. DID NOT POINT OUT ANY DEFECT OR INFIRMITY IN THE CALCULATIONS OF THE ASSESSEE. THE A.O. HOWEVER RESTRICTED THE DEDUCTION U/S 80IA TO RS.37,38,67,760/- BEING T HE AMOUNT CLAIMED IN THE RETURN FILED U/S 139(1) AS OPPOSED TO THE SPECIFIC RATES DIRECTED TO BE ADOPTED BY THE LD. CIT(A). NO REASON OR EXPLANATION IS DISCERNIBLE FROM THE ORDER PASSED U/S 250/143(3) WHICH EXPLAINS AS TO WHY THE AO DID NOT ABIDE BY THE SPECIFIC DIRECTIONS GIV EN BY THE LD. CIT(A). 36. AGGRIEVED BY SUCH ORDER OF THE A.O., THE ASSESS EE PREFERRED APPEAL { SECOND ROUND } BEFORE THE LD. CIT(A)-17, KOLKATA. SINCE THE A.O.S ORDER WAS NON-SPEAKING, THE LD. CIT(A) SOUGHT A REMAND REPORT. IN HIS REMAND REPORT THE A.O. RELYING ON THE PROVISIONS OF SECTION 80AC AND THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD (284 ITR 323) CLAIMED THAT THE DEDUCTION HIGHER THAN THE ONE CLAIMED IN THE RETURN WAS NOT ADMISSIBLE, SINCE IT WAS NEITHER SUPPORTED BY REVIS ED FORM 10CCB NOR WAS IT CLAIMED IN THE RETURN OF INCOME. UPHOLDING THE A.O.S OBJECTIONS I N THE REMAND REPORT, THE LD. CIT(A) IN HIS APPELLATE ORDER ALSO HELD THAT THE LD. CIT(A)-V I, KOLKATA WHILE DISPOSING EARLIER APPEAL AGAINST ORDER U/S 143(3) HAD NOT GIVEN ANY CATEGORI CAL FINDING DIRECTING THE A.O. TO ENHANCE THE DEDUCTION U/S 80IA AND THEREFORE LD. CIT(A) CON FIRMED THE ORDER PASSED U/S 250/143(3) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A ), THE ASSESSEE IS IN APPEAL BEFORE US. 37. WE HAVE CAREFULLY EXAMINED THE AVERMENTS OF BOT H THE PARTIES AND PERUSED THE RELEVANT JUDICIAL PRECEDENTS RELIED UPON IN THIS RE GARD. WITH REGARD TO THE ORDER OF LD. CIT(A) HOLDING THAT ADDITIONAL CLAIM NOT MADE IN TH E RETURN OF INCOME OR BY WAY OF REVISED RETURN OF INCOME WAS NOT ADMISSIBLE, THE LD. AR DRE W OUR ATTENTION TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS M /S. BRITANNIA INDUSTRIES LTD IN ITA NO. 03 OF 2013 DATED 13.07.2017 IN WHICH THE HON'BLE HI GH COURT TOOK A VIEW THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. (SUPRA) WAS APPLICABLE ONLY TO THE POWER OF THE ASSESSING AUTHORITY TO CONSIDER A CLAIM MADE OTHERWISE BY WAY OF A REVISED RETURN OF INCOME, BUT THAT DOES NOT LIMIT T HE POWER OF THE APPELLATE AUTHORITIES TO ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 36 ENTERTAIN A NEW CLAIM. THE LD. AR ALSO DREW OUR ATT ENTION TO SIMILAR DECISIONS RENDERED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT AB HINITA FOUNDATION (P) LTD 396 ITR 251 & HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS P RUTHVI BROKERS & SHAREHOLDERS (349 ITR 336). 38. AS FAR AS THE POWER OF CIT(A) TO ENTERTAIN REVI SED CLAIM OR AN ADDITIONAL CLAIM RAISED BY THE ASSESSEE IS CONCERNED, WE FIND THAT THE LAW IS NOW WELL SETTLED THAT THE APPELLATE AUTHORITIES HAVE THE POWER TO ENTERTAIN A NEW CLAIM BY THE ASSESSEE EVEN IN THE ABSENCE OF A REVISED RETURN OF INCOME. THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF CIT VS BRITANNIA INDUSTRIES LTD (SUPRA) SQUARELY SUPPORTS THE ASSESSEES CASE. 39. WE FURTHER NOTE THAT THE A.O. IN HIS REMAND REP ORT RELIED ON THE PROVISIONS OF SECTION 80AC TO DENY THE BENEFIT OF HIGHER QUANTUM OF DEDUC TION U/S 80IA OF THE ACT. IN OUR CONSIDERED OPINION HOWEVER THE A.O.S SUCH CONTENTI ON WAS PRIMA FACIE UNTENABLE BOTH ON FACTS & IN LAW. SECTION 80AC REQUIRES THAT ANY PROF IT BASED CLAIM OF DEDUCTION UNDER CHAPTER VIA WILL NOT BE ADMISSIBLE IF THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME ON OR BEFORE THE DUE DATE PRESCRIBED IN SECTION 139(1) OF THE ACT. IT NOWHERE PROVIDES THAT ONCE THE ASSESSEE HAS FILED A RETURN OF INCOME WITHIN DU E DATE AND SUCH RETURN INCLUDES A CLAIM FOR DEDUCTION, THEN THE QUANTUM OF DEDUCTION PERMISSIBL E AS PER LAW CANNOT BE SUBSEQUENTLY ALTERED OR MODIFIED. WE FIND THAT FOR THE AY 2008-0 9 THE ASSESSEE HAD FILED ITS RETURN OF INCOME WITHIN THE TIME PRESCRIBED U/S 139(1) AND THE SAID RETURN CONTAINED THE CLAIM FOR DEDUCTION U/S 80IA OF THE ACT. ACCORDINGLY THE COND ITION LAID DOWN IN SECTION 80AC WAS SATISFIED AND THEREFORE THE A.O. WAS OBLIGED TO ADJ UDICATE AND ALLOW THE DEDUCTION PERMISSIBLE UNDER SECTION 80 IA AS PER APPLICABLE L AW AND JUDICIAL PRECEDENTS RELATED THERETO. IT WAS OPEN BOTH FOR THE A.O. TO RAISE OB JECTIONS TO THE CLAIM MADE IN THE RETURN AS WELL AS THE ASSESSEE TO MAKE A HIGHER CLAIM, WITH A VIEW TO ENSURE THAT THE DEDUCTION CLAIMED U/S 80IA WAS CORRECTLY ALLOWED, AS PER LAW. IT IS WELL SETTLED IN LAW THAT THE AMOUNT OF DEDUCTION U/S 80IA STATED IN THE RETURN OF INCOM E OR THE RELEVANT AUDIT REPORT I.E. FORM ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 37 10CCB, IS NOT SACROSANCT. IT IS ALSO WELL SETTLED T HAT THERE IS NO RULE OF ESTOPPEL IN TAXATION LAW. ONCE THE PROCEDURAL REQUIREMENT OF SECTION 80A C WAS SATISFIED AND THE RETURN OF INCOME WAS FILED WITHIN THE TIME LIMIT IN SECTION 1 39(1), THEN NOT ONLY THE AO BUT EVEN THE ASSESSEE WAS LEGALLY ENTITLED TO REVISE OR FOR THAT MATTER RE-COMPUTE THE ELIGIBLE DEDUCTION UNDER SECTION 80IA SO TO ARRIVE AT THE CORRECT SUM PERMISSIBLE IN LAW. THE SUM SO RE- COMPUTED CAN BE A FIGURE HIGHER OR LOWER THAN THE S UM CLAIMED IN THE RETURN OF INCOME. SECTION 80AC THEREFORE HAD NO APPLICATION IN QUANTI FICATION OF THE DEDUCTION PERMISSIBLE UNDER SECTION 80IA OF THE ACT QUANTUM OF WHICH THE AO WAS LEGALLY OBLIGED TO DETERMINE KEEPING IN VIEW APPLICABLE LEGAL PROVISIONS AND DEC ISIONS OF THE JUDICIAL PRECEDENTS ON THE SUBJECT. 40. NOW COMING TO THE SPECIFIC FACTS OF THE ASSESSE ES CASE, WE FIND THAT IN THE ORIGINAL APPELLATE PROCEEDINGS THE LD. CIT(A) HAD TAKEN DUE COGNIZANCE OF THE ASSESSEES PLEA THAT IF THE ANNUAL WEIGHTED AVERAGE COST OF ELECTRICITY PUR CHASED AT KARNATAKA UNIT IS ADOPTED, THEN IT WOULD RESULT IN ENHANCEMENT OF THE QUANTUM OF CL AIM U/S 80IA OF THE ACT. THIS IS APPARENT FROM PARA 18 (AT PAGE 26) OF THE FIRST APPELLATE OR DER OF THE LD. CIT(A)VI. WE FURTHER NOTE THAT THE LD. CIT(A) HAD SPECIFICALLY ANNEXED THE RE VISED COMPUTATION OF SELLING RATES OF POWER OF THE RESPECTIVE CPPS TO THE APPELLATE ORDER AND ISSUED NECESSARY DIRECTIONS TO THE AO TO VERIFY THE SAME AND THEN MODIFY THE CLAIM ALL OWABLE U/S 80IA. ON THESE FACTS THEREFORE, WE FIND THAT IN THE IMPUGNED ORDER THE L D. CIT(A)-17 ERRED IN HOLDING THAT HIS PREDECESSOR DID NOT DIRECT THE A.O. TO ALLOW THE DE DUCTION U/S 80 IA AT A SUM HIGHER THAN THE ONE CLAIMED IN THE RETURN FURNISHED U/S 139(1). ONCE THE LD. CIT(A)-VI S ORDER SPECIFICALLY LAID DOWN THE MANNER AND MODE OF CALC ULATION OF SELLING RATE OF POWER AND ALSO ANNEXED THE COMPUTATION SHEETS TO THE APPELLATE ORD ER, SUBJECT TO VERIFICATION OF FIGURES BY THE A.O. WITH REFERENCE TO ORIGINAL BILLS; IN OUR C ONSIDERED VIEW THE A.O. WAS LEGALLY OBLIGED TO CARRY OUT SUCH DIRECTIONS IN LETTER & SP IRIT. WE HOWEVER FIND THAT IN PASSING THE ORDER U/S 250/143(3) THE AO ERRED BY NOT CARRYING O UT THE DIRECTIONS OF THE FIRST APPELLATE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 38 AUTHORITY AND THEREBY NOT ALLOWING THE DEDUCTION U/ S 80IA IN THE MODE AND MANNER DIRECTED BY THE LD. CIT(A). 41. ON THE NEXT ASPECT AS TO WHETHER WHILE GIVING E FFECT TO THE ORDER OF CIT(A) TOTAL INCOME TO BE ASSESSED, CAN BE LOWER THAN THE RETURN ED INCOME, THE LD. AR DREW OUR ATTENTION TO THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS MILTON LAMINATES LTD (218 TAXMAN 108). ON THE OTHER HAND, THE LD. DR APPEARING ON BEHALF OF THE REVENUE SUPPORTED THE ORDER OF THE LD. CIT(A)-17. WE FIND T HAT THIS QUESTION HAS BEEN ANSWERED IN AFFIRMATIVE BY THE GUJARAT HIGH COURT IN THE CASE O F CIT VS MILTON LAMINATES LTD (SUPRA) WHEREIN IT WAS HELD AS UNDER: '(5) HAD THIS BEEN THE ONLY BASIS OF THE TRIBUNALS ORDER, WE WOULD HAVE CONSIDERED THE MATTER FURTHER. HOWEVER, IN THE PRESENT CASE, THE C ENTRAL ISSUE IS WHETHER THE ASSESSEE HAVING FILED A RETURN OF INCOME AND DISCLOSED CERTAIN INCO ME IN SUCH RETURN, WHILE GIVING EFFECT TO THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER IN FAVOU R OF THE ASSESSEE, COMPUTATION OF ASSESSED INCOME CAN GO BELOW THE RETURNED INCOME OR NOT. IN THIS REGARD, THE DECISION OF OUR COURT IN THE CASE OF GUJARAT GAS CO. LTD. (SUPRA) I S AMPLY CLEAR. A DIVISION BENCH OF THIS COURT WAS OF THE OPINION THAT THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR WHICH PROVIDED THAT THE ASSESSED INCOME OF AN ASSESSEE SHOULD NOT BE BE LOW THE RETURNED INCOME, WAS INVALID. 42. THE LD. AR ALSO EXPLAINED THE LEGISLATIVE HISTO RY OF THE PROVISIONS OF SUB-SECTION (3) TO SECTION 143 OF THE INCOME-TAX ACT, 1961 TO BUTTR ESS HIS CONTENTION THAT THE INCOME FINALLY ASSESSABLE UNDER SECTION 143(3) CAN BE AT A SUM LOW ER THAN THE INCOME RETURNED. WE NOTE THAT THE PROVISIONS OF SECTION 143(3) AS AMENDED BY THE TAXATION LAWS (AMENDMENT) ACT, 1970 READ AS FOLLOWS: '(3) ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDE R SUB-SECTION (2), OR AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY REQUIRE ON SPECIFIED POIN TS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED- A. IN A CASE WHERE NO ASSESSMENT HAS BEEN MADE UNDER S UB-SECTION (1) THE ASSESSING OFFICER SHALL BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR R EFUNDABLE TO HIM ON THE BASIS OF SUCH ASSESSMENT; ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 39 B. IN A CASE WHERE AN ASSESSMENT HAS BEEN MADE UNDER S UB-SECTION (1), IF EITHER SUCH ASSESSMENT HAS BEEN OBJECTED TO BY THE ASSESSEE BY AN APPLICATION UNDER CLAUSE (A) OF SUB- SECTION (2) OR THE ASSESSING OFFICER IS OF OPINION THAT SUCH ASSESSMENT IS INCORRECT, INADEQUATE OR INCOMPLETE IN ANY MATERIAL RESPECT, T HE ASSESSING OFFICER SHALL, BY AN ORDER IN WRITING MAKE A FRESH ASSESSMENT OF THE TOTAL INC OME OR LOSS OF THE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR REFUNDABLE TO H IM ON THE BASIS OF SUCH ASSESSMENT. 43. ON PERUSAL OF THE ABOVE, WE NOTE THAT THE A.O. WAS AUTHORIZED BY THE LEGISLATURE TO MAKE ASSESSMENT OF THE TOTAL INCOME OR LOSS AND DET ERMINE THE SUM WHICH WAS PAYABLE OR REFUNDABLE ON THE BASIS OF THE ASSESSMENT. MEANIN G THEREBY, THE A.O. WAS LEGALLY EMPOWERED IN LAW TO MAKE ASSESSMENT OF THE TOTAL IN COME OF THE ASSESSEE AT A LOWER SUM THAT THE RETURNED INCOME, WHICH WOULD RESULT IN SU M REFUNDABLE TO THE ASSESSEE. 44. THE PROVISION SUB-SECTION (3) WAS SUBSTITUTED B Y THE FOLLOWING PROVISION BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 WITH EFFECT F ROM 1 ST APRIL 1989, WHICH READ AS FOLLOWS '(3) ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDE R SUB-SECTION (2), OR AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY REQUIRE ON SPECIFIED POIN TS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESS ING OFFICER SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF T HE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM ON THE BASIS OF SUCH ASSESSMENT.' 45. ON PERUSAL OF THE ABOVE PROVISION, IT IS NOTED THE LEGISLATURE SPECIFICALLY EXCLUDED THE A.O.S POWER TO DETERMINE SUM REFUNDABLE TO T HE ASSESSEE ON COMPLETION OF ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OF THE ACT. THE INTENTION OF THE LEGISLATURE IN INTRODUCING AMENDED SECTION 143(3) WAS EXPLAINED BY THE CBDT IN CIRCULAR NO. 549 DATED 31.10.1989 WHEREIN THE BOARD STATED THAT UNDE R THE AMENDED PROVISIONS, THE ASSESSING OFFICER IN AN ASSESSMENT ORDER PASSED UND ER SECTION 143(3) CANNOT ASSESS INCOME AT A FIGURE LOWER THAN THE RETURNED INCOME, NOR CAN LOSS BE ASSESSED AT A FIGURE HIGHER THAN THE RETURNED, AND THEREFORE NO TAX PAID WITH REFERE NCE TO THE RETURNED INCOME CAN NOW BE REFUNDED TO THE ASSESSEE ON COMPLETION OF REGULAR A SSESSMENT. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 40 46. THE ABOVE PROVISION WAS LATER ON SUBSTITUTED BY THE FINANCE (NO.2) ACT OF 1998 AND THE POWER TO DETERMINE SUM REFUNDABLE TO THE ASSE SSEE BY THE ASSESSING OFFICERS IN THE PROCEEDINGS U/S 143(3) WAS RE-INSTATED BY THE LEGIS LATURE. THE RELEVANT PROVISION, AS IT STANDS NOW READS AS UNDER: '(3) ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDE R SUB-SECTION (2), OR AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY REQUIRE ON SPECIFIED POIN TS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESS ING OFFICER SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF T HE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR REFUND OF ANY AMOUNT DUE TO HIM O N THE BASIS OF SUCH ASSESSMENT.' 47. THE CBDT IN ITS CIRCULAR NO. 772 DATED 23.12.1 998 EXPLAINING THE ABOVE SUBSTITUTED PROVISION OF SECTION 143(3) EXPLICITLY STATED THAT UNDER THE ERSTWHILE PROVISIONS, THERE WAS NO PROVISION TO ISSUE REFUND AND THE ASSE SSING OFFICER WAS ONLY EMPOWERED TO DETERMINE THE SUM PAYABLE BY THE ASSESSEE, BUT UNDE R THE AMENDED PROVISIONS THE A.O. IS EMPOWERED TO PROVIDE FOR DETERMINATION OF SUM PAYAB LE BY THE ASSESSEE AS WELL AS THE REFUND OF ANY AMOUNT DUE TO HIM. 48. ON CONJOINT & HARMONIOUS READING OF THESE PROVI SIONS & AFTER GIVING DUE CONSIDERATION OF THE LEGISLATIVE HISTORY OF SECTION 143(3) AND THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS BRITANNIA INDUSTRI ES LTD (SUPRA) AND GUJARAT HIGH COURT IN THE CASE OF MILTON LAMINATES LTD (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER U/S 250/143(3) OF THE A.O BY RESTRICTING THE CLAIM OF DEDUCTION U/S 80IA TO THE EXTENT AS CLAIMED IN THE RETURN FIL ED U/S 139(1). WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO ESTOPPEL IN LAW THAT THE ASSE SSED INCOME CANNOT GO BELOW THE INCOME RETURNED BY THE ASSESSEE. WE THEREFORE DIRECT THE A.O TO MODIFY THE DEDUCTION ALLOWABLE U/S 80IA BY RE-COMPUTING THE INCOME /PROFITS OF THE ELI GIBLE POWER GENERATING UNDERTAKINGS BY ADOPTING POWER TARIFF /RATES AS SPECIFIED IN PARA 30 OF THIS ORDER. IF BY ALLOWING DEDUCTION IN CONFORMITY IN THE MANNER AFORESAID, THE AMOUNT OF D EDUCTION PERMISSIBLE IS A SUM HIGHER ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 41 THAN THE SUM CLAIMED IN THE RETURN FILED U/S 139(1) , AND THEN ALSO THE A.O. SHALL GRANT SUCH HIGHER DEDUCTION. GROUND NOS. 1 TO 4 RAISED IN THIS APPEAL THEREFORE STAND ALLOWED. 49. IN THE RESULT, APPEAL OF THE ASSESSEE ITA NO. 1 188/KOL/2016 STANDS ALLOWED. 50. ITA NO. 773/KOL/2013 FOR A.Y. 2009-10 (ASSESSEE S APPEAL). GROUND NOS. 1 TO 4INVOLVED IN THE ASSESSEES APPEAL FOR A.Y. 2009-10 RELATE TO THE DISALLOWANCE OF RS.1,99,90,545/- MADE BY THE A.O. U NDER SECTION 14A READ WITH RULE 8D. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE RELEVANT MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT THE ISSUE INVOLVED IN T HESE GROUNDS ARE SIMILAR TO THE ONE INVOLVED IN GROUND NOS. 1 TO 4 OF THE ASSESSEES APPEAL FOR AY 2008-09, WHICH HAS ALREADY BEEN DECIDED BY US IN THE FOREGOING PORTION OF THIS ORDE R. FOLLOWING OUR CONCLUSION DRAWN IN AY 2008-09, WE CONFIRM THE DISALLOWANCE OF DIRECT EXPE NSES OF RS.1,30,057/- MADE BY THE A.O. IN TERMS OF RULE 8D(2)(I). WE FURTHER DIRECT THE A. O. TO DELETE THE INTEREST DISALLOWANCE OF RS.1,85,65,351/- MADE IN TERMS OF RULE 8D(2)(II). A S REGARDS THE DISALLOWANCE MADE BY THE A.O. UNDER RULE 8D(2)(III), WE DEEM IT FIT AND APPR OPRIATE TO REMAND THIS ISSUE TO THE FILE OF THE A.O. WITH THE DIRECTION TO CONSIDER ONLY THE IN VESTMENTS WHICH YIELDED DIVIDEND INCOME TO THE ASSESSEE DURING THE RELEVANT YEAR FOR COMPUT ING PERMISSIBLE DISALLOWANCE U/S 14A OF THE ACT READ WITH RULE 8D(2)(III) OF THE RULES.. 51. THE A.O. IS FURTHER DIRECTED TO REDUCE THE SUM OF RS.15,00,000/- SEPARATELY DISALLOWED BY THE ASSESSEE U/S 14A FROM THE DISALLO WANCE RE-COMPUTED IN TERMS OF THE DIRECTIONS GIVEN ABOVE AND THE NET SUM SO COMPUTED SHALL BE ADDED BACK TO THE TOTAL INCOME. HOWEVER, IN CASE THE REVISED DISALLOWANCE U/S 14A W ORKS OUT AT A SUM LOWER THAN THE AMOUNT OF RS.15,00,000/- SUO-MOTO DISALLOWED BY THE ASSESSEE, THEN THE A.O. SHALL RESTRICT THE DISALLOWANCE U/S 14A TO RS.15,00,000/-. OVERALL THEREFORE, THE GROUNDS RAISED IN THE ASSESSEES APPEAL ARE PARTLY ALLOWED FOR STATISTICA L PURPOSES. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 42 52. THE ASSESSEE RAISED ADDITIONAL GROUND OF APPEAL RELATES TO THE CLAIM DEDUCTION OF LEAVE ENCASHMENT OF ACTUAL PAYMENT PASSED UNDER SEC TION 43B(F) OF THE ACT. THE LEARNED AR SUBMITTED THAT THE ASSESSEE COMPANY DISALLOWED THE PROVISION IN RESPECT OF LEAVE ENCASHMENT MADE DURING THE YEAR AND OFFERED IT TO T AX IN THE COMPUTATION OF INCOME. THE ASSESSEE HAS NOW MADE A CLAIM FOR DEDUCTION OF A SU M OF RS.2,55,74,457/- U/S 43B OF THE ACT TOWARDS LEAVE ENCASHMENT AND RETIREMENT BENEFIT S THAT WAS ACTUALLY PAID DURING THE RELEVANT PREVIOUS YEAR IN COMPUTING INCOME OF THE B USINESS. AFTER HEARING THE SUBMISSIONS OF THE RIVAL PARTIES, WE FIND THAT THE ADMITTED FAC TUAL POSITION WAS THAT THE ASSESSEE DID NOT CLAIM THE AFORESAID SUM AS DEDUCTION IN THE RETURN OF INCOME AND THE DETAILS THEREOF WERE NOT AVAILABLE BEFORE THE A.O. IN ALL FAIRNESS THEREFOR E WE DEEM IT FIT TO REMAND THE APPELLANTS CLAIM TO THE A.O. FOR FRESH CONSIDERATION. IF THE C LAIM OF THE ASSESSEE REGARDING ACTUAL PAYMENT IS FOUND TO BE CORRECT, THEN THE ASSESSEE S HOULD BE ALLOWED THE DEDUCTION ON ACTUALLY PAYMENT BASIS AS DEMANDED BY SEC. 43B(F). THE A.O. IS ACCORDINGLY DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AFTER GIVING DUE O PPORTUNITY OF HEARING TO THE ASSESSEE AND IN ACCORDANCE WITH LAW. ADDITIONAL GROUND RAISED BY THE ASSESSEE IS THEREFORE DECIDED ACCORDINGLY. 53. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 54. ITA NO. 1995/KOL/2013 (DEPARTMENT APPEAL A.Y 20 09-10). GROUND NO 1 TO 2 RELATES TO THE DISALLOWANCE OF ADV ANCE / INVENTORY AMOUNTING TO RS. 1,62,997/-. AFTER CONSIDERING THE RIVAL SUBMISSIONS , IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS GROUND IS SIMILAR TO THE GROUND NO.1 OF DEPART MENT APPEAL IN A.Y. 2008-09.FOLLOWING OUR CONCLUSION DRAWN IN A.Y. 2008-09, WE DISMISS TH ESE GROUNDS RAISED BY THE REVENUE. 55. GROUND NO. 3 RAISED BY THE REVENUE IS ACTION OF THE LD. CIT(A) IN ACCEPTING THE ASSESSEES CLAIM FOR CONSIDERING THE MARKET VALUE O F ELECTRICITY FOR THE PURPOSE OF SECTION 80IA(4) TO BE THE AVERAGE LANDED COST OF ELECTRICIT Y AT WHICH THE ASSESSEE PROCURED ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 43 ELECTRICITY FROM THE RESPECTIVE STATE ELECTRICITY B OARDS. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL AVAI LABLE ON RECORD, WE FIND THAT ALL THE MATERIAL FACTS RELEVANT TO THIS ISSUE AS INVOLVED I N THE YEAR UNDER CONSIDERATION AS WELL AS THE ARGUMENTS RAISED BY BOTH THE SIDES ARE SIMILAR TO T HAT OF A.Y. 2008-09.WE THEREFORE FOLLOW OUR CONCLUSION DRAWN ON THIS ISSUE IN A.Y. 2008-09. THE A.O. IS ACCORDINGLY DIRECTED TO ALLOW THE DEDUCTION U/S 80IA(4) BY ADOPTING THE WEI GHTED AVERAGE LANDED COST OF ELECTRICITY AT THE RATES OF RS.5.83, RS.3.53& RS.5.46 FOR THE C PPS AT KARNATAKA, ORISSA & WEST BENGAL RESPECTIVELY. THE A.O. SHALL COMPUTE THE GROSS SALE /TRANSFER PRICE OF THE CPPS TAKING INTO ACCOUNT THE FOREGOING RATES AND ACCORDINGLY RE-WORK THE PROFITABILITY OF EACH CPP AND THEREAFTER ALLOW THE DEDUCTION U/S 80IA OF THE ACT. BEFORE THE A.O. WORKS OUT THE PERMISSIBLE DEDUCTION, AN OPPORTUNITY OF BEING HEAR D SHALL BE AFFORDED TO THE ASSESSEE. GROUND NO. 3 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED AND THE PLEA RAISED IN THE APPLICATION UNDER RULE 27 IS ALLOWED. 56. GROUND NO. 4 AND 5 OF THE REVENUES APPEAL ARE AGAINST THE LD. CIT(A)S ACTION OF ALLOWING THE CLAIM OF DEPRECIATION ON THE PLANT & M ACHINERY WHICH WAS PUT TO TRIAL RUN DURING THE YEAR. BRIEFLY STATED THE FACTS OF THE CA SE ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE& SALE OF CEMENT AND HAS ITS PLANT AT VASAVADATTA, KARNATAKA. DURING THE RELEVANT YEAR THE ASSESSEE SET UP A CLIN KER PLANT WHOSE TRIAL RUN COMMENCED ON 12TH MARCH 2009 AND THE COMMERCIAL PRODUCTION ON 1S T JUNE 2009. IN THE BOOKS OF ACCOUNT PREPARED AS ON 31ST MARCH 2009, THE ASSESSEE NEITHE R CAPITALIZED THE CLINKER PLANT TO FIXED ASSETS & CLAIMED THE BENEFIT OF DEPRECIATION THEREO N NOR DID IT CHARGE OFF THE INTEREST PAID ON BORROWED FUNDS USED FOR MEETING COST OF CLINKER PLA NT, TO THE PROFIT & LOSS ACCOUNT. HOWEVER FOR TAX PURPOSES, THE ASSESSEE CLAIMED THAT THE PLANT & MACHINERY OF THE CLINKER PLANT HAD BEEN PUT TO USE ON 12TH MARCH 2009 I.E. THE DATE ON WHICH TRIAL RUN WAS CONDUCTED AND THEREFORE CLAIMED DEPRECIATION IN RES PECT THEREOF ON THE GROUND THAT CONDITIONS PRESCRIBED IN SECTION 32 WERE SATISFIED. THE ASSESSEE ALSO CLAIMED DEDUCTION FOR INTEREST OF RS.72,50,371/- RELATABLE TO BORROWED FU NDS UTILIZED FOR ACQUIRING CLINKER PLANT, ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 44 FOR THE PERIOD 12TH MARCH 2009 TO 31ST MARCH 2009, ON THE GROUND THAT CONDITIONS FOR CLAIMING DEDUCTION FOR INTEREST PAID ON BORROWED CA PITAL, PRESCRIBED IN SECTION 36(1)(III) OF THE ACT WERE SATISFIED. IN THE COURSE OF ASSESSMENT , THE A.O. REQUIRED THE ASSESSEE TO EXPLAIN THE RATIONALE BEHIND BOTH THE CLAIMS MADE IN THE RE TURN ALONG WITH RELEVANT DETAILS. THE DETAILS REQUISITIONED BY THE A.O. WERE FURNISHED BY THE ASSESSEE THROUGH ITS LETTERS DTD. 22.12.2011 & 27.12.2011.AFTER EXAMINING THE SUBMISS IONS OF THE ASSESSEE AND THE MATERIAL ON RECORD, THE A.O. HELD THAT SINCE THE ASSESSEE HA D NOT CAPITALIZED THE COST OF CLINKER PLANT IN ITS BOOKS OF ACCOUNT AND NO DEPRECIATION WAS AC COUNTED IN THE BOOKS IN RESPECT OF THE SAID CLINKER PLANT IT COULD NOT BE HELD THAT THE SA ID CLINKER PLANT WAS USED FOR THE PURPOSE OF ASSESSEES BUSINESS DURING THE RELEVANT YEAR AND TH EREFORE DISALLOWED DEPRECIATION IN RESPECT OF THE CLINKER PLANT. ON APPEAL, THE LD. CIT(A) DEL ETED THE IMPUGNED DISALLOWANCE BY OBSERVING THAT THE ASSET HAD BEEN FIRST USED BY TH E ASSESSEE FOR ITS BUSINESS ON 12 TH MARCH 2009 WHEN IT CONDUCTED TRIAL RUN AND THEREBY CONDIT IONS LAID DOWN IN SECTION 32 WERE SATISFIED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE REVENUE IS NOW IN APPEAL BEFORE US. 57. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR APPEARING ON BEHALF OF THE REVENUE HEAVILY SUPPORTED THE ORDER OF THE A.O. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) . HE ALSO RELIED ON THE JUDGMENT OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS UNION CAR BIDE (I) LTD (124 TAXMAN 859). THE LD. AR DREW OUR ATTENTION TO THE FACT THAT THE TRIA L RUN WAS CONDUCTED ON 12TH MARCH 2009 AND THIS MATERIAL INFORMATION WAS DISCLOSED IN NOTE NO 2 OF SCHEDULE 17 OF THE AUDITED FINANCIAL STATEMENT FOR THE FY 2008/09. HE ALSO SUB MITTED THAT CLINKER PRODUCED DURING TRIAL RUN WAS ALSO REPORTED IN THE EXCISE RECORDS. THE LD . AR THEREFORE ARGUED THAT SINCE THE TRIAL RUN WAS CONDUCTED ON 12TH MARCH 2009 THE CIT(A) WAS JUSTIFIED IN HOLDING THAT CLINKER PLANT WAS USED FOR ASSESSEES BUSINESS, AND THEREFO RE THE ASSESSEE WAS LEGALLY ENTITLED TO CLAIM DEPRECIATION U/S 32 OF THE ACT. REFERRING TO A RECENT JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS LARSEN & TOUBRO LTD (89 TAXMANN.COM 186) THE LD AR SUBMITTED THAT ON SIMILAR SET OF FACTS & CIRCUMSTAN CES, THE HIGH COURT ALLOWED THE ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 45 DEPRECIATION ON PLANT & MACHINERY OF A CEMENT PLANT , WHICH WAS ALSO USED ONLY FOR 1 DAY DURING THE RELEVANT PREVIOUS YEAR FOR CONDUCTING TR IAL RUN. 58. THE LD. AR FURTHER SUBMITTED THAT SINCE THE TRI AL RUN WAS CONDUCTED ON 12TH MARCH 2009 AND ON THAT DATE THE ASSETS OR CLINKER PLANT H AD BEEN PUT TO USE, THE ASSESSEE COMPANY NOT ONLY CLAIMED DEPRECIATION UNDER SECTION 32 ON T HE PLANT & MACHINERY OF CLINKER PLANT BUT ALSO CLAIMED DEDUCTION FOR THE INTEREST PAID ON BORROWED FUNDS FOR THE PERIOD 12.03.2009 TO 31.03.2009 RELATABLE TO CLINKER PLANT IN ARRIVIN G AT THE PROFITS OF THE BUSINESS. WE FIND THAT THE A.O. HAD CALLED FOR AND EXAMINED THE DETAI LS AND DOCUMENTS IN RESPECT OF BOTH THESE CLAIMS I.E. DEDUCTION FOR INTEREST AND DEPRECIATION IN RELATION TO THE CLINKER PLANT, WHICH WAS PUT TO TRIAL RUN ON 12TH MARCH 2009. A BARE PERUSAL OF THE IMPUGNED ORDER U/S 143(3) SHOWS THAT THE DEDUCTION FOR INTEREST OF RS.72,50,371/- U/S 36(1)(III) WAS ALLOWED BY THE A.O. ON BEING SATISFIED THAT THE ASSETS OF CLINKER PLANT WE RE USED FOR THE PURPOSES OF ASSESSEES BUSINESS WHEN TRIAL RUN WAS CONDUCTED ON 12TH MARCH 2009. HOWEVER ON THE SELF SAME FACTS THE A.O. HOWEVER REFUSED TO ACCEPT THE CLAIM DEPREC IATION ON THE GROUND THAT ASSETS WERE NOT CAPITALIZED AND ASSESSEE FAILED TO PROVE THAT A SSETS WERE ACTUALLY USED FOR BUSINESS PURPOSE BECAUSE COMMERCIAL PRODUCTION DID NOT COMME NCE BEFORE 31.03.2009. THE LD. AR ARGUED THAT THE PROVISIONS OF SECTION 32 & 36(1)(II I) WERE ANALOGOUS & ALLOWED DEDUCTION ONLY IF THE ASSET IS USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. UNDER BOTH THESE PROVISIONS ONCE THE QUALIFY ING ASSET IS PUT TO USE, THEN THE ASSESSEE BECOMES LEGALLY ENTITLED TO CLAIM DEPRECIATION AS W ELL AS INTEREST INCURRED IN RELATION TO BORROWINGS MADE FOR SUCH ASSETS FROM THE PROFITS OF THE BUSINESS. IN THE CIRCUMSTANCES, WHEN FOR THE PURPOSE OF ALLOWING DEDUCTION FOR INTE REST U/S 36(1)(III) THE A.O. ACCEPTED THE FACT THAT THE FIXED ASSETS OF CLINKER WERE PUT TO U SE FOR THE ASSESSEES BUSINESS PURPOSE, THEN THE A.O. COULD NOT DISALLOW THE DEPRECIATION U/S 3 2 WITH REFERENCE TO THE VERY SAME ASSETS ON THE ALLEGED PREMISE THAT ASSETS WERE NOT USED FO R ASSESSEES BUSINESS PURPOSE MERELY BECAUSE THE ASSETS WERE NOT CAPITALIZED IN THE BOOK S OR THAT COMMERCIAL PRODUCTION BEGAN IN THE SUBSEQUENT FINANCIAL YEAR. ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 46 59. AFTER CONSIDERING FOREGOING FACTS AND THE RIVAL CONTENTIONS, WE FIND SUFFICIENT MERIT IN THE SUBMISSIONS OF THE LD. AR. WE NOTE THAT THE PLANT & MACHINERY OF THE CLINKER PLANT WAS INDEED PUT TO USE IN THE COURSE OF ASSESSEES B USINESS FOR CONDUCTING TRIAL RUN ON 12 TH MARCH 2009. WE FIND THAT BEFORE THE A.O. THE ASSESS EE HAD FURNISHED SUFFICIENT MATERIAL AND DOCUMENT TO SHOW THAT THE TRIAL RUN AT THE CLINKER PLANT WAS CONDUCTED ON 12 TH MARCH 2009 AND THEREAFTER THE COMMERCIAL PRODUCTION HAD BEGUN IN JUNE 2009. ON THE SAME SET OF FACTS THE ASSESSEE HAD CLAIMED TWIN DEDUCTIONS VIZ. FOR I NTEREST PAID ON BORROWED FUNDS AND DEPRECIATION ON ASSETS OF CLINKER PLANT. BOTH THE D EDUCTIONS WERE LEGALLY PERMISSIBLE ONLY WHEN ASSESSEE COULD PROVE THAT THE ASSETS OF CLINKE R PLANT WERE USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSE DURING THE RELEVANT PREVIOUS YEAR AND NOT OTHERWISE. WE FIND THAT ALTHOUGH SAME SET OF FACTS AND CIRCUMSTANCES PREVAILED THE A .O. DREW COMPLETELY CONTRARY AND CONTRADICTORY INFERENCES. ALTHOUGH THE A.O. ALLOWED DEDUCTION FOR INTEREST PAID ON BORROWED CAPITAL USED FOR MEETING COST OF CLINKER P LANT, DEPRECIATION CLAIMED WAS DENIED ON THE GROUND THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE SAME CLINKER PLANT WAS NOT USED FOR ASSESSEES BUSINESS PURPOSE. ON THESE FACTS AN D CIRCUMSTANCES THEREFORE WE HOLD THAT THE A.O.S FINDING THAT THE ASSETS IN QUESTION WERE NOT PUT TO USE DURING THE RELEVANT YEAR WAS FACTUALLY INCORRECT. AS REGARDS THE QUESTION AS TO WHETHER THE ASSESSEE IS LEGALLY ENTITLED TO CLAIM DEPRECIATION UNDER SECTION 32 ON THE ASSETS P UT TO TRIAL RUN, WE FIND THAT THIS QUESTION HAS BEEN RECENTLY ANSWERED BY HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS LARSEN & TOUBRO LTD (SUPRA) IN FAVOUR OF THE ASSESSEE. THE H ONBLE HIGH COURT HELD THAT EVEN TRIAL PRODUCTION CONDUCTED ONLY FOR 1 DAY WOULD FALL WITH IN THE AMBIT OF THE PHASE USED FOR THE PURPOSES OF BUSINESS CONTAINED IN SECTION 32 OF TH E ACT. IT WAS HELD THAT THE QUANTITY PRODUCED AND ITS SALE-ABILITY OR MARKETABILITY WAS OF NO CONSEQUENCE BECAUSE THE ONLY REQUIREMENT OF SECTION 32 WAS THAT THE ASSET SHOULD BE PUT TO USE. THE COURT FURTHER HELD THAT EVEN SUBSEQUENT BREAKDOWN OF MACHINERY OR TECH NICAL SNAG WHICH MAY BE DEVELOPED DURING THE TRIAL RUN WHICH INTERRUPTED SUBSEQUENT P RODUCTION FOR A PERIOD OF TIME CANNOT BE THE REASON TO DEPRIVE THE ASSESSEE OF THE BENEFIT O F DEPRECIATION CLAIMED. WE FIND THAT IN ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 47 PRESENT CASE THE ASSETS OF THE CLINKER PLANT WERE U SED TO CONDUCT TRIAL RUN ON 12 TH MARCH 2009. THE DISCLOSURE OF SUCH FACT WAS MADE IN THE A UDITED ACCOUNTS. THE ASSESSEE ALSO FURNISHED RELEVANT DETAILS AND DOCUMENTS SUPPORTING PURCHASE OF THE PLANT AND MACHINERY BEFORE THE A.O. AND ALSO SUBSTANTIATED THAT THE SAI D PLANT WAS USED FOR CONDUCTING TRIAL RUN ON 12 TH MARCH 2009. THE A.O. HAS NOT SHOWN ANY INFIRMITY I N THE FACTUAL MATRIX. IN THE A.O.S OPINION HOWEVER THE USE OF CLINKER PLANT FOR CONDUCTING TRIAL RUN DID NOT SATISFY THE CONDITION OF THE ASSET BEING USED FOR BUSINESS PUR POSE AS PROVIDED IN S 32 OF THE ACT. WE HOWEVER FIND THAT THE VIEW CANVASSED BY THE A.O. WA S CONTRARY TO THE VIEWS EXPRESSED BY HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE C ASE OF CIT VS UNION CARBIDE (I) LTD (SUPRA) & BOMBAY HIGH COURT IN THE CASE OF CIT VS L ARSEN & TOUBRO LTD (SUPRA). IN BOTH THESE JUDGMENTS THE HIGH COURTS ALLOWED THE DEPREC IATION CLAIMS OF THE ASSESSEE EVEN THOUGH THE PLANT AND MACHINERIES WERE USED DURING T HE RELEVANT PREVIOUS YEAR ONLY FOR THE PURPOSE OF CONDUCTING TRIAL RUNS AND COMMERCIAL PRO DUCTION HAD NOT BEGUN DURING THE RELEVANT PREVIOUS YEARS. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THESE JUDGMENTS, WE UPHOLD THE ORDER OF THE LD. CIT(A) ALLOWING THE DEP RECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF THE CLINKER PLANT. GROUND NOS. 4 & 5 OF THE REVENUES APPEAL ARE THEREFORE DISMISSED. 60. IN THE RESULT REVENUES APPEAL IS DISMISSED AND THE ASSESSEES APPLICATION UNDER RULE 27 OF THE RULES IS ALLOWED. 61. ITA NO. 505/KOL/2017 (ASSESSEES APPEAL FOR AY2 009-10). GROUND NO. 1 TO 4 INVOLVED IN THE ASSESSEES APPEAL ARE AGAINST THE ACTION OF THE LD. CIT(A)-17, KOLKATA { SECOND ROUND } IN CONFIRMING THE A.O.S ORDER PASSED U/S 250/143 (3) WHEREIN THE A.O. RESTRICTED THE AMOUNT OF DEDUCTION U/S 80IA TO THE AMOUNT CLAIMED IN THE RETURN OF INCOME FILED U/S 139(1) AS OPPOSED TO THE SPECIFIC DIRECTIONS ISSUED BY THE LD. CIT(A)-VI, KOLKATA IN THE FIRST ROUND . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE MATERIAL FACTS RELEVANT TO ITA NO773/KOL/2013 ITA NO. 1037/KOL/2012 ITA NO. 1722/KOL/2012 ITA NO. 1188/KOL/2016 ITA NO. 1995/KOL/2013 ITA NO. 505/KOL/2017 KESORAM INDUSTRIES LTD., AYS- 2008-09 & 2009-10 48 THIS ISSUE; INVOLVED IN THE YEAR UNDER CONSIDERATIO N AS WELL AS THE ARGUMENTS RAISED BY BOTH THE SIDES ARE SIMILAR TO THAT OF A.Y. 2008-09.WE TH EREFORE FOLLOW THE CONCLUSIONS DRAWN ON THIS ISSUE IN OUR ORDER IN ITA NO.1188/KOL/2016 FOR A.Y. 2008-09.WE ACCORDINGLY HOLD THAT THE LD. CIT(A)-17 ERRED IN UPHOLDING THE ORDER U/S 250/143(3) PASSED BY THE A.O. WHEREIN HE RESTRICTED THE CLAIM OF DEDUCTION U/S 80IA TO TH E EXTENT RETURNED. WE DIRECT THE A.O. TO MODIFY AND ENHANCE THE DEDUCTION CLAIMED U/S 80IA I N LIGHT OF THE SPECIFIC DIRECTIONS CONTAINED AT PARA 48 OF OUR ORDER (SUPRA). GROUND NOS. 1 TO 4 RAISED IN THIS APPEAL THEREFORE STAND ALLOWED. 62. IN THE RESULT THE REVENUES APPEALS FOR A.Y. 20 08-09 AND 2009-10 ARE DISMISSED WHILE THE ASSESSEES PRAYERS MADE UNDER RULE 27 ARE ALLOW ED IN BOTH THE YEARS AND THE ASSESSEES APPEALS FOR A.Y. 2008-09 AND 2009-10 ARE PARTLY ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26.04.2018 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26TH APRIL, 2018 BISWAJIT.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. KESORAM INDUSTRIES LTD., 9/1, R .N. MUKHERJEE ROAD, KOLKATA 700 001. 2 RESPONDENT ACIT/DCIT RANGE - 5, KOLKATA. 3. THE CIT(A) KOLKATA. 4. 5. CIT KOLKATA DR, ITAT, KOLKATA. / TRUE COPY, BY ORDER, SR. PVT. SECRETARY